A Bench of Chief Justice NV Anjaria and Justice KV Aravind passed the order today after both Byju's and its warring investors were agreeable to an interim status quo order until the NCLT decides on the rights-issue row.
A Division Bench of the Karnataka High Court on Friday directed Byju's to maintain status quo while the National Company Law Tribunal (NCLT) at Bengaluru reconsiders the question of whether the ed-tech firm should be restrained from proceeding with a second rights issue.
The rights issue had been objected to by four investors who have accused Byju's and its parent company, Think & Learn Private Limited, of oppression and mismanagement.
While dealing with a plea by these investors, the NCLT had passed an interim order on June 12 to halt the rights issue. The interim order was passed after the investors alleged that Byju's had violated a prior undertaking not to proceed with any rights issue unless it increased its authorised capital.
On July 2, a single judge of the Karnataka High Court set aside the interim NCLT order on finding merit in the argument by Byju's representatives and Think & Learn that the tribunal order was unreasoned.
The single-judge also refused to stay the operation of this order, while sending the case back to the NCLT to decide the matter afresh in two weeks.
The refusal to stay the order was challenged by the investors by way of two appeals that were heard this morning by a Division Bench of the High Court comprising Chief Justice NV Anjaria and Justice KV Aravind.
The Division Bench today ordered that status quo shall be maintained until the NCLT finally decides on the rights issue dispute. Any allotment of shares that has taken place after the single judge's order of July 2 shall be subject to the NCLT's final decision, the Court added. The NCLT has also been asked to decide on the rights issue aspect expeditiously and by July 31.
"During the proceedings of remand and till the decision which may be taken by the NCLT, the parties shall maintain status quo with regard to the subject matter dispute as obtained on today ... The transactions which may have taken place of allotment of shares and other connected transactions between the period from the date of the order of learned Single Judge that is from 02.07.2024 till the date, shall remain subject to final order which may be passed by the NCLT and the rights in that regard shall be governed accordingly," the order stated.
The Court clarified that it has not expressed any opinion on the merits of the matter and said that the NCLT should consider the case independently and without being influenced by any observation made by the High Court.
Appearing for the investors, Senior Advocate Udaya Holla argued that since the single judge had declined to order any status quo, shareholders' rights may be diluted if Byju's goes ahead with its contentious rights issue before the NCLT decides on the matter.
Holla added that between July 2 and July 3, Byju's had already allotted some shares.
Senior Advocate KG Raghavan represented Byju's and argued that there was no difficulty for the company to maintain the status quo as on today. He also reiterated that Byju's has not violated any undertaking, contrary to the investor's claims.
Meanwhile, Holla expressed concern that some shares have already been allotted since the July 2 single-judge order. Byju's cannot claim equity on anything done since July 2 and all such actions should be subject to the NCLT's final decision, Holla argued.
Raghavan's response also included a note of protest against the manner in which allegations against Byju's have been made and reported.
"Everything that has happened during the pendency of a company petition is always subject to final order. Where is the question? It can't be, that all these observations are taken from your Lordship and shown to the NCLT, saying 'Look at what the Hon'ble Chief Justice sitting in Division Bench has said.' This has become problematic. And tomorrow, this is published in the newspaper as headlines. Everything that orally happens is also published. In this case, one observation was made by an NCLT member yesterday, it was published in headlines yesterday!"
Having heard both sides (both of whom were agreeable to an interim status quo order) the Court disposed of the appeals by directing Byju's to maintain status quo from today.
Think & Learn and the directors of Byju's were represented by Senior Advocates KG Raghavan and Dhyan Chinnappa.
The investors were represented by Senior Advocates Udaya Holla and Gaurav Chopra.