The Karnataka High Court on July 5 restrained Byju's from allotting shares pursuant to its rights issue, till the National Company Law Tribunal (NCLT) decides on the plea by investors.

"The respondents shall not make allotment of shares in the interregnum, to be subject to the final order which may be passed by the NCLT," the order passed by a bench led by the Chief Justice said.

The court also ordered status quo on Byju's second rights issue in response to a plea by a group of investors who said if the offer were to go ahead, it would dilute their holding and make it difficult for them to recover their money.

The NCLT has been directed to decide the application filed by investors against the second rights issue by July 31. The court further clarified that it has not gone into the merits of the case, but has only decided on the status of rights issue and share allotment till NCLT puts an end to the case.

"It is clarified that this Court has not gone into the merits of the case of the appellant and has not expressed any opinion on merits. Any observations in this order shall not be construed as an expression on merits," the order said.

The order was passed in an appeal filed by the investors challenging the order of a single judge of the high court that set aside a National Company Law Tribunal (NCLT) order, which restrained Byju's from launching a second rights issue.

The tribunal had asked the embattled edtech firm not to proceed with the second rights issue till the petition against the first was disposed of. The second rights issue opened on May 13 and was to close on June 13. Byju’s has said it is not a second issue but an extension of its $200-million rights offer.

Appearing for the investors, senior advocate Uday Holla presented various documents, saying conduct from Byju's had not inspired confidence. Byju's failed to comply with its undertaking that it would no allocate shares based on the first rights issue.

Byju's lawyer Raghavan denied the allegations and said the undertaking had not been violated.

When Holla urged the court to order status quo, K Raghavan said he would not object to it but it should be from July 5 and not from the earlier data.

The investors wanted the status quo from July 2, the date till which NCLT stayed the issue.

In June, investors including Peak XV Partners, General Atlantic, Chan-Zuckerberg Initiative and Prosus filed a plea in the NCLT to halt Byjus' second rights issue, saying it would further dilute their holding in the company.

On June 12, the Bengaluru bench of NCLT directed Byju's to maintain the status quo on existing shareholders and their holdings.