The Bengaluru bench of NCLT is set to hear the petition filed by four investors of Byju’s on the oppression and mismanagement suit against the management of the company on Tuesday.

Also read: Byju’s investors pass resolution to oust CEO Raveendran, kin 

The investors are seeking to declare the founders as unfit to run the company, appoint a new board, declare the rights issue as void, and conduct a forensic audit, as reported by businessline.

It also include financial mismanagement by the founders leading to losing control of Aakash, Byju’s Alpha (TLB loan) default, prolonged corporate governance issues, including non-hiring of CFO & independent director, oppressive nature of the $200-million rights offer, regulatory non-compliances, oppressive opacity, and wilful default in sharing information with stakeholders.

The petition has been signed by four investors — Prosus, GA, Sofina, and Peak XV — along with support from other shareholders, including Tiger, and Owl Ventures.

The plea seeks declaration of the just-concluded $200-million rights offer as void and seeks a direction that the company should not take any corporate actions that will prejudice the rights of investors. Italso mentions inter-corporate loans taken on undisclosed terms and multiple insolvency petitions filed by BCCI, TLB lenders and Surfer Technologies Pvt Ltd.

This comes at a time when the select group of investors of Think & Learn (T&L), the parent company of Byju’s, voted on and passed several resolutions at the EGM, including the removal of chief executive officer (CEO) Byju Raveendran from the company and the change of the board, which currently includes his wife and co-founder Divya Gokulnath and his brother Riju Raveendran.

Also read: Byju’s investors move NCLT, file petition against oppression, mismanagement by the company

The EGM was held even as the edtech major secured an interim stay from the Karnataka high court, which said that any resolutions passed at the meeting would be contingent upon the final decision on a petition filed by the company.

Long legal battles

The conflict between Byju’s leadership and its investors may become a intricate legal battle, said experts. According to people close to the development, Byju Raveendran has no intention to step down as the CEO of the embattled edtech major.

Ashlesha Gowariker, Senior Partner, Desai & Diwanji, noted that passing of the desired resolutions represents a first step for the investors in their attempt to remove the promoters from office and management of Byju’s.

“For the co-founders, the EGM represents a first loss in the attempt by the investors to remove them from office and management of Byju’s. However, this does not necessarily mean that the High Court will uphold the resolutions passed at the EGM. The High Court will have evaluate the merits, rationale and basis of the resolutions and whether, in the facts of the case, grounds might exist to set aside the resolutions,” said Gowariker.

While the shareholders of a company have the power to remove a director, the due process under the Companies Act, 2013 such as issuing a show cause notice, allowing the director to be heard, has to be followed, noted Aaron Solomon, Managing Partner, Solomon & Co., Advocates and Solicitors.

“The removal of a director may not necessarily mean the removal of such a director from other key managerial positions such as CXOs. The power to remove a person from CXO positions is usually exercised by the board. It is unclear in law whether the shareholders can usurp the powers of the board, and further the company’s constitutional documents and private agreements will govern the removal of persons holding CXO positions,” said Solomon.

Post the EGM, Raveendran reached out to the 15,000 employees and told them that the management remains unchanged.

Also read: NCLT issues notice to Sony on ZEEL’s plea on enforcing merger

The company has raised $5.08 billion from investors. The company is also looking to to raise $200 million via rights issue. It has been fully subscribed, founder and CEO Byju Raveendran said in a shareholder letter, reported Businessline.