'Pay salary or face audit; you surely have money': NCLT to troubled Byju's

The National Company Law Tribunal (NCLT) has instructed Byju's to ensure the payment of salaries to its employees, regardless of the company’s access to funds raised through its recent rights issue.

During the hearing on July 4, the tribunal emphasized that Byju's is an operational company and should have sufficient revenue to pay its staff. If Byju’s fails to comply, an audit by the Institute of Chartered Accountants of India (ICAI) could be initiated, Moneycontrol reported.

"You are a company that is functioning. Surely you should be having revenues," the Bengaluru bench of NCLT said.

Ongoing salary delays and legal disputes

Byju's has paid its employees for April and May but has not fully compensated them for February and March.

The company attributes the delays to the funds raised through a rights issue in February, which are currently tied up in an escrow account due to a legal dispute.

The NCLT has directed Byju's to file a response to the employees' application and scheduled another hearing for the following week.

Legal battle over rights issue funds

The ongoing conflict between Byju’s and its investors involves a $200 million rights issue. The funds have been locked in an escrow account by NCLT orders until the case is resolved.

Byju’s investors, including Prosus, General Atlantic, Sofina, and Peak XV (formerly Sequoia), have filed a petition alleging oppression and mismanagement. They sought a stay on the rights issue, arguing that it was conducted at a significantly lower valuation than Byju’s peak valuation of $22 billion.

Karnataka high court and further hearings

Byju's investors have challenged the Karnataka High Court's July 2 decision, which set aside an NCLT order that restrained the company from launching a second rights issue.

The high court will hear this plea on July 5. Meanwhile, Byju’s has requested 48 hours from the tribunal to decide whether to undertake not to pledge, sell, or transfer its assets. The NCLT will rehear the plea for a stay on the second rights issue and a contempt petition filed by the investors on July 9.

Employees and vendors seeking dues

Besides the ongoing salary issues, Byju’s faces lawsuits from at least seven vendors seeking to recover their dues. Over 2,000 former employees have also joined forces to fight for their rights, with some planning to take legal action against the company.

Karnataka Labour Minister Santosh Lad recently met with representatives of Think and Learn Pvt Ltd, Byju’s parent company, urging them to address the unpaid dues of former employees.

Byju’s, currently employing around 13,000 people, down from nearly 15,000 at the end of 2023, faces a total salary burn of between Rs 40 and 50 crore. The situation remains critical as the company navigates its financial and legal challenges.