CHENNAI: The board of directors of Aakash Educational Services Limited (AESL) has put Think & Learn Pvt Ltd (TLPL)’s share allotment of Rs 25 crore, alleging that the amount by the BYJU’s parent company does not comply with Foreign Exchange Management Act (FEMA) rules, the Companies Act or the External Commercial Borrowings (ECB) guidelines, the AESL said on Friday.
Concluding the Rs 100-crore rights issue, the board of AESL has approved the allotment of shares to the Manipal Group and Beeaar Investco Pte. Ltd, which contributed Rs 58 crore and Rs 16 crore, proportionate to their shareholding of 58.8 percent and 16 percent, respectively. TLPL, the parent company of BYJU’S, is currently undergoing corporate insolvency resolution process (CIRP).
Resolution Professional of TLPL had unsuccessfully opposed the rights issue before the NCLT, NCLAT and the Supreme Court. Yet, TLPL tried to subscribe by depositing Rs 25 crore. Riju Ravindran, a former promoter of TLPL, has filed an application before the NCLT, Bengaluru, alleging that TLPL raised the money for its Rs 25-crore rights issue subscription by issuing Rs 100 crore of debentures in a structure that may violate FEMA, the ECB guidelines and the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019.
The NCLT is examining these allegations. On AESL’s insistence for clarity about compliance of funds, the RP provided the Debenture Subscription Agreement executed between TLPL and Byju’s Alpha Inc. (a Delaware-incorporated investor), along with a legal opinion stating that the subscription money did not violate FEMA laws.
The AESL then obtained independent opinions of a former Supreme Court justice and a retired RBI general manager, who indicated that the debenture issuance and the inflow of funds did not comply with FEMA, ECB Guidelines, or the Companies Act.
A senior advocate also confirmed that the structure of the debenture investment did not meet FEMA requirements, the Master Direction on Foreign Investment in India; and the ECB Guidelines. Sanjay Garg, Head–Legal of AESL, stated, “It is clear the money received by TLPL is in the nature of a loan/debenture in the framework of external commercial borrowing and cannot be used for the purpose of acquisition of equity i.e., shares in Aakash. If any inquiry was undertaken by a regulatory authority, Aakash could be accused of having allowed a rights issue, thereby enabling an ECB to be used for the purposes of investment into equity.”
After considering all legal opinions, the board deferred allotment of shares to TLPL until the pending issues are adjudicated by the NCLT, Bengaluru. The Rs 25 crore deposited by TLPL is likely to be kept in a separate interest-bearing account pending final decision, the company said.
The AESL also indicated that the company may initiate another Rs 140-crore rights issue shortly.