Karnataka HC directs Qatar Holding to approach tribunal in case against Byju's
Offering some relief to edtech company Byju's, which is battling insolvency concerns, the Karnataka high court has dismissed a petition filed by one of its investors, Qatar Holding LLC (QHL), seeking to restrain Byju's and its founder Byju Raveendran from disposing of assets worth $235 million, including shares in Aakash Educational Services Limited (Aakash Institute).
In an order passed on April 16 this year, Justice Ashok S Kinagi held that since an arbitral tribunal has already been constituted under the Singapore International Arbitration Centre (SIAC) Rules, QHL must seek relief before the Tribunal instead of approaching Indian courts under Section 9 of the Arbitration and Conciliation Act, 1996.
'The petitions are rejected. However, the liberty is reserved to the petitioner to make necessary application either before the Emergency Arbitrator, seeking clarification or before the Arbitral Tribunal, seeking interim relief,' the court said.
However, to safeguard QHL's interest, the court said all existing interim orders, undertakings, and status quo arrangements already in place will continue for the next three months.
The dispute stems from the failed merger of Byju's parent entity, Think & Learn Private Limited, with Aakash Institute. Under the financing arrangements, if the merger did not take place, Byju Raveendran was obligated to ensure that the shares were exchanged for equivalent shares in Think & Learn, but that did not happen.
As per QHL's petition, in 2022, it had given $150 million to Byju's to part-finance the acquisition of 17.89 million equity shares in Aakash Institute. This investment was secured through a share security agreement by Byju's Global Pte Ltd and a personal guarantee from Byju Raveendran.
Under the agreement, Byju's was required to repay $300 million by March 31, 2025. However, QHL terminated the transaction in February 2024 citing defaults, and demanded early payment of $235 million.
Following this, QHL initiated arbitration at the SIAC in March 2024. An emergency arbitrator restrained Byju's from disposing of assets up to the claimed amount. The order was subsequently also upheld by the Singapore high court.
QHL then also moved the Karnataka high court seeking additional protections over assets, particularly concerning Aakash Institute shares. It alleged that Byju Raveendran had filed inconsistent affidavits regarding ownership of the shares, first listing them as assets and later claiming that such inclusion was erroneous.
The high court said that once an arbitral tribunal was in place, it had the same powers to grant interim relief as courts under Section 17 of the Arbitration Act. Therefore, there was no reason for the high court to entertain QHL's petition.
The court, however, also agreed with QHL's submission that Raveendran had taken inconsistent positions regarding the ownership of Aakash shares. Justice Kinagi criticised Raveendran's contradictory positions invoking the doctrine of estoppel— the legal principle that prevents a party from denying a previous statement or action that has caused another person to act upon it.
'Taking inconsistent pleas by a party makes its conduct far from satisfactory. A party should not blow hot and cold by taking inconsistent stands, and prolong proceedings unnecessarily,' the high court said.
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