As per the recent press release by the Enforcement Directorate, the Adjudicating Authority under FEMA has issued Show Cause Notices to M/s Think & Learn Private Limited and its founder Byju Raveendran, following a complaint by the Directorate of Enforcement (ED). The notices allege contraventions of Foreign Exchange and Management Act, 1999 (FEMA) provisions amounting to Rs. 9362.35 Crore.
During the investigation, ED conducted search and seizure of documents related to investments received and overseas investments made by the company. Statements from Byju Raveendran and the CFO of M/s Think and Learn Private Limited were recorded. The findings allegedly suggest contraventions, including failure to submit import documents against advance remittances, delayed filing of documents for Foreign Direct Investment (FDI), and failure to realise proceeds of exports outside India.
The entire Byju’s controversy began with the resignation of three board directors and its auditor, Deloitte, due to alleged prolonged delays in submitting financial statements. Byju’s released its FY21 financial statements nearly 12 months late, and the FY22 statements were recently disclosed in early November. According to Section 137(1) of the Companies Act, 2013, financial statements must be filed with the Registrar of Companies within 30 days of being adopted at the annual general meeting, using Form AOC-4. Failure to meet this deadline can be rectified within an additional 270 days, as specified in the first proviso to Section 403(1).
Further, the issue was exacerbated by the failure to repay loans and honor the financial covenants to its lenders. The non-payment of loan is a serious offence and is liable to a penalty of Rs. 1 crore which may extend up to Rs. 10 crore as under Section 74 of the Companies Act.
Although the press release from the ED outlines their allegations, an ongoing legal debate questions the fairness of naming and shaming entities by an investigative authority that lacks judicial status. This concern has become more prominent not only with the ED but also with other financial regulators such as SEBI and Reserve Bank of India. In the evolving legal landscape, it is conceivable that the Hon’ble Supreme Court of India may need to establish guidelines addressing this issue, especially regarding the appropriateness of publicly identifying entities prior to a formal trial and judicial process.
A copy of the press release is enclosed hereinbelow.
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