Author: Sejal Suda, Bhartiya vidyapeth New Law College
To The Point
Byju’s, India’s top online learning company, is in big trouble. They have money problems. People are asking questions about their money, how they run the company, and their accounting. They face many legal issues.
Byju’s is accused of making their income seem bigger than it was. They are also accused of hiding money they lost. They’re also accused of waiting too long for audits. They gave investors wrong information, too.
This shows what can happen when a new business grows too fast. It doesn’t have enough rules or oversight. This article explains Byju’s money problems. It also explains their legal issues and what the government is doing. It shows a huge company failing. This is important for India.
Abstract
Byju’s, once a huge success, quickly failed. This shows us that big dreams don’t always mean good results. They got tons of money and bought many companies. But, they had serious money problems.
Some issues were:
– They made their sales look bigger than they were by letting people pay later.
– They missed deadlines for their financial reports.
– They did questionable deals with companies they were related to.
– They broke rules about foreign money.
– They are in legal fights with banks and past workers.
This article looks closely at Byju’s money troubles. We will use accounting and legal methods to understand what went wrong. We’ll also look at how they managed their company, what they told investors, and the legal trouble they face. We explain things in a way that is easy to understand. We make complex ideas simple for everyone.
Use of Legal Jargon
1. a person tricked you. They lied. Someone wanted you to agree to something. They really hoped you’d say yes.. this is against the law. it is called misrepresentation. you may locate this regulation. it’s in section 18. this is within the 1872 Indian agreement Act. They used lies. They used faux records. They tricked you right into a deal.
2. A borrower didn’t repay a loan, even though they could. This is a willful default. They chose not to pay back what they owed.
3. Someone broke rules about money. These are rules from the Foreign Exchange Management Act of 1999 (FEMA). This often happens with international investments or moving money between countries.
4. Company rules and how it works? That’s corporate governance. It means everyone, from the top boss to each worker, acts right and fairly. It’s like a system to make sure things are balanced. This helps the company make good choices and do well. It helps everyone in the end.
5. A forensic audit is when experts check a company’s finances closely. They look for cheating or stealing. They review records to find any problems.
6. Fraud is intentionally lying to gain an unfair advantage. It’s against the law (Section 447, Companies Act, 2013). Someone used lies to get something illegally.
7. Accounting standards (Ind AS) are the rules for showing a company’s finances. They make sure everyone uses the same guidelines for financial reports.
8. The Enforcement Directorate (ED) is a government group. They fight financial crimes. They ensure people follow the country’s economic laws.
9. Unfair trade practices are when businesses use tricks. They trick buyers or hurt fair competition. It’s dishonest business behavior.
10. If someone stops making payments on a loan for a long time, the bank calls it a non-performing asset, or NPA. It means the loan is no longer bringing in money like it should. It’s a loan where the borrower isn’t paying back the money.. It’s a loan where the borrower is late with payments. They haven’t paid the main loan amount. Or they haven’t paid the interest on the loan. Either way, they’re behind. They’ve missed payments for at least three months, which is 90 days.
The Proof
1. Late Reports
• Byju’s didn’t send in its financial papers on time for 2021 and 2022. It should have, because it got money from other countries and is worth a lot of money.
• The company that checks its books, Deloitte, quit in July 2023. They said Byju’s took too long to give them the papers.
• This made investors distrust Byju’s. It looked like they were hiding losses.
2. False Revenue
• Byju’s used a strange way to count its money. They took payment for years of classes all at once. But they didn’t count the costs until later. This made it look like they were making more money than they really were.
• The government found that Byju’s said they made over 1000 crore rupees more than they actually did in 2021.
3. Shady Loans and Money
• Byju’s borrowed over $1.2 billion. People think this money was used incorrectly. This broke the rules about borrowing from other countries.
• Many lenders sued Byju’s because they didn’t repay their loans or follow the loan agreements.
• In 2023, the government investigated Byju’s offices. They thought Byju’s broke the rules about sending money to other countries, involving a huge amount of money.
4. Many Job Cuts and Unpaid Workers
• Byju’s let go of many workers. They fired over 10,000 people. This happened between 2022 and 2024. Many weren’t given a warning or severance pay.
• Some former workers went to court because Byju’s broke their work agreements.
• Byju’s owes money to former employees for stock options and hasn’t paid teachers and trainers. This breaks worker protection laws.
5. Investor Problems and Board Changes
• Big investors had problems with how Byju’s used its money.
• Peak XV, Prosus, and the Chan Zuckerberg group all said they didn’t like Byju’s spending.
• These big companies said Byju’s money choices were bad.
• In June 2023, three board members quit. They didn’t trust Byju’s to be open and honest about its finances.
• Some shareholders went to court to say Byju’s leaders were doing things wrong and mismanaging the company.
6. Buying Companies Without Checking
• Byju’s bought many other companies. They bought WhiteHat Jr., Aakash, and Toppr very quickly. They did not check if these were good buys.
• WhiteHat Jr. lost a lot of money in 2022. The loss was 1,690 crore rupees.
• Byju’s closed some of the companies it owned. This shows they made bad choices. It also looks like they tried to make their company seem bigger and more important.
Case Laws & Regulatory Action
1. Deloitte Left Byju’s
• Byju’s auditor, Deloitte, quit. That’s unusual for a big company. It appears that Byju’s may have broken the law. They may have ignored rules on reporting fraud, according to the Companies Act.
2. Probe into Byju’s Money (2023-2024)
• The government is checking Byju’s money. They can take property and trace how the money moved, using a law called FEMA.
• It’s suspected that Byju’s moved about 9,000 crore rupees illegally.
• If found guilty, Byju’s will pay big fines, lose property, and some people may go to jail.
3. Supreme Court Decision (2013)
• The Supreme Court said that lying about money is fraud. That was in the Satyam case.
• Byju’s might face the same thing, and their leaders could be held responsible.
4. Other Legal Problems
• Byju’s is in trouble. People say the company tricked investors, which is against the law.
• Investors sued Byju’s. They said the company was badly run. The case is still in court.
Conclusion
What’s happening with Byju’s is a serious eye-opener. It highlights the risks facing not just online learning platforms in India, but also new startups trying to grow too fast. The company’s issues show that focusing too much on high value, hiding financial details, and ignoring good company rules can ruin even great ideas. Byju Raveendran, once seen as a star in India’s business world, now has many serious problems: legal, financial, and with his reputation.
The government is taking action, but this is just the start. Will Byju’s fail, or will it be saved? It depends on government checks, realistic investors, and a big change toward following the rules and being responsible.
India needs to update its rules for new businesses. The changes should make audits better, protect investors, and ensure companies are open about money. As the courts and government look at Byju’s financial records, this case could change how India deals with business fraud and financial rules in the future.
FAQs
1. What bad money stuff is Byju’s accused of?
• Byju’s is accused of making its sales look bigger than they were. They used tricky accounting.
• They were late in giving the financial reports to accountants for review.
• They broke rules about getting money from other countries.
• They misused loan money.
• They told investors and government officials things that weren’t true.
2. Did any government group take action against Byju’s?
Yes. One group called the Enforcement Directorate (ED) is investigating them for breaking rules about foreign money. Another group, the Ministry of Corporate Affairs, is looking into their financial reports because they seem wrong. A court called NCLT is listening to investors who say Byju’s was badly run.
3. What legal trouble might Byju’s face?
• Byju’s could get large fines. This is if they used money from other countries the wrong way.
• Byju’s might be called cheaters. This is all because of rules found in part 447 of the Companies Act. That part of the law explains these rules.
• If Byju’s broke its promises, people who lent them money or invested could sue.
• If Byju’s did something really bad with money, the company or its leaders could face criminal charges.
4. How does this affect Byju’s users and employees?
Many employees lost their jobs and didn’t get their final pay. Lots of teachers and trainers aren’t getting paid. People who use Byju’s might find it harder to get help or good service.
5. Can Byju’s recover from this?
It’ll be hard, but it’s not impossible. They need to fix their finances, get new leaders, solve their legal problems, and make investors trust them again.
6. What can other new Indian businesses learn from this?
• It’s really important to get your finances reviewed on time and be open about them.
• Follow all the rules set by the RBI, FEMA, and the Companies Act.
• Have good business rules and an independent board to watch over things.
• Focus on steady growth, not just how much the business is worth.
