Amidst the escalating legal woes of edtech giant BYJU’S, an arbitrator has issued an order instructing the company to refrain from selling 4 million shares of its subsidiary, Aakash Educational Services. This development stems from Ranjan Pai’s MEMG Family Office initiating arbitration proceedings against BYJU’S last month, alleging breach of terms of a $42 million loan agreement, as reported by Reuters.

Under the terms of the loan agreement, BYJU’S was obligated to transfer a specified number of shares of Aakash Education to MEMG Family Office. However, BYJU’S failed to fulfill this obligation, citing delays in obtaining necessary approvals from certain investors.

The arbitrator, appointed under the Singapore International Arbitration Centre rules, has directed BYJU’S to withhold the sale of the 4 million shares, which represent a 6% stake in Aakash Education, in accordance with the loan agreement.

Despite the legal dispute, sources within BYJU’S have indicated that there is no hostility between the company and the investor. It is emphasized that Ranjan Pai’s move to initiate arbitration proceedings is aimed at safeguarding his interests in Aakash Education, of which he recently became the largest shareholder with a 40% stake, following a substantial investment of over $300 million earlier this year.

This recent legal tussle adds to the litany of challenges faced by BYJU’S in recent times. In January of this year, lenders of BYJU’S $1.2 billion Term Loan B objected to Ranjan Pai’s acquisition of a stake in Aakash Education, prompting them to seek legal recourse. However, a civil court in Bengaluru dismissed the lenders’ plea for an ex-parte injunction, allowing Pai’s transaction to proceed.

Aakash Education holds significant strategic importance for BYJU’S. Recent reports suggest that the coaching institute is poised for substantial growth, with operating revenue projected to surge by over 60% year-on-year to INR 2,325.1 crore in FY23. Net profits are also expected to witness a substantial increase, reaching INR 330 crore from INR 79.5 crore in the previous fiscal year.

Despite its once lofty valuation of $22 billion, BYJU’S has been grappling with a myriad of challenges. These include board member exits, legal battles with investors and lenders, insolvency proceedings, delayed financial filings, mounting losses, and cash flow issues leading to delays in employee salary payments.