The Union Ministry of Corporate Affairs will be exploring the possibility of involving the Serious Fraud Investigation Office (SFIO) to look into the irregularities at Think and Learn Pvt. Ltd, including auditor resignation and delayed financial reporting. Think and Learn Pvt. Ltd runs the edtech firm Byju’s.
The ministry has already examined the legalities and the procedures for making a reference to SFIO over the last few days, a Mint report said.
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In June, Deloitte Haskins and Sells resigned as Byju’s auditor citing a delay in submitting financial statements. Directors – GV Ravishankar, Russell Dreisenstock and Vivian Wu — also resigned from Byju’s board.
After quitting, Deloitte explained its inability to commence an audit for FY22 financial statements due to delays in accessing financial statements and the underlying books of account. It said financial statements for FY22 should have been placed before shareholders at an annual general meeting by September 2022.
However after quitting, Deloitte noted that there was no ‘non-cooperation by the management’, ‘financial irregularities’ or ‘fraud’ in the company. This factor is crucial for the government’s regulatory response to the alleged compliance defaults in the edtech company.
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Resigning statutory auditors are also required to inform the authorities about the circumstances of their decision, the report said.
Under Section 143 of the Companies Act, a statutory auditor quitting an audit assignment must report to the government any fraud in the company if he has reason to believe that such a thing is happening.
Although the Registrar of Companies (RoC) is empowered to inspect books of accounts, the ministry considers SFIO for a probe as it is armed with experts across disciplines, including accountancy, forensic auditing, information technology, banking, law, capital markets and taxation.
Crisis management
Earlier this week, Byju’s founder Byju Raveendran organised an extraordinary general meeting (EGM) of the crisis-ridden edtech company in a bid to address ongoing company issues.
In the meeting, Raveendran told shareholders that it will be forming a Board Advisory Committee (BAC) to provide advice and guidance to the CEO on matters pertaining to the composition of the board and the governance structure suitable for Byju’s.
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“The BAC will serve as a working group consisting of independent directors with credible backgrounds and relevant experience from diverse corporate fields,” Raveendran told shareholders.
During the meeting, Byju’s shareholders, investor representatives sought updates on the Aakash IPO timeline, the company’s audit, progress regarding the TLB resolution, and the long-pending fundraising efforts.
Byju’s has been in middle of a storm since December last year with its term loan B lenders. Both the parties, Byju’s and the bondholders, have sued each other in different courts in the US.
Newly appointed CFO Ajay Goel said that the company’s newly-appointed auditor BDO, has already begun the audit for Aakash Educational Services, WhiteHat Junior, Think & Learn and the overall consolidated group. Byju’s, however, is yet to file BDO’s appointment officially with the Ministry of Corporate Affairs (MCA). Goel said that BDO has allocated “significant resources” for the audit.
