SFIO may look into auditor resignation, irregularities at Byju’s, says report

The Union Ministry of Corporate Affairs is actively exploring the possibility of engaging the Serious Fraud Investigation Office (SFIO) to investigate alleged irregularities at Think and Learn Pvt. Ltd, the parent company of leading edtech firm Byju's. This decision comes in the wake of auditor resignations and delayed financial reporting, raising concerns about compliance issues within the organisation.

The report comes amid various news reports that EPFO data indicated that payments of Rs 39 crore were made for nine months, from September 2022 to May 2023 in June 2023. These reports had been denied by Byju’s.  The EPFO laws stipulate that a company must deposit PF funds by the 15th of the following month. Any delay could incur penalties ranging from 5 to 100 per cent of the actual amount

According to a recent report by Mint, the ministry has spent the past few days examining the legalities and procedures involved in referring the matter to SFIO. The move underscores the seriousness with which the government intends to address the alleged irregularities at Think and Learn Pvt. Ltd.

In June, Deloitte Haskins and Sells, the auditor for Byju's, resigned from their role, citing a delay in submitting financial statements. Additionally, directors GV Ravishankar, Russell Dreisenstock, and Vivian Wu also stepped down from Byju's board during the same period.

Deloitte clarified that its inability to commence an audit for the financial year 2022 was due to delays in accessing financial statements and the underlying books of account. They emphasised that there were no instances of non-cooperation, financial irregularities, or fraud on the part of the company. However, as per regulations, resigning auditors are required to inform the authorities about the circumstances surrounding their decision.

Under Section 143 of the Companies Act, if a statutory auditor resigning from an assignment has reason to believe that fraud is occurring within the company, they are obliged to report it to the government. While the Registrar of Companies (RoC) possesses the authority to inspect books of accounts, the ministry deems SFIO suitable for this investigation due to its pool of experts in various disciplines, including accountancy, forensic auditing, information technology, banking, law, capital markets, and taxation.

In a separate development earlier this week, Byju's founder Byju Raveendran convened an extraordinary general meeting (EGM) in an attempt to address the ongoing issues within the embattled edtech company. During the meeting, Raveendran disclosed plans to establish a Board Advisory Committee (BAC) aimed at providing guidance and advice to the CEO regarding board composition and governance structures that would be conducive to Byju's.

The involvement of SFIO, known for its multidisciplinary expertise, signals the government's intent to thoroughly investigate the alleged compliance defaults and irregularities at Think and Learn Pvt. Ltd. As the situation unfolds, stakeholders eagerly await the outcomes of these inquiries, which have far-reaching implications for the edtech sector and corporate governance in the UK.