Mumbai: Congress MP Karti Chidambaram, who has been one of the most prominent voices in the Lok Sabha for more regulation in India’s edtech space, has called the Enforcement Directorate’s (ED) raids on edtech giant BYJU’s locations in Bengaluru an ‘overreach and overkill,’ instead demanding a more thorough investigation into the company’s financial statements through Institute of Chartered Accountants of India (ICAI) or Income Tax (IT) department.
“Raids by the ED are an overreach and overkill. The ED in its official press release stated that “various incriminating documents and digital data was seized” as part of these raids. This is a standard practice to issue a statement like this: What are these incriminating documents and what do they contain?," questioned the Sivaganga Member of Parliament (MP) in an exclusive interaction with the Free Press Journal.
‘ICAI has power to review financial statements’
According to Karti, the ED should look at financial transactions involving cases of Narcotics or Terrorism instead of matters concerning foreign exchange as it’s not under their purview.
“The Financial Reporting Review Board (FRRB) under the ICAI has the power to review general purpose financial statements of enterprises and auditor’s report thereon relating to which serious accounting irregularities have been highlighted by media reports. A thorough investigation into the company’s financial statements should have been launched,” Karti added.
Karti, who has called for more scrutiny into BYJU’s finances, had written to ICAI in October 2022 urging them to probe the edtech company over alleged irregular practices ‘which fail to give a clear picture of BYJU’s income, expenses, and losses,’ while also highlighting an 18-month delay in the company releasing its FY21 financials.
BYJU’s had then attributed the delay to consolidating accounts of startups it had acquired in FY21 and FY22.
IEC not enough to scrutinise edtech sector, says Karti
On January 12, 2022, the Internet and Mobile Association of India (IAMAI) announced the formation of the Indian Edtech Consortium (IEC), a self-regulatory body that comprises organisations such as BYJU’s, Unacademy, Vedantu, upGrad, and many others in the sector, who are committed to quality and affordable education.
Under the aegis of IAMAI, these edtech startups aim to observe a common ‘code of conduct’ and have established a grievance redressal mechanism for their consumers, according to their mission statement released in January 2022.
As per an analysis conducted by EdTechReview, on January 20, 2023, a total of 16 edtech startups had laid off 8,000 employees, while another five shut down their operations in 2022, further underlying the precariousness of the edtech space.
“With the self-regulation approach adopted by the Indian Ed-Tech (Indian EdTech Consortium) industry failing to bring a halt to unfair trade practices such as misleading advertising, mis-selling, aggressive marketing, predatory lending, and misuse of automatic debit and transfers, it is time for the Government to introspect,” stated Karti, who added that he has written to the Union Education Minister regarding India’s edtech regulatory landscape on multiple occasions.
“The Government should consult a host of stakeholders such as Ed-Tech industry watchers, as well as experts in the fields of consumer rights, data protection, labour rights, etc., and bring about a comprehensive and clearly laid out regulatory mechanism for the industry,” Karti continued.
BYJU’s CEO hails company amid ED raids
While addressing the raid at its Bengaluru premises in a late-night email on April 29, BYJU’s CEO Byju Raveendran told his employees that the ED’s visit was part of an inquiry under the Foreign Exchange Management Act (FEMA), 1999.
“The information requested and furnished to the officers in connection with the FDI raised, overseas investments made, and cross-border transactions relating to branding and marketing activities by BYJU’s has previously been submitted by our authorised representatives,” stated the mail by Raveendran, a copy of which The FPJ has seen.
While praising its international acquisitions in which it invested approximately Rs 9,000 crores, Raveendran called BYJU’s the largest startup employer for creating job opportunities for over 55,000 talented professionals.
“Byju's has taken all efforts to fully comply with all applicable foreign exchange laws and all our cross-border transactions have been duly vetted,” said Raveendran’s mail.
The FPJ has sent queries to BYJU's, responses to which we are yet to receive.
