Karnataka HC lifts NCLT freeze on Aakash Educational Services stake sale

Industry:    1 week ago

The Karnataka High Court on Tuesday quashed an order of status quo on the shareholding of Aakash Educational Services Limited (Aakash) and sent the matter back to National Company Law Tribunal (NCLT) Bengaluru for consideration.

NCLT Bengaluru had on March 27 ordered status quo on the shareholding of Aakash. This was on the basis of a plea by the resolution professional of parent company Byju’s Think and Learn Pvt Ltd.

Tuesday’s order was given by Justice M Nagaprasanna of the Karnataka High Court. Aakash has been told to not dilute the shareholding of Byju’s until the case is decided by the NCLT.

The National Company Law Appellate Tribunal (NCLAT) had in December last year sent the matter to NCLT after Aakash told the appellate tribunal that its move to amend Articles of Association (AoA) was aimed at infusing funds by selling equity and saving the firm from going “down the path” of Byju’s — the debt-ridden edtech firm that owns Aakash.

But the NCLAT did not set aside the NCLT order halting Aakash from amending its AoA and sent the matter back to NCLT.

The appellate tribunal had, however, allowed Aakash to move an application before the NCLT for relief and told the NCLT to decide the matter in three weeks from the date of application.

 

Aakash’s counsel argued before the appellate tribunal that it was vital for their survival and future growth to amend the AoA.

 

AoAs outline the rules and regulations that govern a firm’s operations and define its purpose.

 

The proposed amendments allegedly sought to dilute the rights of minority shareholders, including Singapore VII Topco I Pte Ltd, owned by Blackstone, which holds a 6.97 per cent stake in Aakash. Blackstone had alleged that its rights and interests were being violated.

 

The dispute revolves around proposed amendments to Aakash’s AoA. This was reportedly first raised during an extraordinary general meeting. Minority shareholders, including Blackstone, filed a mismanagement and oppression petition with the NCLT. They claimed the amendments violated their rights under a prior merger framework agreement (MFA).

 

On November 25, 2024, the Karnataka HC stayed an NCLT order that barred Aakash from passing a resolution to amend its AoA.

 

The resolution was an attempt to reduce the influence of minority shareholders, the investors had argued. They reportedly accused Byju’s, which has a stake in Aakash, of trying to give a greater say to big investors like Manipal Education.

 

Aakash had challenged the NCLT order in the Karnataka High Court, arguing that the tribunal had failed to provide sufficient reasons for halting the resolution. The high court granted an interim stay on the NCLT order. However, it clarified that this stay should not be interpreted as the final opinion on the matter.

 

The Supreme Court, on November 29 last year, barred Aakash from implementing a resolution to amend its AoA passed at its EGM. It had sent the matter to NCLAT.

 

In 2021, Byju’s acquired 35-year-old brick-and-mortar coaching centre Aakash for nearly $1 billion in a cash-and-stock deal. However, Byju’s, which was valued at $22 billion in 2022, has seen its fortunes dwindle. This is due to various regulatory issues and disputes with investors, triggering the firm’s insolvency.
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