In a dramatic turn of events, Aakash Educational Services defended its move to amend the Articles of Association (AoA), arguing it was vital for the company’s survival and future growth.
“We don’t want to go down the path of Think and Learn (parent of edtech major Byju's). We want to stay afloat,” Aakash’s senior counsel told the National Company Law Appellate Tribunal (NCLAT) on December 6. He explained that the company was not seeking a loan but intended to raise funds by selling more equity. The amendment to the AoA, Aakash argued, would help infuse much-needed capital and ensure the company’s survival.
The company emphasised that the proposed change was necessary to raise capital without taking on more debt. Aakash's counsel stressed that this move was essential for the company's financial health, particularly as it had over 10,000 employees and 3 lakh students.
The statement came as part of Aakash’s plea challenging the National Company Law Tribunal (NCLT) order, which had halted the company’s attempt to amend the AoA during an Extraordinary General Meeting (EGM), Bar and Bench reported. The proposed amendment, specifically a revision in reserved rights, had the potential to dilute the shareholding of existing investors, notably Singapore VII Topco I Pte Ltd, backed by Blackstone.
Supreme Court slams brakes on Aakash Institute's AoA amendment plan
Singapore VII Topco had opposed the move, claiming they were not consulted on the matter. They argued that the amendment would dilute their 6.8% shareholding in Aakash, which they had acquired through a Merger Framework Agreement (MFA) with Byju's. As per them, Byju's will not be worth anything without its stake in Aakash.
Aakash had responded by pointing out that the larger framework agreement, which had envisioned a merger between Aakash and Byju's, had never materialised. As a result, Aakash contended that the rights that Blackstone held were no longer valid. According to Aakash, the original terms of the agreement were obsolete since the merger had not gone through as planned. This, they argued, justified their move to amend the AoA and seek new sources of funding to stay afloat.
Karnataka High Court stays NCLT order barring Aakash from amending AoA
NCLAT refuse to intervene
In response, NCLAT on December 6 refused to overturn the National Company Law Tribunal's (NCLT) order, which had halted the amendment, and remanded the case back to NCLT. However, it allowed Aakash to file an application to lift the stay within a week.
NCLT has been directed to rule on the matter within three weeks.
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