Supreme Court slams brakes on Aakash Institute's AoA amendment plan

The legal battle centers around a petition by Singapore VII Topco, a Blackstone-backed entity holding 6.97% in Aakash. The petitioners argue that the move is aimed at diluting their stake in Aakash, a key asset for Byju’s financial stability.

In a setback for Byju's and its subsidiary Aakash Institute, the Supreme Court on November 29 stayed Aakash Educational Services’ controversial resolution to amend its Articles of Association (AoA). The move is allegedly being seen by its minority shareholders as a bid to sideline them and facilitate a stake sale in the edtech subsidiary.

The Supreme Court’s decision follows a similar ruling by the National Company Law Tribunal (NCLT), which had blocked the resolution on November 20, citing potential violations of shareholder rights. However, this was later stayed by the Karnataka High Court on November 25.

NCLT stays Aakash from amending its AoA, halting Byju's alleged attempt to dilute stake

A Bench led by Chief Justice Sanjiv Khanna and Justice PV Sanjay Kumar directed Aakash Institute to approach the National Company Law Appellate Tribunal (NCLAT) within seven days, as per a report by Bar and Bench.

The stay on the implementation of the Extraordinary General Meeting (EGM) resolution will remain in place until the first hearing at the NCLAT, preventing Aakash from proceeding with changes that could potentially dilute minority investors’ stakes.

Aakash and Manipal Health Systems, a majority shareholder in the subsidiary, told the Supreme Court that they would no longer pursue the writ petition in the Karnataka High Court against the NCLT order. The NCLAT has been instructed to decide the case independently, unaffected by the Karnataka High Court’s interim stay on the NCLT decision.

Karnataka High Court stays NCLT order barring Aakash from amending AoA

The legal battle revolves around a petition filed by Singapore VII Topco, a Blackstone-backed entity holding a 6.97 percent stake in Aakash, which argued that the amendment to the AoA would violate its rights under a previous Merger Framework Agreement (MFA).

The petitioners contend that Byju’s attempt to amend the AoA was designed to dilute their holdings in Aakash, a profitable business on which the ed-tech firm has come to depend for its valuation and stability amid financial troubles.

Aakash, however, maintains that the investors’ rights have been nullified due to the failure of the merger process and that they have no claim to the company’s governance structure. It also pointed out that Byju’s parent company, Think and Learn, has initiated arbitration proceedings at the Singapore International Arbitration Centre (SIAC) in relation to the dispute.

The NCLT’s November 20 ruling had instructed Aakash to refrain from enforcing the resolution until the main petition is resolved, underscoring the seriousness of the allegations and the potential impact on Aakash’s shareholder structure.