NCLAT sends Aakash-Byju’s dispute back to NCLT amid minority shareholder tensions
- The tribunal has asked Aakash to file its application within one week and requested the NCLT Bengaluru bench to decide on the matter within three weeks.
The National Company Law Appellate Tribunal (NCLAT) on Friday declined to stay an order from the National Company Law Tribunal (NCLT) barring Aakash Educational Services, a subsidiary of the embattled edtech giant Byju’s, from amending its Articles of Association (AoA). The amendments had sparked a legal battle with minority shareholders, led by Blackstone, alleging an infringement of their rights.
The proposed changes to the AoA allegedly aimed to dilute the rights of minority stakeholders, including Singapore VII Topco I Pte Ltd, an entity owned by Blackstone, which holds a 6.97% stake in Aakash. Blackstone accused Aakash of violating its rights under a prior merger framework agreement (MFA).
In its ruling, the NCLAT directed Aakash and its largest shareholder, Manipal Health Systems, to approach the NCLT with a plea to vacate the restriction on the amendments. The tribunal asked Aakash to file its application within one week and requested the NCLT Bengaluru bench to decide on the matter within three weeks.
The appellate tribunal’s decision follows a 29 November directive from the Supreme Court, which instructed Aakash to approach the NCLAT for resolution while barring any AoA amendments until the issue was decided.
The Supreme Court’s involvement followed Blackstone’s appeal against a 25 November Karnataka High Court ruling that permitted Aakash to proceed with the amendments despite opposition from minority shareholders.
The top court had clarified that the high court’s order would not affect the NCLAT’s decision-making process.
Case background
The dispute traces back to proposed amendments raised during an extraordinary general meeting (EGM) of Aakash. Minority shareholders, including Blackstone, filed a petition with the NCLT alleging mismanagement and oppression, arguing that the changes would dilute their stake in Aakash—a profitable entity that Byju’s acquired in 2021 for $1 billion.
The investors contend that Byju’s, struggling with mounting debts and operational challenges, relies heavily on Aakash for valuation stability. Concerns were also raised about Byju’s founder, Byju Raveendran, being allowed to represent Think & Learn Pvt. Ltd., Byju’s parent company, in Aakash’s affairs.
Aakash countered these claims, asserting that the MFA, which formed the basis of the shareholders' stakes, had failed to materialize as planned, leaving minority investors without substantive rights in the company. Aakash also revealed that Think & Learn had initiated arbitration proceedings at the Singapore International Arbitration Centre (SIAC) over the matter.
In November, the NCLT restrained Aakash from implementing the amendments, citing potential harm to minority shareholders. Aakash subsequently challenged the order in the Karnataka High Court, which overturned the NCLT’s decision and allowed the amendments to proceed. Blackstone and other minority shareholders then escalated the matter to the Supreme Court.
On Friday, the NCLAT remanded the case back to the NCLT for a final decision.
Share swap and governance concerns
Aakash’s governance troubles stem from its acquisition by Byju’s in April 2021 in a deal involving 70% cash and 30% equity. Under the agreement, Aakash’s promoters—the Chaudhry family—and Blackstone were to receive shares in Think & Learn.
However, the share swap faced hurdles after the Chaudhry family refused to exchange their remaining stake, citing governance concerns. Byju’s later issued a legal notice to the family.
Adding to the complexity, Ranjan Pai, chairman of Manipal Education and Medical Group, emerged as Aakash’s largest shareholder in 2023 after converting a $300 million investment into equity. Pai’s total investments of $500 million between 2022 and 2023 were aimed at helping Byju’s clear debts and fund operations.
Pai now holds a 39% stake in Aakash, while Think & Learn owns 26%, Byju Raveendran 17%, and the Chaudhry family and Blackstone 10% and 8%, respectively.
In March, Think & Learn and Aakash withdrew their merger petition from the NCLT, further clouding the governance and ownership dynamics of the company.
For Byju’s, Aakash represents a critical source of valuation and operational stability as the edtech firm faces financial headwinds. But Aakash's minority shareholders argue that Byju’s governance decisions, including the proposed amendments, prioritize its survival over shareholder rights.
Catch all the Business News , Corporate news , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
Business NewsCompaniesNewsNCLAT sends Aakash-Byju’s dispute back to NCLT amid minority shareholder tensions
First Published:6 Dec 2024, 04:18 PM IST
- Top Gainers
- Top Losers
- 52 Week High