Karnataka High Court stays NCLT order on Aakash Institute resolution to amend Articles of Association

The Karnataka High Court on November 25 stayed the order of the National Company Law Tribunal (NCLT) directing Aakash Educational Services to not give effect to the resolution to amend the Articles of Association (AoA) that could dilute the investors' shareholding in the company. [Aakash Educational Services v. Singapore VII Topco I PTE LTD]

It was Aakash Education's contention that the NCLT's order does not give reasons as to why it halted the Extraordinary General Meeting (EGM) resolution to amend the AoA. Justice Hemant Chandangoudar agreed with the submissions of the education company, stating,

"It is settled law that reasons are an objective expression of an opinion, and the Tribunal have to substantiate their orders in interest of legality, propriety, and in adherence of principles of natural justice. Interim order as prayed for."

The Court, however, clarified that this interim order was not a final opinion on the dispute. The case is now expected to be heard on December 2 for further consideration.

Aakash Educational Services Limited was represented by Senior Advocate Dhyan Chinnappa.

The respondents were represented by Senior Advocates Kapil Sibal and Darius Khambata.

On November 20, ruling in favour of the investors of Byju's parent company Think and Learn Private Limited, the NCLT passed an order directing Aakash Institute to not give effect to the resolution to amend the AoA that could dilute the investors' shareholding in the company.

"In view of the above and in the interests of justice, this Tribunal directs the Respondents No.1 to 11 not to give effect to the resolutions, if passed, in relation to the Agenda Item No.8 in the Extra Ordinary General Meeting to be held on today i.e. 20.11.2024, till the disposal of the main Petition," the order passed by Judicial Member K Biswal and Technical Member Manoj Kumar Dubey said.

Agenda Item No.8 refers to the resolution to amend the AoA.

The order was passed in an oppression and mismanagement petition filed by Singapore VII Topco I, an entity owned by Blackstone. The entity holds 6.97% shares in Aakash Institute and alleged that its rights and interests were being oppressed.

Byju's acquired Aakash Institute in 2021 at the peak of the pandemic. Aakash was the largest acquisition by Byju's, valued at $1 billion. It continued to make profits even after the pandemic owing to its physical outlets.

Byju's lenders and investors such as Singapore VII Topco I contended that the former management of Byju's was trying to dilute their shareholding in Aakash by amending portions of AoA that protected their rights in the company.

It is their contention that Byju's would not be worth anything without Aakash institute.

However, Aakash and its shareholders contended that the investors had obtained shares as a result of a Merger Framework Agreement (MFA). The merger did not got through as planned, as a result of which they do not have any right in the company. They further argued that Think and Learn had initiated arbitration against them in the Singapore International Arbitration Centre (SIAC) in this regard.