NCLAT declines to lift stay on NCLT order barring Aakash from amending AoA

The National Company Law Appellate Tribunal has declined to lift the stay on the NCLT order, barring amendment of the Articles of Association of Aakash Educational Services, a subsidiary of the debt-ridden edtech major Byju.

Disposing the petitions moved by Manipal Health Systems and Aakash Educational Services, the Chennai bench of the National Company Law Appellate Tribunal (NCLAT) on Friday asked them to file applications before the National Company Law Tribunal for vacating the order passed on November 20, 2024.

A two-member bench granted them a week to file it and also directed the National Company Law Tribunal (NCLT) to decide it within three weeks thereafter.

Moreover, the status quo would continue as directed by the Supreme Court in this matter, a 14-page-long NCLAT order said.

An extraordinary general meeting (EGM) of Aakash Educational Services was scheduled to be held on November 20 to consider and approve alteration in the AoA, which was objected to by the minority shareholders.

However, on the same day on November 20, 2024, the Bengaluru bench of NCLT stayed the resolution related to amendment in the AoA of Aakash Educational Services, which allegedly seeks to dilute the rights of minority shareholders, including Blackstone-backed Singapore VII Topco.

This was later challenged before the High Court of Karnataka by Aakash, which stayed the order of the NCLT.

However, later the Supreme Court on November 29 prevented the amendment of Articles of Association (AoA).

The Apex Court had directed Akash to approach the NCLAT within seven days and said that the stay on implementing the EGM resolution over alteration in the AoA will remain in effect until the appellate tribunal hears the appeal.

On Friday, hearing the matter, the appeal filed by both parties Aakash Educational Services and Manipal Health Systems, the NCLAT observed that while passing the stay order, it had "not considered the arguments and assigned reasons".

The NCLAT said, "Assigning of the reason is the basic guiding principle for the Court of Law to justify the logic, as to what has transpired under the given set of circumstances to pass an order, which impeaches upon the rights of the either of the parties to the proceedings".

The NCLAT further said both the parties have agreed that a consenting order is being passed and it would be open for the appellant to file an appropriate Stay Vacation Application before the learned Adjudicating Authority (NCLT) seeking vacation of the order dated November 20, 2024.

The appellate tribunal said it could be filed within one week and "if it is filed within the aforesaid time period, the tribunal is requested to decide the aforesaid Stay Vacation Application, considering all the contentions, even the one raised in this Company Appeal, within a period of three weeks thereafter".

The NCLAT clarified that whatever observations by it in the matter, would not have any effect while taking a decision by the NCLT over the stay application.

The NCLT has stayed the alteration of AOA over a petition filed by Singapore VII Topco I Pte Ltd and others under Sections 241, 242 and 244 of the Companies Act, which protects the rights of minority shareholders.

They had requested to direct Aakash Educational Services not to take up agenda item no 8 in the EGM, which was for "alternation" of the AoA.

The petitioners, including Singapore VII Topco I, which holds 6.97 per cent of the stake in Aakash Institute, alleged that their rights and interests were being oppressed.