NCLAT rejects plea to stop Aakash EGM amid Byju's insolvency case

Tribunal says insolvency of Byju's cannot be used to restrict a solvent subsidiary's commercial independence as Aakash prepares for key rights issue

The National Company Law Appellate Tribunal (NCLAT), Chennai bench, on Tuesday dismissed a request from GLAS Trust Company LLC, which represents troubled edtech firm Byju’s US-based lenders, to stop the extraordinary general meeting (EGM) of Aakash Educational Services Ltd on October 29.

 

The EGM is intended to clear a rights issue that, if approved, would reduce Byju’s holding in Aakash from 25.75 per cent to about 5 per cent. Byju’s parent company, Think & Learn Pvt Ltd (TLPL), is currently undergoing the insolvency process and cannot subscribe to new shares.

 

Observing that the value of Byju's stake in Aakash cannot be preserved if the subsidiary is commercially “killed”, a division bench of Justice N Seshasayee and Technical Member Jatindranath Swain said, “...the spirit of Insolvency and Bankruptcy Code (IBC) is best served when the companies in which corporate debtor (one who owes a debt) has some shares are allowed to prosper, irrespective of who has the controlling power.”

 

It said that insolvency proceedings against Byju's cannot be used to stifle a solvent subsidiary's commercial freedom. “While it is true that IBC aims to maximise the asset value of the corporate debtor, it has not sanctioned the idea that every company in which the corporate debtor has a shareholding should sacrifice its own interest to stay, grow and sustain itself commercially for the benefit of the corporate debtor.”

 

The appellate tribunal heard detailed submissions from GLAS Trust, Aakash, and the resolution professional (RP) appointed to manage TLPL.

 

Representing GLAS Trust, Senior Advocate C Aryama Sundaram said the Aakash stake formed a crucial part of TLPL’s assets and was protected by provisions in Aakash’s Articles of Association that gave TLPL veto rights and required its nominee’s presence for valid board decisions.

 

Sundaram alleged that Aakash’s board, during a meeting on October 21, 2024, attended by Byju Raveendran without the RP’s sanction, removed these protective clauses and later amended the Articles in violation of a National Company Law Tribunal (NCLT) directive from November 19, 2024, which had restrained the company from doing so. 

He further contended that the board’s subsequent move to raise Aakash’s authorised share capital, without notifying the RP, was a deliberate attempt to dilute TLPL’s ownership. Sundaram also questioned the company’s justification for the rights issue, citing the absence of audited financial statements for FY24.

 

Appearing for Aakash, Senior Advocate Gopal Subramanium argued that the company operates as a distinct legal entity, independent of Byju’s insolvency proceedings. He said the rights issue was driven by an urgent need to secure working capital for a business that serves over 3.5 lakh students and employs around 10,000 people.

 

Subramanium maintained that the proposed issuance adheres fully to the Companies Act and offers equal participation rights to all shareholders. He added that the November 2024 NCLT restraint order was no longer operative following the withdrawal of related oppression and mismanagement petitions in February 2025. He also accused GLAS Trust and Byju’s lenders of “forum shopping” by filing multiple overlapping cases.

 

During the hearing, the bench remarked that “the matter appears to be an octopus with several tentacles.” The tribunal noted that while Aakash’s funding requirements could not be ignored, the interests of Byju’s lenders and the corporate debtor also warranted protection.

 

Before this, the Bengaluru bench of NCLT had dismissed TLPL’s plea for an interim stay on the EGM on October 17.