SC rejects plea to stop Aakash's rights issue, reducing Byju's stake to 5%

The Supreme Court on Monday dismissed an appeal filed by US-based lender GLAS Trust Company LLC against the rights issue proposed by Aakash Educational Services Limited (AESL), clearing the way for the capital raise that will reduce Byju’s holding in the company from 25.75 per cent to about 5 per cent.

 

Byju’s parent company, Think & Learn Private Limited (TLPL), is currently undergoing insolvency proceedings and cannot subscribe to fresh shares. GLAS Trust, representing Byju’s US-based lenders, had challenged AESL’s move before the National Company Law Appellate Tribunal (NCLAT), Chennai, which rejected its plea on October 28. The lender then approached the Supreme Court, which upheld the NCLAT’s order.

 

Observing that the value of Byju’s stake “cannot be preserved if the subsidiary is commercially killed,” the NCLAT bench of Justice N Seshasayee and Technical Member Jatindranath Swain had held that the Insolvency and Bankruptcy Code (IBC) could not be used to stifle a solvent subsidiary’s operations.

 

“The spirit of the IBC is best served when companies in which a corporate debtor has shareholding are allowed to prosper, irrespective of who has controlling power,” the tribunal said. Following the dismissal of the appeal, AESL on October 29 approved an increase in its authorised share capital at an extraordinary general meeting (EGM) attended by all 11 shareholders, including the resolution professional (RP) of Byju’s. Despite the RP’s objections, the resolution was passed by the requisite majority.

 

AESL Chairman Shailesh Vishnubhai Haribhakti said the rights issue and capital infusion were vital for sustaining operations.

 

“In the interest of Think & Learn Pvt. Ltd., the rights issue is the only way Aakash can continue its operations, which ultimately protects TLPL’s investment,” he said.

 

Welcoming the verdict, Sanjay Garg, head, legal, AESL, said the ruling reaffirmed the company’s legal position.

 

“The Supreme Court’s dismissal of GLAS Trust’s appeals upholds the integrity of the process and ensures Aakash’s ability to deliver quality education. GLAS and the RP must reconsider their obstructionist stance that threatens the future of 3.7 lakh students and 10,000 employees,” he said.

 

The dispute traces back to insolvency proceedings against TLPL before the NCLT, Bengaluru, where the RP, who is EY partner Shailendra Ajmera, had sought to block AESL’s rights issue. Both the NCLT and NCLAT refused interim relief, clearing the way for AESL to proceed with its capital-raising plans now upheld by the Supreme Court.