NCLT Bengaluru rejects plea by Byju’s RP to stay Aakash EGM, rights issue

The National Company Law Tribunal (NCLT) at Bengaluru on October 17 declined to stay the Extraordinary General Meeting (EGM) of Aakash Educational Services Ltd (AESL) slated to be held on October 29 [Think & Learn Vs Aakash Education Services Limited]..A Bench of Judicial Member Sunil Kumar Aggarwal and Technical Member Radhakrishna Sreepada rejected the plea by Think & Learn Pvt Ltd (Byju’s) seeking a stay on the proposed EGM where a rights issue is to be considered.Byju's is one of the shareholders in AESL. This was the second petition filed by Byju's under Sections 241–242 of the Companies Act, 2013 alleging oppression and mismanagement by AESL..Byju’s, represented by Senior Advocate Abhinav Vasisht, argued that AESL’s Board has been convening meetings in violation of Part B of the Articles of Association (AoA) and ignoring Byju’s participation and veto rights. Despite an NCLT order dated November 19, 2024 in a prior insolvency case, the AESL Board was now allegedly attempting to dilute Byju’s shareholding from 25.75% to below 5% through the rights issue, it was contended.This dilution would severely prejudice Byju’s since its stake in AESL represents a major corporate asset during the ongoing corporate insolvency resolution process (CIRP), it was submitted.Hence, the resolution professional sought an immediate injunction against the rights issue and the EGM..Appearing for AESL, Senior Advocates UK Chaudhary and CK Nandakumar opposed the maintainability of the fresh petition. They argued that the second oppression and mismanagement petition was filed while the first petition was still at the stage of arguments on maintainability. Senior Advocates Arun Katpalia and Dhyan Chinnappa, appearing for the respondents, submitted that the NCLT, in a Section 241–242 petition, must safeguard the affairs of the company concerned — AESL — and not those of its shareholder undergoing CIRP.They further stated that AESL’s Articles of Association were no longer workable after expiry of earlier frameworks and that Byju’s could not rely on the 2024 NCLT order as AESL was not a party to those proceedings.It was also contended that AESL’s Board decided on the rights issue to raise funds due to banks’ unwillingness to lend amid shareholder disputes and financial stress. .The Bench declined to interfere with the EGM at this stage and noted that it must refrain from detailed observations since similar issues were pending in the earlier petition.It held that a rights issue cannot be termed unequitable merely because a shareholder may not be able to participate. Accepting such a contention would undermine the company’s independent decision-making, the NCLT said."We have considered the relevant materials without delving further given the piquant situation, we do not think that the Petitioner should be favoured with the Interim order," the tribunal said. .The matter will next be heard on November 12 along with the earlier petition..Vashisht was briefed by a team from Chandhiok & Mahajan comprising Pooja Mahajan, Arveena Sharma, Ichchha Kalash, Hari Krishna Pramod, Aishwarya V Ravindranath, Samridhi Shrimali, Akshita Sachdeva Jaitly and Sparsh Jain..[Read Order]