Supreme Court pulls up Karnataka High Court for frequently interfering with NCLT orders

The Supreme Court on Friday criticised the Karnataka High Court for repeatedly interfering with orders of the National Company Law Tribunal (NCLT), despite the availability of appellate remedies before the National Company Law Appellate Tribunal (NCLAT). .The observations were made while hearing an appeal filed by Byju's challenging a Karnataka High Court order that had set aside an NCLT directive to maintain status quo on the shareholding of Aakash Education Services Limited (Aakash Institute).Byju's chose to withdraw the plea after the top court expressed its reluctance to entertain it. A Bench of Justices PS Narasimha and Joymalya Bagchi proceeded to dismiss the plea as withdrawn. "We are not inclined to interfere with the order of the High Court. The SLP is dismissed as withdrawn. However, we observe that there was no justification for the Karnataka High Court to interfere with the order of the NCLT," the Court added. The Bench also took note of similar past interventions by the Karnataka High Court, which had been subsequently overturned by it. .The case concerned a long-running corporate tussle surrounding the shareholding of Aakash Institute, currently controlled by Manipal Systems, with significant stakes held by Byju’s (Think & Learn) and Singapore Topco (a Blackstone-backed entity)The NCLT had on March 27 passed a status quo order on Aakash’s shareholding pattern to prevent any dilution of Byju’s stake, after it raised concerns that a proposed amendment to Aakash’s Articles of Association would reduce its shareholding. Soon after, the Karnataka High Court quashed the NCLT order, holding that Aakash was not given an opportunity to be heard. Justice M Nagaprasanna remitted the matter back to the NCLT for fresh consideration, while recording Aakash's undertaking that it will not dilute Byju’s stake till April 30. On April 30, Aakash told the NCLT that it was continuing the undertaking further. The tribunal proceeded to adjourn the case till June 6. This was also taken note of by the Supreme Court today when it decided not to interfere in the matter. .Aakash is facing legal challenges over an attempted amendment to its Articles of Association (AoA). Blackstone-backed Singapore Topco, a shareholder in Aakash, opposed the amendment, fearing that the same would significantly dilute its 6.8% stake. This stemmed from a merger agreement with Byju's through which Topco acquired its shares.Glas Trust, which is one of Byju's lenders, also raised concerns, arguing that the amendment was a move by former Byju's management to dilute the company's valuable stake in Aakash. Glas Trust emphasised that Aakash is a crucial asset for Byju's.Aakash defended the amendment, stating it was necessary to secure funding for the company. Manipal Systems is currently the largest stakeholder in Aakash..The NCLT had initially restrained Aakash from implementing the amendment. However, the Karnataka High Court subsequently stayed the NCLT order, allowing Aakash to proceed.Singapore Topco challenged the High Court's authority to intervene in the matter before the Supreme Court, which then directed Aakash to halt the implementation and approach the NCLAT for resolution.The NCLAT refused to modify the stay order and directed Manipal Systems and Aakash to file an application to vacate the stay before the NCLT instead.Aakash subsequently filed a petition in the NCLT to vacate the stay. However, Singapore Topco chose to withdraw its objection, before the NCLT could adjudicate on the issue.Appeals are currently pending before the NCLAT Chennai over this issue..Think & Learn (Byju's) was represented by Senior Advocate Paramjit Patwalia. .The respondents were represented by Senior Advocates Gopal Subramanium and Abhishek Manu Singhvi.