The Supreme Court Today (Nov 29) directed Aakash Institute not to give effect to the Extraordinary General Meeting (EGM) resolution to amend its Articles of Association (AoA). A Bench of CJI Sanjiv Khanna and Justice PV Sanjay Kumar directed Aakash Education to approach the National Company Law Appellate Tribunal (NCLAT) in seven days. The stay on implementation of the resolution will remain in place till the first date of hearing of the appeal before the NCLAT.
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NEW DELHI: The Supreme Court of India on Friday ordered Aakash Institute to refrain from implementing the resolution passed during its Extraordinary General Meeting (EGM) to amend the Articles of Association (AoA).
The Bench comprising Chief Justice of India (CJI) Sanjiv Khanna and Justice PV Sanjay Kumar instructed Aakash Education to approach the National Company Law Appellate Tribunal (NCLAT) within seven days. Notably, the stay on the resolution’s enforcement will remain effective until the NCLAT hears the appeal.
The court also noted that Aakash Institute and Manipal Health Systems had agreed not to pursue their writ petition in the Karnataka High Court challenging an earlier order by the National Company Law Tribunal (NCLT).
NCLAT to Hear Case Uninfluenced by High Court Decision
The Supreme Court directed that the NCLAT should adjudicate the matter independently, uninfluenced by the Karnataka High Court’s decision. The directive highlights the need for a fair and objective assessment of the dispute.
Prominent legal representation was noted in the case.
Senior Advocates Kapil Sibal and Maninder Singh represented Singapore Topco, while Senior Advocates Gopal Subramanium, Abhishek Manu Singhvi, and Neeraj Kishan Kaul appeared on behalf of Aakash Institute and Manipal Health Systems.
Background: Karnataka High Court’s Interim Stay
On November 25, 2024, the Karnataka High Court granted an interim stay on the NCLT’s November 20, 2024, order, which had restrained Aakash from implementing the proposed amendments to its AoA. These amendments, introduced during the EGM, were alleged to dilute the shareholding rights of specific investors.
In its challenge before the High Court, Aakash argued that the NCLT had failed to provide adequate reasoning for halting the resolution’s enforcement. Justice Hemant Chandangoudar, presiding over the matter, supported this contention, stating:
“It is settled law that reasons are an objective expression of an opinion, and the Tribunal [must] substantiate their orders in the interest of legality, propriety, and adherence to principles of natural justice.”
While granting the interim stay, the High Court clarified that this order should not be construed as a conclusive opinion on the merits of the case.
NCLT’s Findings and the Shareholder Dispute
The NCLT’s November 20, 2024, order was issued in response to a petition filed by Singapore VII Topco I PTE LTD, an entity under Blackstone, holding a 6.97% stake in Aakash. The petition raised concerns that the proposed AoA amendments violated shareholder rights established under a previously agreed Merger Framework Agreement (MFA).
The petitioners contended that the amendments aimed to dilute their stake in Aakash, a profitable subsidiary of Byju’s, acquired for $1 billion in 2021.
They argued that Byju’s, grappling with financial challenges, relied heavily on Aakash’s valuation and operational stability to sustain its position.
Aakash’s Defense and Ongoing Arbitration
On the other hand, Aakash Institute and its shareholders maintained that the investors’ stake was derived from the MFA, which failed to materialize as originally planned.
Consequently, they argued, these investors held no enforceable rights within the company.
Additionally, it was revealed that Think and Learn, the parent company of Byju’s, had initiated arbitration against Aakash in the Singapore International Arbitration Centre (SIAC) concerning the matter.
Interim Relief from NCLT
In its earlier order, the NCLT directed Aakash to halt the enforcement of the EGM resolution until the primary petition was resolved. This directive underscored the need to protect shareholder rights and maintain corporate governance standards amidst the ongoing dispute.
The case, now referred to the NCLAT, represents a critical juncture in the legal battle between Aakash Institute, its stakeholders, and aggrieved investors.
As the appellate tribunal prepares to hear the matter, the Supreme Court’s order ensures that the contentious resolution remains suspended, safeguarding the interests of all parties involved until a comprehensive resolution is reached.
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