NCLT blocks Aakash’s attempt to change Articles of Association amid BYJU’S issue
The NCLT order was issued in response to a petition filed by Blackstone, a minority investor in Aakash Educational Services, which argued that it was being “deprived of all their rights”.
The NCLT Bengaluru Bench on Wednesday ordered Aakash Educational Services Limited (AESL) not to implement any decisions made during an Extraordinary General Meeting on November 20 concerning the removal of Part-B of its Articles of Association.
The order was issued in response to a petition filed by Blackstone, a minority investor in AESL, through its entity Singapore VII Topco I Pte. Ltd. Blackstone argued that despite holding a 6.97% equity stake in AESL, they were “being deprived of all their rights”.
“In view of the above and in the interests of justice, this Tribunal directs the Respondents No.1 to 11 not to give effect to the resolutions, if passed, in relation to the Agenda Item No.8 in the Extra Ordinary General Meeting to be held on today i.e. 20.11.2024, till the disposal of the main Petition,” the National Company Law Tribunal (NCLT) order noted.
Respondents 1 to 11 include AESL, its CEO Deepak Mehrotra, Manipal Health Systems Private Limited, and J.C. Chaudhry. Agenda Item 8 involves a proposal to entirely remove Part-B of AESL’s Articles of Association (AoA).
The AoA are a set of rules that govern a company’s management and operations, and they define the rights and responsibilities of shareholders.
Lawyers representing Blackstone stated that although the investor's stake in AESL has been reduced to 6.97% from the initial 38.5%, their rights under Part B are being proposed for removal, which violates Article 146. This article guarantees that the minority investor will retain its rights as long as it holds shares in AESL.
In 2021, BYJU’S acquired AESL for approximately $950 million, with around 70% of the deal paid in cash and the remaining portion meant to be adjusted against its parent Think and Learn Private Limited’s equity.
The Delhi-based test preparation firm is now said to be valued at approximately $700 million, with Ranjan Pai holding a 40% stake as the largest shareholder. In July, the Competition Commission of India approved the allotment of an equity stake in AESL to Pai’s Manipal Group.
In prior hearings, BYJU’S lenders and investors claimed the edtech’s former management sought to dilute their stake in AESL by changing the AoA, arguing that BYJU’S depended on AESL for its value.
The petitioners accused Manipal Group of collaborating with the company to violate their rights.
AESL and its shareholders argued the investors had no rights due to the failed Merger Framework Agreement (MFA) and ongoing arbitration, but the petitioners maintained they retained shareholder rights regardless of the MFA.
The case will be reviewed further on December 19 as the respondents’ lawyers acknowledged the notice and requested three weeks to submit objections. The petitioners will then have an additional week to respond, if needed.
Edited by Kanishk Singh