SC directs Aakash Educational Services not to implement AoA amendment plan

Minority shareholders of Aakash have alleged that the company was trying to dilute their shareholding in the company by amending the Articles of Association (AoA)

The Supreme Court on Friday stopped Aakash Educational Services from implementing a resolution seeking to amend its articles of association (AoA) that was passed at its extraordinary general meeting (EGM).

 

Articles of association outline the rules and regulations that govern a firm's operations and define its purpose. 

 

The proposed amendments allegedly sought to dilute the rights of minority shareholders, including Singapore VII Topco I Pte Ltd, owned by Blackstone, which holds a 6.97 per cent stake in Aakash. Blackstone had alleged that its rights and interests were being violated.

 

A Bench comprising Chief Justice of India Sanjiv Khanna and Justice PV Sanjay Kumar directed Aakash to approach the National Company Law Appellate Tribunal (NCLAT) in seven days, according to the report by law platform Bar & Bench. The stay on implementation of the resolution will remain in place till the first date of hearing of the appeal before the NCLAT.

 

Aakash Institute and Manipal Health Systems informed the apex court that they would not be pursuing the writ petition in the Karnataka High Court against the National Company Law Tribunal (NCLT) order.

 

The NCLAT has been directed to decide the case uninfluenced by the decision of the High Court. Aakash declined to comment on the matter.

 

The dispute revolves around proposed amendments to Aakash’s AoA. This was reportedly first raised during an EGM. Minority shareholders, including Blackstone, filed a mismanagement and oppression petition with the NCLT. They claimed the amendments violated their rights under a prior merger framework agreement (MFA). 

On November 25, Karnataka High Court stayed an NCLT order that barred Aakash from passing a resolution to amend its AoA.

The resolution was an attempt to reduce the influence of minority shareholders, the investors had argued. They reportedly accused Byju’s, which has a stake in Aakash, of trying to give a greater say to big investors like Manipal Education. 

Aakash challenged the NCLT order in the Karnataka High Court, arguing that the tribunal had failed to provide sufficient reasons for halting the resolution, according to the Bar & Bench report. The High Court granted an interim stay on the NCLT order. However, it clarified that this stay should not be interpreted as a final opinion on the matter.

 

In 2021, Byju's (Think & Learn) acquired 35-year-old brick-and-mortar coaching centre AESL for nearly $1 billion in a cash-and-stock deal. However, Byju’s, which was valued at $22 billion in 2022, has seen its fortunes dwindle. This is due to various regulatory issues and disputes with investors, triggering the firm’s insolvency.