BYJU’S Loses NCLAT Appeal in Aakash Educational Services Shareholding Case

The National Company Law Appellate Tribunal (NCLAT) has rejected a petition from BYJU’S that sought to challenge an interim order requiring that the shareholding status of Aakash be maintained as is on the edtech platform facing insolvency.

The NCLAT stated in an order from June 6 that the interim NCLT order was “interlocutory in nature” and “consensual”, rendering it unsuitable for appellate review.

To provide some context, an interlocutory order is a temporary ruling made during the hearing that does not determine the final result of the case.  It deals with particular procedural problems that come up in the course of legal proceedings, leading up to a complete hearing.

The Appellate Tribunal noted that the interim directions were issued with the agreement of both parties and did not deal with the merits of the dispute.  According to it, the arrangement was merely a temporary measure to keep things as they were while the proceedings continued.

“… Given that the order being challenged (from April 30) is an interlocutory order that does not resolve any rights of the parties involved and is a consenting order, this tribunal should not intervene in its appellate jurisdiction at this point.  Therefore, the immediate company appeal… lacks merits and is thus dismissed,” stated the NCLAT order.

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The NCLAT has thus effectively confirmed the NCLT ruling that preserved Aakash’s existing shareholding structure and prohibited any new fundraising by the coaching chain.

The problem originated in 2021, when BYJU’S purchased Aakash, a well-known test prep company.  Later, as the edtech platform entered insolvency proceedings and Ranjan Pai’s Manipal Group obtained a 40% stake in Aakash, the coaching chain suggested changes to its articles of association (AoA) to generate INR 500 Cr in new capital.

Aakash has insisted that this fundraising effort is essential for its survival and necessary to meet operational expenses throughout its network of offline coaching centres.

BYJU’S, represented by its resolution professional (RP) Shailendra Ajmera, expressed opposition to the proposed changes, cautioning that they could lead to a further dilution of the edtech platform’s ownership in Aakash, which is prone to insolvency.  The NCLT’s interim order thus prohibited any such amendments until a thorough examination of the case had been conducted.

The courts have intervened previously to preserve Aakash’s shareholding structure.  This case arises from a plea submitted by BYJU’S, through RP Ajmera, under Sections 241 and 242 of the Companies Act, claiming oppression and mismanagement in Aakash.

The NCLT released an interim order on March 27 that put a stop to alterations in Aakash’s shareholding.  In April, the Karnataka High Court annulled that order (which required status quo) and directed the NCLT to carry out a new review, while instructing all parties to keep the status quo until a proper hearing could take place.

The subsequent hearing of the NCLT was held on April 30, during which the Tribunal reiterated its freeze on changes to shareholding.  The Bengaluru bench of the NCLT is anticipated to keep hearing the case, with a comprehensive review of the shareholding dispute and management control issues planned for a subsequent date.

Earlier this month, the situation changed dramatically when Aakash submitted a request to dismiss BYJU’S petition on the grounds that it was vexatious.  It also sought to add consultancy firm EY and its partner Ajay Shah as defendants, claiming they were instrumental in important decisions.

The NCLAT order arrives as BYJU’S deals with corporate insolvency proceedings and mounting legal issues.  The edtech company is already embroiled in disputes with shareholders, lenders, and its global subsidiaries.

The week gone by has been particularly chaotic.  Aakash lodged a case with the NCLT, alleging that EY India was in a conflict of interest.  The coaching chain asserted that the consultancy major, which previously provided guidance to Aakash, is now acting against its interests through Ajmera, an EY partner currently managing BYJU’S insolvency resolution.

Aakash has called on the NCLT to officially add EY to the proceedings and has warned that he may take the issue to government regulators.

On June 5, Riju Ravindran, who is a cofounder of BYJU’S and a former promoter, also entered the legal battle by filing a petition that disputes GLAS Trust’s involvement in the insolvency process.  Ravindran claimed that GLAS Trust lacks a valid claim and charged it with misrepresenting its influence in the committee of creditors, thereby skewing the process.  He called on the Tribunal to get rid of GLAS Trust and invalidate any decisions that it had an impact on.