Byju’s Lenders Accuse Ex-Management of Diluting Aakash Stake

In an ongoing legal showdown at the National Company Law Tribunal (NCLT) in Bengaluru, a heated exchange erupted on Monday between the lawyers representing the lenders of Byju's parent company, Think and Learn Private Limited, and the Resolution Professional (RP). The crux of the dispute centers around Aakash Institute’s Extraordinary General Meeting (EGM), scheduled for November 20, and allegations that Byju's former management, including CEO Byju Raveendran, is attempting to dilute the company’s stake in the coaching giant, Aakash.

The Background: Byju’s Big Bet on Aakash Institute

In 2021, at the peak of the COVID-19 pandemic, Byju's made its largest acquisition to date, purchasing Aakash Coaching for a staggering $1 billion. This acquisition was part of Byju’s broader strategy to expand its reach into offline education, bolstering its online offerings. Aakash, known for its expertise in preparing students for competitive exams, has been a cornerstone of Byju's offline presence.

Despite the pandemic’s disruption to the education sector, Aakash Institute continued to thrive, thanks to its vast network of physical outlets, which remained operational even during the pandemic's peak. This success has made Aakash a vital asset for Byju’s, as evidenced by the company's continued profits and strong market presence.

Read More: Does Byju Ravindran Remind You of Ashneer Grover? Overfunding Lessons

The Allegations: Dilution of Shareholding in Aakash

The lenders involved in Byju’s ongoing insolvency proceedings have raised concerns about a potential attempt by Byju's former management to alter the structure of ownership within Aakash Institute. Specifically, they have accused Byju Raveendran and other members of the previous management of attempting to amend the Articles of Association (AoA) of Aakash in a way that would dilute Think and Learn's shareholding in the company. This alleged move is being seen as an attempt to reduce Byju’s control over its highly valuable subsidiary, a move the lenders strongly oppose.

Senior Advocate Uday Holla, representing Glas Trust, a key lender in the case, stated before the NCLT, "Without Aakash, Byju's will not be worth anything." This sentiment underscores the importance of Aakash to Byju’s overall business model. Given Aakash’s ongoing profitability and its strategic role in Byju’s plans, any dilution of its stake could have significant repercussions for the company's financial stability.

A Clash of Legal Interests: The Resolution Professional’s Role

At the heart of the dispute is the role of the Resolution Professional (RP) in managing Byju’s insolvency process. Senior Advocate Ramji Srinivasan, appearing for the RP, clarified that Aakash is a subsidiary of Think and Learn and that the RP would attend the upcoming EGM as Byju's representative. Srinivasan argued that the lenders were trying to make submissions in a matter that had not been formally listed for hearing, suggesting a lack of procedural clarity in the lenders’ actions.

However, the lenders are not convinced. They insist that Byju Raveendran still holds significant sway over Aakash, despite the ongoing insolvency proceedings, and that the RP has not taken adequate steps to prevent him from exercising control over the company. “The RP must tell the tribunal what he was going to do at the EGM,” Holla demanded during the proceedings, emphasizing the urgency of the matter.

Read More: Aakash Institute To Bring "Acche Din" For Drowning BYJU's, But How?

Legal Maneuvering: The Battle Over the Amendment of AoA

This legal tussle is not limited to the ongoing insolvency proceedings. Earlier, Senior Advocate Kapil Sibal, representing a Singapore-based investor in Byju's, had sought an urgent hearing regarding the amendment of the Articles of Association of Aakash. The amendment, according to Sibal, could significantly alter the ownership structure and governance of Aakash, potentially undermining the interests of the lenders and other stakeholders.

The NCLT is expected to hear the application against the AoA amendment on November 19, a day before Aakash’s EGM. The outcome of this hearing could have far-reaching consequences for both Byju’s and Aakash, especially considering the stakes involved in the insolvency process.

Pending Cases: A Growing Legal Web

The NCLT has been inundated with multiple applications in the Byju’s insolvency case, with over 10 petitions still awaiting consideration. In response, a coram of Judicial Member K Biswal and Technical Member Manoj Kumar Dubey urged Glas Trust, which had earlier moved the Karnataka High Court, to request an extension of time for the tribunal to hear and dispose of the petitions.

This legal web is growing more complex with each passing day. Senior Advocates Aditya Sondhi, Dhyan Chinnappa, KG Raghavan, and others have appeared for various parties involved, including Byju and Raveendran, making the case even more convoluted.

Supreme Court’s Intervention: A Pivotal Judgment

A key turning point in the case came on October 23, when the Supreme Court allowed Glas Trust’s appeal, which challenged the National Company Law Appellate Tribunal (NCLAT) ruling that had stalled the insolvency proceedings against Think and Learn. The Supreme Court’s judgment overturned the NCLAT’s decision, which had accepted a settlement between Raveendran and the Board of Control for Cricket in India (BCCI), whose plea had initially led to the NCLT’s admission of Byju’s to the insolvency process in July.

Following this, the Karnataka High Court issued a significant order on October 30, barring the Committee of Creditors (CoC) of Think and Learn from holding meetings or making decisions on the company’s affairs until the NCLT has resolved the pending applications related to the removal of the RP.

Read More: Unveiling the Big Bull Meltdown: India's Biggest Ed-Tech Controversy!

The Bigger Picture: What’s at Stake?

As the legal battle continues to unfold, the fate of Byju's, one of India’s most high-profile edtech companies, hangs in the balance. The outcome of these proceedings will not only determine the future of Byju’s acquisition of Aakash Institute but could also set a significant precedent for how other high-stakes mergers and acquisitions are handled in the Indian startup ecosystem.

For Byju’s, Aakash Institute represents far more than just a profitable asset; it is a cornerstone of its expansion strategy, combining the strength of offline education with its already dominant online presence. Any threat to its shareholding could have ripple effects on the company’s valuation, investor confidence, and long-term sustainability.

As the NCLT prepares to hear more arguments on November 19 and 20, all eyes will be on how this legal drama plays out—and what it means for Byju’s future and the broader edtech sector.

The Legal Drama Intensifies

The ongoing saga between Byju’s lenders, the former management, and the Resolution Professional is far from over. With multiple legal hurdles, allegations of corporate governance manipulation, and a high-stakes battle over control of a key asset, the resolution of this case will be closely watched by industry experts, investors, and entrepreneurs alike. As Byju’s attempts to navigate through this complex legal landscape, the next few weeks could prove pivotal in determining the company’s future trajectory.

Join Our Thriving Entrepreneurial Community

Follow TICE News on Social Media and create a strong community of Talent, Ideas, Capital, and Entrepreneurship. YouTube  | Linkedin | X (Twitter) | Facebook | News Letters