SC Allows Aakash Educational Services to Proceed with Rights Issue
New Delhi: The Supreme Court has ruled in favor of Aakash Educational Services (AES), permitting the company to continue with its ₹140 crore rights issue—marking the second tranche of a total planned fundraise of ₹240 crore.
Background of the Case
– Involvement of Think & Learn: AES has faced allegations for withholding the share allotment to Think & Learn (TLPL), the bankrupt parent of Byju’s, based on suspicions of violations of foreign exchange laws during its fundraising efforts.
– NCLAT’s February Ruling: TLPL, which holds a minority stake in AES, contested a December ruling from the National Company Law Appellate Tribunal (NCLAT) that authorized the rights issue. The tribunal allowed TLPL to apply for shares limited to its original 25.75% equity stake in AES.
Key Developments from the Supreme Court
– Diverse Shareholding: Manipal Group, led by Ranjan Pai, is the largest stakeholder in AES. The NCLAT had insisted that AES refrain from any actions necessitating special resolutions until the ongoing dispute concerning TLPL’s share allotment is resolved.
– Court’s Assurance: A Supreme Court bench, led by Justice PS Narsimha, acknowledged AES’s commitment to maintain TLPL’s 25.75% ownership in the company, providing assurance until the appellate tribunal reaches a decision regarding the rights issue.
– Timeline for Participation: The court mandated TLPL to participate in the rights issue by the upcoming Monday, despite the concerns raised by TLPL regarding its exclusion from important management discussions at AES.
Legal Arguments Presented
– Concerns About Exclusion: Senior counsel Dhruv Mehta, representing TLPL, argued that his client has been systematically marginalized in AES’s decision-making processes, contrary to the Companies Act.
– Management Participation: Mehta noted that Byju Raveendran, despite being suspended from TLPL’s board, remains involved as a nominee director at AES, adding complexity to the governance structure.
Previous Legal Challenges
– Past Supreme Court Decisions: In prior rulings, the Supreme Court denied requests from Glas Trust Co and Ajmera, which sought to halt AES’s rights issue, further underscoring the ongoing financial and governance tensions surrounding AES and TLPL.
Conclusion
The Supreme Court’s decision to allow Aakash Educational Services to move forward with its rights issue reflects ongoing complexities in the intersection of corporate governance and financial regulation within the high-stakes edtech sector. As AES embarks on this fundraising journey, the impact on shareholder dynamics and regulatory compliance remains to be closely observed.