NCLT Rejects Byju’s Interim Plea to Halt Aakash Rights Issue, Citing Company’s Fundraising Needs

Bengaluru, IN – The National Company Law Tribunal (NCLT), Bengaluru Bench, has delivered a significant order, declining to grant interim relief to the insolvency-bound edtech giant Think & Learn Pvt. Ltd. (Byju’s). The plea, filed by Byju’s Resolution Professional, sought to stay an Extraordinary General Meeting (EGM) convened by its subsidiary, Aakash Educational Services Ltd. (AESL), to approve a crucial rights issue.

The decision, passed on October 17 by a coram of Judicial Member Sunil Kumar Aggarwal and Technical Member Radhakrishna Sreepada, underscores the delicate balance between protecting shareholder rights and allowing a company's board to make essential business decisions for its survival. The ruling permits AESL to proceed with its EGM scheduled for October 29, 2025, a move that could drastically alter the shareholding structure of the prominent coaching institute.

This legal battle represents a critical juncture in the protracted dispute between the parent company and its most valuable asset, which Byju's acquired in a landmark $950 million deal in 2021. The case, titled Think & Learn Pvt. Ltd. through its RP v Aakash Educational Services Ltd. & Ors. (C.P. No. 135/BB/2025), was brought under Sections 241-242 of the Companies Act, 2013, with Byju’s alleging acts of oppression and mismanagement by AESL.

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The Core of the Dispute: Dilution vs. Survival

The petition, filed by Byju's Resolution Professional (RP), Shailendra Ajmera of Ernst & Young LLP, argued that the proposed rights issue was a calculated move to oppress Byju’s as a minority shareholder. The central contention was that the rights issue would dilute Byju's stake in AESL from approximately 25.75% to less than 5%.

Senior Advocate Abhinav Vasisht, representing the RP, vehemently argued that this dilution would cause "serious prejudice" to Byju's. Given that Byju's is currently undergoing a Corporate Insolvency Resolution Process (CIRP), it is financially incapacitated and cannot subscribe to the new shares. The RP contended that AESL’s board was fully aware of this constraint and that the timing and nature of the rights issue were therefore mala fide.

Furthermore, Byju’s argued that its shareholding in AESL constitutes a major asset for the company and its creditors. Its depletion would severely impact the insolvency resolution process. The RP also alleged that the EGM was being convened in "gross violation of the Articles of Association (AoA)" and disregarded the participating and veto rights of Think & Learn.

AESL’s Counter-Argument: A Matter of Financial Exigency

In a robust rebuttal, counsels for AESL, including Senior Advocates Dr. UK Chaudhary and CK Nandakumar, framed the rights issue not as an oppressive tactic but as a necessary measure for corporate survival. They informed the tribunal that AESL is in "precarious financial health" and that traditional lenders, such as banks, have become unwilling to extend further credit facilities due to the ongoing and public disputes among shareholders.

AESL’s board, therefore, concluded that infusing capital through a rights issue was the most viable path to ensure the company remains a going concern. The respondents maintained that the offer was equitable and open to all shareholders, and Byju’s inability to participate due to its own insolvency could not be construed as an act of oppression. "The fact that the Petitioner may or may not be able to exercise rights cannot form the basis to assess the efficacy of the board resolution," the NCLT order quoted from the arguments.

The Tribunal's Rationale: Prioritizing Corporate Independence

In its order, the NCLT bench sided with the argument for corporate autonomy and financial prudence. The tribunal observed prima facie that the proposed rights issue, aimed at infusing necessary funds, "cannot be termed to be unequitable."

The bench articulated a key legal principle: a shareholder's financial inability to participate in a rights issue does not grant it the power to veto a legitimate business decision made by the company's board. The tribunal stated, “As a shareholder, the Petitioner may validly seek financial documents to be aware of the health of the Respondent No 1, but the proposed rights issue infusing funds cannot be termed to be unequitable. The acceptance of such plea would lead to an incoherent proposition undermining the independent rights of the company.”

The NCLT was also critical of the petitioner's litigation strategy, noting that this was the second oppression and mismanagement petition filed on similar grounds. An earlier, related petition (C.P No. 46/BB/2025) is already pending before the tribunal, with arguments ongoing. The bench expressed caution, stating, “We seek to refrain from making detailed observations, lest it would prejudice the other petition... pending between the parties.” This reluctance to intervene at an interim stage, especially given the parallel proceedings, played a crucial role in the decision.

Role of the Committee of Creditors

An interesting procedural aspect of the hearing was the attempted intervention by the Committee of Creditors (CoC) of Byju’s, represented by Senior Counsel SS Nagananda. The CoC sought to support the RP’s petition, arguing that their interests were directly at stake as the value of Byju's primary asset was threatened.

However, the tribunal did not permit the intervention. It recorded the objection raised by AESL's counsel: “The objections raised on behalf of other Respondents to the presence of CoC is that the oppression and mismanagement petition is essentially between the shareholders of the Company and no stranger can be allowed to participate.” This reinforces the established legal position that disputes under Sections 241-242 are primarily intra-corporate shareholder matters.

Legal Implications and Way Forward

This NCLT order carries significant implications for corporate law, particularly at the intersection of insolvency proceedings and shareholder disputes.

1. Limits of 'Oppression' Claims: The ruling suggests that actions taken by a board for the bona fide purpose of securing a company's financial stability will not easily be classified as oppressive, even if they have a disproportionately negative impact on a financially distressed shareholder.
   
   
2. Insolvency as a Shield and Sword: While Byju’s used its CIRP status to argue its inability to participate, the NCLT’s decision indicates that insolvency cannot be used as a shield to stymie legitimate corporate actions of a subsidiary.
   
   
3. Judicial Restraint: The tribunal’s decision to avoid making detailed observations due to a pending parallel case highlights its adherence to procedural propriety and its reluctance to pre-judge issues being argued extensively in another matter.

The tribunal has issued notice to AESL and the other 21 respondents in the petition and has listed the matter for further hearing on November 12, 2025, alongside the related petition. This upcoming hearing will be closely watched by the legal and business communities as it promises to delve deeper into the substantive claims of mismanagement and the future governance of one of India's most prominent educational institutions.