SC Backs NCLAT, Allows Aakash Rights Issue Amid Byju's Insolvency

New Delhi – In a significant ruling that underscores the distinct legal identity of subsidiary companies during a parent's insolvency, the Supreme Court of India on Monday dismissed appeals challenging an NCLAT order that permitted Aakash Educational Services Ltd. to proceed with a crucial rights issue. The decision represents a setback for the creditors of Aakash’s parent company, the beleaguered ed-tech giant Think and Learn Pvt. Ltd. (Byju's), who sought to block the move over fears of shareholding dilution.

A bench of Justice P.S. Narasimha and Justice Atul Chandurkar declined to interfere with the October 28, 2025, interlocutory order of the National Company Law Appellate Tribunal (NCLAT), Chennai Bench. The appeals were brought by US-based lender GLAS Trust Company LLC, which represents a majority of Byju's US creditors, and Shailendra Ajmera, the Insolvency Resolution Professional (IRP) for Byju's.

The Supreme Court, in dismissing the appeals (C.A. No. 13149/2025), provided a crucial clarification. The bench held that its non-interference was based on the interim nature of the NCLAT's order and that any observations made by the appellate tribunal would not prejudice the final hearing of the main appeal.

“We are not inclined to admit the appeal as the NCLAT passed the order only for the purpose of disposing of an interlocutory application,” the Court stated. “While we are not inclined to interfere with the order passed by the NCLAT, we make it clear that the observations made by the Tribunal are intended only for the purpose of disposing of the interlocutory application and these observations will not have a bearing on the final disposal.”

This judgment reinforces a critical principle within the Insolvency and Bankruptcy Code (IBC) framework: the corporate veil of a solvent and independently operating subsidiary is not easily pierced, even when its parent company is undergoing a Corporate Insolvency Resolution Process (CIRP).

Background of the Dispute: A Tale of Control and Capital

The legal battle is rooted in the ongoing CIRP of Think and Learn Pvt. Ltd., which was admitted into insolvency by the National Company Law Tribunal (NCLT), Bengaluru, on July 16, 2024. A key asset in this insolvency is Byju's 25.41% stake in its profitable subsidiary, Aakash Educational Services Ltd.

The primary appellant, GLAS Trust, which commands a dominant 99.41% voting share in Byju's Committee of Creditors (CoC), has been actively seeking to preserve the value of this asset. Their concerns escalated following a Board resolution at Aakash on October 21, 2024, which led to an Extraordinary General Meeting (EGM) on November 20, 2024. This EGM passed resolutions to amend Aakash’s Articles of Association (AoA), effectively stripping Byju's of its significant control over Aakash's management.

These amendments removed key provisions that had previously allowed Byju's to nominate a majority of directors, required its consent for reserved matters, and mandated the presence and affirmative vote of a Byju's nominee for board quorum and resolutions.

Aakash contended that these amendments were not a hostile takeover but a necessary compliance measure stemming from a Debenture Trust Deed (DTD) executed on April 25, 2023—well over a year before Byju's insolvency commenced. The DTD, aimed at protecting debenture holders, mandated these AoA changes within 60 days of the first fund disbursement.

The conflict intensified when Aakash scheduled another EGM for October 29, 2025, to approve a rights issue and increase its authorised share capital. GLAS Trust approached the NCLAT seeking an interim stay on this EGM, arguing it was a strategic move to dilute Byju's stake and erode the value of an asset crucial to the CIRP.

NCLAT’s Rationale: Preserving Commercial Viability

The NCLAT's order of October 28, 2025, which the Supreme Court has now upheld at the interim stage, was a detailed examination of the principles for granting an injunction and the scope of the IBC.

The tribunal found that GLAS Trust failed to establish a prima facie case, irreparable injury, or a balance of convenience in its favour. Central to the NCLAT's reasoning was the finding that Aakash’s actions were a “direct sequel” to the pre-insolvency DTD of April 2023. The tribunal noted that the capital restructuring was not an independent decision "aimed solely to affect the value of the shares that TLPL [Think & Learn Pvt. Ltd.] has in it.”

Crucially, the NCLAT delved into the jurisdictional limits of the IBC over subsidiaries. It made a powerful observation that the IBC “does not authorise the Resolution Professional or the Committee of Creditors to control the internal management of a solvent company in which a corporate debtor holds shares.”

The appellate tribunal emphasized that Aakash, as a distinct juristic entity, must be allowed to function commercially to protect its own value, which in turn preserves the value of Byju's shareholding. In a poignant remark, the NCLAT stated, “The value of TLPL's shares in Aakash can never be preserved if Aakash is commercially killed.”

Regarding the argument of shareholding dilution, the NCLAT pointed out that Byju’s, through its IRP, had the right to subscribe to its proportionate entitlement in the rights issue. Any potential dilution would be a consequence of its own financial inability or choice not to participate, not a coercive action by Aakash.

Legal Implications and the Path Forward

The Supreme Court's decision, while procedurally focused on the interlocutory nature of the NCLAT order, carries significant weight for insolvency practitioners, creditors, and corporate groups. It sends a clear signal that the CIRP of a holding company does not automatically grant the CoC or the RP carte blanche to interfere in the bona fide business decisions of a solvent subsidiary, especially when those decisions are rooted in prior, arm's-length contractual commitments.

This ruling affirms that the objective of value maximization under the IBC cannot be pursued by commercially stifling a valuable, operational subsidiary. The NCLAT's line of reasoning—that killing the subsidiary's business kills the asset's value—is a pragmatic approach that the apex court has chosen not to disturb at this stage.

For Resolution Professionals, this case serves as a crucial guide on navigating the complexities of corporate groups. It highlights the need to respect the separate legal personalities of subsidiaries while balancing the duty to protect the corporate debtor's assets.

The legal saga, however, is far from over. The main appeal, Company Appeal (AT) (CH) (Ins) No. 139 of 2025, is scheduled for orders before the NCLAT on November 7, 2025. Furthermore, a separate plea filed by Byju's IRP in an oppression and mismanagement case, also seeking to halt the rights issue, is listed for hearing before the NCLAT on November 6.

With the rights issue scheduled to close on November 17, the outcomes of these pending hearings will be closely watched by all stakeholders, as they will ultimately determine the future control and capital structure of Aakash and the value that can be realized for the creditors of its parent, Byju's.