Karnataka High Court sets aside NCLT order directing Aakash to maintain shareholding status quo

The Karnataka High Court on Tuesday quashed an order of the National Company Law Tribunal (NCLT) that had ordered status quo on the shareholding of Aakash Education Services Limited (Aakash Institute)..Justice M Nagaprasanna remitted the matter back to the NCLT for fresh consideration. Aakash was directed not to dilute the shareholding of Byju's (Think & Learn) in it until the case is heard by NCLT. .Aakash Institute and its largest shareholder Manipal Systems had moved the Court contending that the NCLT had passed the status quo order without giving it an opportunity to present their side of the case..Aakash is facing legal challenges over an attempted amendment to its Articles of Association (AoA). Blackstone-backed Singapore Topco, a shareholder in Aakash, opposed the amendment, fearing that the same would significantly dilute its 6.8% stake. This stemmed from a merger agreement with Byju's through which Topco acquired its shares.Glas Trust, which is one of Byju's lenders, also raised concerns, arguing that the amendment was a move by former Byju's management to dilute the company's valuable stake in Aakash. Glas Trust emphasised that Aakash is a crucial asset for Byju's.Aakash defended the amendment, stating it was necessary to secure funding for the company. Manipal Systems is currently the largest stakeholder in Aakash..The NCLT had initially restrained Aakash from implementing the amendment. However, the Karnataka High Court subsequently stayed the NCLT order, allowing Aakash to proceed.Singapore Topco challenged the High Court's authority to intervene in the matter before the Supreme Court, which then directed Aakash to halt the implementation and approach the National Company Law Appellate Tribunal (NCLAT) for resolution.The NCLAT refused to modify the stay order and directed Manipal Systems and Aakash to file an application for vacation of stay before the NCLT instead.Aakash subsequently filed a petition in the NCLT to vacate the stay. However, Singapore Topco chose to withdraw its objection today, before the NCLT could adjudicate on the issue.Appeals are currently pending before the NCLAT Chennai over this issue..On March 27, the NCLT passed the status quo order later.Senior Advocate CK Nandakumar, who appeared for Aakash, told the Tribunal that he was under the impression that the matter was being adjourned and an order was not going to be passed. He thus offered to commence his arguments.However, the coram told him that they had already signed a copy of the order.This prompted Aakash to file a plea in the Karnataka High Court. The case will now come up for hearing on April 30..Aakash was represented by Senior Advocate CK Nandakumar with Advocates Shyam Sundar HV and R Chandrachud. .Manipal Systems was represented by Senior Advocate Dhyan Chinnappa with Advocate Varun S..Byju's financial creditor Glas Trust was represented by Senior Advocate Udaya Holla.