NCLAT Affirms Aakash’s Right to Thrive Amid Byju’s Financial Turmoil
NCLAT Affirms Aakash’s Right to Thrive Amid Byju’s Financial Turmoil
Introduction
The Supreme Court of India has been approached by GLAS Trust Company LLC, a U.S.-based lender representing Byju’s major creditors, challenging the National Company Law Appellate Tribunal’s (NCLAT) refusal to stay Aakash Educational Services Ltd.’s Extraordinary General Meeting (EGM) for approving a rights issue. The move underscores the tension between creditor protection during insolvency and the commercial autonomy of solvent subsidiaries.
Factual Background
GLAS Trust, acting as the debenture trustee for Byju’s lenders, sought to halt Aakash Educational Services Ltd.’s rights issue, alleging that it would unfairly dilute Byju’s 25.41% stake in the subsidiary. The rights issue was set to raise capital following the issuance of offer documents to all shareholders, including Byju’s, on October 30, 2025, with closure scheduled for November 17, 2025.
A separate plea by Byju’s resolution professional (RP) also remains pending before the NCLAT, seeking to restrain Aakash from proceeding with the issue in an ongoing oppression and mismanagement dispute.
Procedural Background
On October 28, 2025, the NCLAT (Chennai Bench), comprising Justice N. Seshasayee and Technical Member Jatindranath Swain, dismissed GLAS Trust’s plea to block Aakash’s EGM scheduled for October 29. The Tribunal emphasized that the insolvency of Byju’s (Think & Learn Pvt. Ltd.) cannot restrict the commercial operations of its solvent subsidiary, Aakash.
The order noted that Aakash’s decision to issue shares was rooted in its Debenture Trust Deed (DTD) dated April 25, 2023, executed long before Byju’s entered insolvency. The DTD required amendments to Aakash’s Articles of Association (AoA) to protect debenture holders’ interests.
Issues
- Whether the NCLAT erred in refusing to stay Aakash’s EGM approving the rights issue.
- Whether Aakash’s rights issue violated the NCLT’s earlier status quo order on shareholding.
- Whether Byju’s insolvency proceedings could restrict capital restructuring by its solvent subsidiary.
Contentions of the Parties
Appellant (GLAS Trust Company LLC): Argued that Aakash’s rights issue violated the NCLT’s March 27 order maintaining status quo on its shareholding. Alleged collusion between Aakash’s management and Byju’s promoters to erode Byju’s stake value. Claimed that the rights issue would cause irreparable harm to Byju’s creditors and undermine insolvency proceedings.
Respondents (Aakash & RP for Byju’s): Contended that the rights issue stemmed directly from the Debenture Trust Deed (DTD) obligations and was not an independent or malicious act. Emphasized that Byju’s, as a shareholder, retained the right to subscribe to additional shares, preventing any automatic dilution. Maintained that insolvency proceedings against Byju’s do not curtail Aakash’s commercial independence.
Reasoning and Analysis
The NCLAT underscored that the essence of the Insolvency and Bankruptcy Code (IBC) lies in ensuring the continued commercial viability of companies linked to the corporate debtor, regardless of shareholding control. The Tribunal found that Aakash’s rights issue originated from a contractual obligation under the DTD (April 2023)—a financial arrangement predating Byju’s insolvency—and was intended to protect debenture holders. Hence, it did not amount to an attempt to dilute Byju’s stake.
Further, the Tribunal held that none of the three essential conditions for interim relief—prima facie case, irreparable injury, or balance of convenience—were satisfied by GLAS Trust. It clarified that Byju’s shareholding value “cannot be preserved if the subsidiary is commercially killed,” emphasizing the need to let Aakash operate freely.
The decision also noted that Aakash’s fundraising efforts were consistent with sound financial governance and not in violation of any judicial restraint.
Implications
This case reaffirms that solvent subsidiaries of insolvent parent entities retain full operational and financial autonomy unless a direct violation of insolvency law is demonstrated. It highlights the judiciary’s preference for protecting commercial functionality over speculative creditor concerns. The appeal by GLAS Trust to the Supreme Court will likely determine the limits of creditor oversight vis-à-vis independent subsidiaries in complex group insolvencies.
