The Supreme Court of India on Monday rejected the appeals by US-based lender GLAS Trust Co. LLC and Byju’s parent company Think & Learn Pvt Ltd (TLPL) to halt the rights issue being carried out by Aakash Educational Services Ltd (AESL).
This clearance allows AESL to proceed with its rights issue that will reduce TLPL’s shareholding in AESL from roughly 25.75 % to around 5 %.
Background of the Dispute
- In 2021, Byju’s had acquired a significant stake in Aakash as part of its offline education expansion strategy.
- TLPL is currently undergoing corporate insolvency resolution process (CIRP), and thus it cannot subscribe to fresh shares in the rights issue.
- The rights issue by AESL required increasing its authorised share capital and issuing rights shares to existing shareholders — excluding TLPL. The move effectively dilutes TLPL’s share.
- GLAS Trust, representing TLPL’s US-based creditors, argued that the rights issue was essentially a mechanism to dilute TLPL while it is under insolvency resolution. They challenged the move before the National Company Law Tribunal (NCLT), then the National Company Law Appellate Tribunal (NCLAT), and finally the Supreme Court.
- The NCLT and NCLAT earlier refused to stay AESL’s extraordinary general meeting (EGM) or the rights issue.
Why This Matters
For Byju’s / TLPL
The decision signals significant erosion of Byju’s influence and stake in Aakash. From ~25.75 % down to ~5 % is a major drop. The parent company’s inability to participate in the rights issue (due to insolvency) makes it more vulnerable.
For Aakash Educational Services Ltd
AESL gets the green light to raise capital (via the rights issue) which it says is crucial for its operations (serving lakhs of students, thousands of employees) and for safeguarding continuity.
For Investors / Creditors
Creditors of TLPL, Through GLAS Trust, will have to contend with reduction in the value of TLPL’s asset (i.e., its shareholding in AESL). For the broader ed-tech ecosystem, this shows how insolvency or debt distress can affect equity stakes and shareholder rights.
For the Insolvency & Corporate Governance Environment
The case reinforces that a solvent subsidiary (AESL) of a company under CIRP (TLPL) can continue business and raise capital, and that the parent’s insolvency does not automatically block the subsidiary’s capital-related decisions. The NCLAT noted: “The value of TLPL’s investment cannot be preserved if the subsidiary is commercially killed.” Business Standard
Key Takeaways
- The Supreme Court’s decision does not stop the rights issue of AESL.
- TLPL’s share in AESL will fall substantially — from ~25.75% to about ~5%.
- TLPL, being in CIRP, is not permitted to subscribe to the new shares, which opens the door for significant dilution.
- AESL retains the right to raise fresh equity capital for its business despite the parent being under insolvency.
- Creditors representing TLPL’s interests (like GLAS Trust) challenged the move but were unsuccessful.
- The ruling is likely to be a precedent for how troubled parent companies’ stakes in subsidiaries may be treated in future.
What to Watch Next
- How AESL executes the rights issue: timing, size of raise, participation of other shareholders, dilution effects.
- What happens to TLPL’s holdings and whether any remedial claims are made by its creditors or resolution professional.
- Whether TLPL or its resolution professional will file any further legal recourse (within permissible limits).
- How the market and investors in the education/ed-tech sector react — the decision may affect valuations and governance perceptions.
- The impact on AESL’s business: how the fresh capital will be utilised, and whether the move helps stabilise and grow its operations as claimed.
