The conflict centres on proposed amendments to Aakash’s Articles of Association (AoA), introduced during an extraordinary general meeting (EGM) last year. Minority shareholders have taken the matter to the National Company Law Tribunal (NCLT), alleging these changes are aimed at diluting their stake and eroding governance rights.
As tensions mount, Blackstone and other minority investors have rejected Manipal Group’s claim that the AoA restrictions hinder operations, arguing instead that the proposed amendments unfairly undermine their rights and influence.
The outcome of this legal battle will shape Aakash’s governance, liquidity, and ability to raise future funds, with the company grappling with mounting financial pressures, it claims. While Aakash argues that amending the AoA is crucial for securing fresh capital, minority stakeholders fear it will diminish their control and ability to exit.
For Blackstone, the stakes are equally high: any amendments could significantly reduce the value of its investment and limit its influence over Aakash’s strategic direction.
Mint breaks down the development.
What’s driving the dispute?
The dispute traces its origins to Byju’s 2021 acquisition of Aakash in a $950 million deal, structured as 70% cash and 30% equity. As part of the agreement, Byju’s was to issue shares of its parent company, Think & Learn Pvt. Ltd, to the Chaudhary family and Blackstone in exchange for their stakes.
However, disagreements over Byju’s valuation led to delays, with payments stalling by June 2022. This incomplete share swap left ownership claims unresolved, with Byju’s founder, Byju Raveendran, asserting in October 2023 that he and Think & Learn hold 60% of Aakash. The Chaudhary family disputes this, claiming 11%, and Blackstone asserts a 7% stake.
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Complicating matters is Aakash’s AoA, framed during the acquisition. These provisions grant minority stakeholders veto rights over key decisions, such as changes to governance, fundraising, and mergers. Blackstone and the Chaudhary family argue the AoA safeguards their interests, while Manipal Group contends these provisions are void due to the acquisition’s collapse and the termination of related agreements.
Adding to the complexity, Ranjan Pai’s Manipal Group now holds 40% of Aakash after converting non-convertible debentures (NCDs) into equity in January 2024. Pai had purchased the NCDs in April 2023, but when Aakash defaulted on repayments, he acquired them from Davidson Kempner in a ₹1,400-crore deal.
What does Blackstone stand to lose if the AoA is amended?
Blackstone has opposed Aakash’s push to amend its AoA, arguing that the changes would erode the rights of minority shareholders.
“Blackstone, already under an injunction preventing its exit from Aakash, risks further loss of governance rights if the amendments proceed,” said Ketan Mukhija, senior partner, Burgeon Law.
During NCLT proceedings, Blackstone emphasized that under Article 121 of the AoA, Aakash cannot act on any “Reserved Matters” without prior written consent from minority shareholders. These reserved matters include altering the capital structure, approving mergers, selling substantial assets, and modifying share rights. Blackstone further asserted that any decision taken in breach of this procedure would be “void ab initio” or invalid from the outset, as specified in Article 121(e).
“If the proposed amendments are allowed and if Manipal Group invests in Aakash, Blackstone’s holding would substantially reduce from its existing 6.97%”, explained Shrenik Gandhi, managing partner, Chambers of Shrenik Gandhi.
On what grounds are Manipal Group and Aakash pushing for amendments?
Manipal Group and Aakash argue that the AoA provisions, tied to the failed 2021 acquisition by Byju’s, are no longer valid.
In June 2023, when the merger collapsed, Blackstone terminated the accompanying Merger Framework Agreement (MFA) and Implementation Framework Agreement (IFA). These agreements had outlined the terms of the merger, including governance rights and operational transitions.
“The rights emanating therefrom also stood terminated. Clause 17.2, which is a saving clause, does not include Schedule 8—management rights @137 of AESL LOD Vol I (dealing with reserved matter rights in the MFA),” said a document seen by Mint.
The document further argued that since Schedule 8, which detailed management rights, was excluded from the saving clause, these rights ceased to exist after the termination of the agreements. “Essentially, it is argued by Aakash that as the MFA had not materialized, the minority shareholders would not have substantial rights,” said Gandhi.
Additionally, Aakash claims that Blackstone forfeited its rights by consenting to the NCD transaction in April 2023 when Ranjan Pai made his initial investment.
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“EGM resolutions were passed unanimously approving the issuance and conversion of the NCDs, also empowered the Board to settle the terms and constrictions basis which the NCDs may be issued. It also authorised the Board to execute documents and take all other necessary steps without being required to seek further consent or approval,” said the document cited earlier.
What’s next?
So far, Manipal has been unable to substantiate its claims in court.
“The status remains the same, which is, the court continues to acknowledge Blackstone’s rights over Manipal’s. And Manipal has been unable to succeed in the court,” a source in the know of the legal proceedings, told Mint.
As the dispute unfolds, its resolution will shape not only the control and governance at Aakash but also the company’s liquidity and ability to raise future funds, directly affecting its operational stability.
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“The failure of the merger with Think & Learn has placed rights tied to the agreement under judicial scrutiny. The courts will ultimately decide their validity and implications,” said Burgeon Law’s Mukhija.
The NCLT has scheduled the next hearing for 4 March.
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