Karnataka High Court's Share Attachment Raises Legal Questions for Aakash Rights Issue
A recent order from the Karnataka High Court has effectively locked a block of shares in Aakash Educational Services Ltd (AESL). These shares are allegedly linked to Byju Raveendran. This move creates fresh compliance and legal questions around the coaching firm's recently concluded rights issue.
The court issued this order on January 13. It involves an ad-interim attachment, which is a temporary freeze. This freeze aims to protect alleged interests and is subject to review after objections are heard. Although AESL's ₹100 crore rights issue closed in December faces no immediate threat, lawyers say the order draws sharper scrutiny. It focuses on who ultimately owns and benefits from the shares.
How Did the AESL Rights Issue Land in Legal Trouble?
AESL allowed Beeaar Investco Pte. Ltd to participate in its first ₹100 crore tranche of a ₹250 crore rights issue. Beeaar Investco is a Singapore vehicle wholly owned by Raveendran. This happened even as AESL's board blocked subscription from Byju's parent, Think & Learn Pvt. Ltd (TLPL), to keep Raveendran at bay. This decision exposed the exercise to potential legal challenges.
TLPL is currently undergoing insolvency proceedings. It is being run by a committee of creditors. US-based GLAS Trust Company holds about 99% of the voting rights in this committee. The same AESL shares held through Beeaar are at the heart of an arbitration award by Qatar Investment Authority Holding Llc (QIA). QIA is Qatar's sovereign wealth fund. The award relates to a $150 million loan to Byju's Investments Pte. Ltd (BIPL) in 2022.
Filings with the Registrar of Companies show Bisy Philip subscribed to around 32.2 million shares worth ₹16.09 crore. Bisy Philip is a UAE-based businesswoman. This stake matches exactly what AESL announced was picked up by Beeaar Investco. This raises questions about whether the subscription ultimately sat with Beeaar, was transferred, or was structured through a connected person route.
What Does the Karnataka High Court Have to Do With It?
The question of who received the rights-issue shares ties back to QIA's enforcement case against Raveendran. Qatar Holding, an arm of QIA, asked the Karnataka High Court to recognize the arbitration award as a decree. They sought help to execute it against Indian assets. This turned AESL's cap table into a potential enforcement ground.
The Karnataka High Court has now flagged the AESL stake held through Beeaar Investco as beneficially owned by Raveendran. This means the court proceeds on the basis that Raveendran ultimately controls or benefits from these shares, even if Beeaar is the recorded holder.
The court also passed an ad-interim attachment to protect that alleged beneficial interest. This is a temporary freeze order that can be changed after objections are filed and heard. The court issued notice to Beeaar Investco and AESL for the next hearing, directed to be listed after two weeks.
How Does This Affect AESL's Rights Issue?
At its core, the share attachment aims to prevent the disputed shareholding from being moved while the court considers QIA's request. Sunayana Basu Mallik, partner at King Stubb & Kasiva, explains that the ad-interim attachment is a protective measure. It ring-fences Raveendran's alleged beneficial interest in AESL shares. It does not automatically unsettle a concluded rights issue unless the allotment itself is shown to be a device to defeat creditor claims.
She adds that a completed rights issue is not void merely because there is a parallel attachment dispute. For it to be reopened or stayed, QIA would need to demonstrate suppression of beneficial ownership, fraud, or deliberate circumvention of the court's restraint. This distinction separates whether AESL followed corporate process and whether disputed economic interest can be locked as examined by courts.
Where Does the Real Risk Sit for AESL?
Lawyers say the immediate risk is less about fundraising being reversed and more about compliance and record-keeping once the company is on notice. Alay Razvi, managing partner at Accord Juris, states the risk is court-compliance and governance risk, not that the rights issue is void by default. The company must ensure it does not register transactions that could help bypass the attachment.
He points to a practical problem. If the court examines who ultimately funded, controlled, or benefited from the shares, AESL may need to show a clean, consistent paper trail. Tushar Kumar, an advocate with the Supreme Court of India, frames it as a governance issue under the Companies Act. The principal risk lies in accuracy and completeness of compliance under Sections 89 and 90 of the Companies Act, 2013.
These sections require companies and individuals to declare who really benefits from or controls shares. Once a constitutional court begins examining beneficial ownership, the issuer's registers, board papers, and disclosure trails become critical.
What Could Courts Look for Next?
The Karnataka High Court order flags QIA's concern that subsequent changes to shares could defeat the restraint. Raveendran's side claims transfers relate to pre-existing agreements and that QIA was aware. How the court views Beeaar's eventual ownership trail could become central.
Razvi says the default outcome is not a blanket stay or reopening of the entire rights issue. The practical risk is less about the issue being reopened and more about the disputed slice becoming court-locked regardless of whose name it is currently in.
Ashima Obhan, senior partner at Obhan & Associates, notes the order signals courts will look through layers to identify the ultimate beneficial owner. Issuers must demonstrate correct recording and compliance. She says reopening the rights issue is a high threshold. QIA's realistic next steps may include seeking continuation of the attachment, disclosures on oath, appointment of a receiver, and directions to maintain status quo.
Overall, the message is clear. Courts will not allow corporate structuring or rights issues to be used as a shield against enforcement. This case highlights the importance of transparency in shareholding and beneficial ownership declarations.
