Aakash Drags EY Into Byju's Battle: NCLT Petition Adds New Twist to Edtech Dispute

According to court documents examined by a media group, the conflict between Aakash Educational Services (AESL) and edtech company Byju's has intensified.

Aakash filed a strongly worded petition before the National Company Law Tribunal (NCLT) in Bengaluru, accusing international consulting firm Ernst & Young (EY) of professional misconduct and conflict of interest.

In a June 1 implementation application, AESL has sought the tribunal to either declare EY LLP and its partner Ajay Shah respondents in the case or dismiss Byju's company petition, which was filed under Sections 241 and 242 of the Companies Act and claimed oppression and mismanagement.

AESL Allegations Against EY

Through Shailendra Ajmera, Byju's Resolution Professional (RP) and a senior EY employee, AESL claims that EY, which has provided the company with a wide range of strategic, financial, and compliance-related advice services, is now working against it.

 According to the application, this is a typical instance of conflict of interest and procedural abuse. EY designed and managed the very transactions that are currently under attack in the petition, including the issuance and conversion of non-convertible debentures (NCDs), equity restructuring, and internal governance issues.

The petition states that EY provided advice to Davidson Kempner about the structuring and valuation of NCDs. Additionally, it offered tax and regulatory advice with the transfer of shares to the Manipal group.

Furthermore, as recently as October 2024, EY participated in corporate strategy and internal board-level decisions at AESL.

AESL Showcased Evidences to Validate its Claims

In order to demonstrate EY's purported participation in financial forecasts, liquidity management, and decision-making processes, AESL is displaying internal emails and advisory documents.

According to AESL's submission, the RP has concealed important information, is going outside his authority under the Insolvency and Bankruptcy Code (IBC), and lacks standing to submit this petition under the Companies Act.

Ajmera's status as RP is "severely compromised", according to AESL, which has also threatened to take the issue to authorities, such as the Ministry of Corporate Affairs and the Insolvency and Bankruptcy Board of India (IBBI).

The action signals a larger governance challenge in the continuing battle, as the RP wrote to the AESL board a few days ago to ask for clarification on the independence and nomination status of its directors.

One of the main points of contention in the edtech giant's continuous financial and legal issues is the dispute over Aakash, which Byju's purchased in 2021 for $1 billion.

The board of AESL is currently under the leadership of the Manipal company, which acquired a sizable interest by turning debt into equity.

This submission challenges Byju's petition's validity as well as the advisers' professional neutrality, setting up AESL for a full-scale legal and reputational onslaught. The RP and EY have not yet submitted a formal response to the implementation request.