NCLT Bengaluru Reserves Order On Riju Ravindran's Plea Against Glas Trust's Aakash Right Issue Funding Plan

The National Company Law Tribunal (NCLT), Bengaluru, on Wednesday reserved its order on an interim plea sought by Riju Ravindran, former promoter of Think and Learn Pvt Ltd (Byju's), challenging the Committee of Creditors' (CoC) approval of a Compulsorily Convertible Debenture (CCD) structure proposed by Glas Trust to fund TLPL's participation in Aakash Educational Services Ltd's (AESL) ongoing rights issue.

The matter was heard by a coram comprising Judicial Member Sunil Kumar Aggarwal, and Technical Member Radhakrishna Sreepada, who heard marathon submissions from all sides before reserving the ruling.

Background: CoC Clears CCD Funding Route to Preserve TLPL's AESL Stake

TLPL, the parent of Byju's, owns 25.7 percent of AESL and is entitled to subscribe to shares worth 25.75 crore rupees in AESL's rights issue, which has now been extended to November 21 from the earlier deadline of November 17.

Because TLPL lacked funds, Glas Trust, which commands 99.25 percent of CoC voting rights, proposed that its wholly owned subsidiary would subscribe to CCDs issued by TLPL.

TLPL would then deploy these funds to take up its rights. On November 5, the CoC approved issuing CCDs of up to 100 crore rupees, authorised the Resolution Professional (RP) to negotiate and execute the CCD subscription agreement, and categorised the infusion as Corporate Insolvency Resolution Process (CIRP) costs.

Ravindran has questioned these decisions and sought a declaration that the CCD arrangement is void.

Ravindran: Optionality in CCD Shows It Is Debt and Violates FEMA

Senior Advocate Navin Pahwa, for Ravindran, argued that the CCD structure presented to the CoC was fundamentally different from the one contained in the draft and the executed agreements shared later.

He submitted that while the CoC was told that the instruments were compulsorily convertible, the operative clauses in the draft agreement revealed optionality.

He relied on clauses of the draft agreement, which states that each holder “shall have the right at the end of the term to require the company to convert all or part of the subscription securities.”

This, he said, could not be reconciled with compulsory conversion and converted the instrument into optionally convertible debt.

Pahwa argued that such optionality brought the instrument within the External Commercial Borrowing (ECB) regime. He referred to the RBI's June 8, 2007 circular, which requires that only fully and mandatorily convertible instruments qualify as FDI-compliant equity, and to the ECB Master Direction, especially Clause 8, which prohibits the use of ECB proceeds for equity investment.

He submitted that the funding routed through these CCDs would therefore violate FEMA and expose TLPL and its stakeholders to penalties under FEMA. He relied on the NCLAT's decision in Indian Renewable Energy Development Agency to submit that similar optional conversion clauses had previously been held to evidence a debt instrument.

Pahwa also argued that the CoC had voted on incomplete information. He pointed to the minutes of the 11th CoC meeting, which recorded that only “indicative terms” were presented to the members and that the full draft agreement was not circulated before the vote. He said that the executed agreement was shared for the first time at 10.30 a.m. on the day of the hearing.

That document, he submitted, revealed that the investor subscribing to the CCDs was not a Glas subsidiary but Byju's Alpha Inc., a Delaware corporation that was historically a subsidiary of TLPL itself.

He said the CoC was led to believe that the subscriber would be a Glas entity and was never informed about Byju's Alpha Inc. “This is shocking,” he said, adding that the identity of the investor was concealed in a situation where Glas held overwhelming voting control.

He submitted that Glas, as administrative agent with near-total voting power, had effectively created a new creditor with super priority without transparency. He also argued that the classification of the CCD subscription as a CIRP cost was unlawful because equity instruments cannot simultaneously be categorised as interim finance or given super priority under Sections 30 and 53 of the Insolvency and Bankruptcy Code.

According to him, the document relied on by the RP was a “hybrid instrument” that was neither valid debt nor valid equity.

Glas Trust: No Optionality in CCD; Petition Built on Misquotation and Suppression

Senior Advocate C A Sundaram, representing Glas Trust, opposed the application, describing it as an abuse of process. He argued that the petitioner had suppressed a recent NCLAT order refusing to stay the AESL rights issue and holding that the decision to subscribe rests with TLPL's CoC. He submitted that the present plea sought to overturn that finding.

On the merits, Sundaram said the CCDs were clearly compulsorily convertible. He pointed to the definition of “subscription securities” in the agreement which described them as fully paid up CCDs and to the requirement of filing FC-GPR form to RBI which applies only to equity instruments.

He argued that the clause relied by relied on by Ravindran to show optionality, was merely an amendment clause that could operate only if the CoC and RBI approved a future modification.

He accused the petitioner of inserting the phrase “at the option” into extracts of the indicative terms and presented the minutes to show that no such language appeared in the CoC records.

Responding to the allegation regarding the investor's identity, Sundaram explained that Byju's Alpha Inc. had long become a wholly owned subsidiary of Glas Trust, as reflected in filings before the United States Bankruptcy Court for the District of Delaware.

He submitted that Ravindran, who had participated in those proceedings as a director, could not claim to have been unaware.

He also alleged that the petition was collusive and aimed at preventing TLPL from subscribing to ensure dilution of its stake. He pointed to the timeline of the filing, the last-day mentioning of the matter, and the subsequent extension of the rights issue as evidence of this.

Resolution Professional: CCD Is Pure Equity and RP Must Protect TLPL's 25.7 Percent AESL Stake

Senior Advocate Abhinav Vashisht, for the RP, supported the CoC's decision and reiterated that Byju's Alpha Inc. was Glas's wholly owned subsidiary. He said the RP had a statutory obligation to protect and preserve the value of TLPL's assets and that TLPL's 25.7 percent shareholding in AESL was its only valuable asset. Allowing the stake to fall to 4.99 percent, he submitted, would significantly erode TLPL's value.

He maintained that the CCDs were equity instruments because they contained no redemption feature and therefore could not constitute debt or ECB. He added that the funds had already been infused and transferred to AESL.

Senior Advocate Arvindh Pandian, also for the RP, questioned the bona fides of the petitioner and said the plea was designed solely to prevent TLPL from protecting its principal asset.

Aakash Says It Needs the Funds but Hopes Money Is FEMA Compliant

Senior Advocate Dhyan Chinnappa, appearing for AESL, told the tribunal that the company urgently needed the funds and had now received them. He said AESL wanted to ensure that the money was lawful and not tainted by FEMA violations. He added that the Board of AESL was obtaining independent opinions because allegations had been made in court. He noted that AESL had not been served with complete pleadings but said the rights issue would continue in the normal course. When counsel for Glas stated that the funds were “squeaky clean”, Chinnappa jestly remarked that such a statement would suffice.

After hearing all submissions, the tribunal reserved its order on Ravindran's interim plea seeking status quo on the implementation of the CCD arrangement.

Case Title: Riju Ravindran Vs Resolution Professional and Ors.

Case Number: IA(IBC) 1032/2025

For Applicant: Senior Advocate Navin Pahwa with Advocates Shyamohan V, Rishabh Gupta, Sradhaxna M, Anshika B. and Anirud C instructed by KMNP Law Advocates.

For Resolution Professional: Senior Advocates Abhinav Vasisht, P H Arvind Pandian with Advocates Pooja Mahajan, Arveena Sharma,  Ichchha Kalash, Samridhi Shrimali, Sparsh Jain, Harikrishna Pramod, Aishwarya Ravindranath, Lakshana Viravalli and Advocate Madhusmitha