NCLT vs HCs: A Turf War that Undermines Insolvency Justice
Supreme Court of India, Byju's, and Karnataka High Court (Image credit X.com)
Byju’s-Aakash Shareholding Clash: Why India’s Supreme Court vs. Karnataka High Court Battle Highlights Judicial Hierarchy as a Constitutional Must
By P. Sesh Kumar
NEW DELHI, MAY 3, 2025 — If there’s one thing the Indian judiciary has taught us lately, it is that procedural hierarchy isn’t just a matter of legal housekeeping—it’s a constitutional necessity. The latest fireworks between the Supreme Court and the Karnataka High Court over Byju’s-Aakash shareholding battle make for a telling commentary on judicial discipline—or the lack thereof.
In a stinging rebuke, the Supreme Court on May 2 pulled up the Karnataka High Court for repeatedly interfering with the orders of the National Company Law Tribunal (NCLT), ignoring the fact that the National Company Law Appellate Tribunal (NCLAT) exists precisely for such appeals.
The trigger?
A status quo order passed by NCLT on March 27 to protect Byju’s stake in Aakash Education Services Limited, which was swiftly overturned by the Karnataka High Court on procedural grounds. The High Court held that Aakash wasn’t given a chance to be heard—thereby remanding the matter back to the NCLT.
The Supreme Court, although it declined to entertain Byju’s special leave petition, made it crystal clear: the High Court had no business stepping into a domain that Parliament has deliberately ring-fenced for specialised tribunals.
“There was no justification for the Karnataka High Court to interfere,” the Bench observed bluntly. The Court was clearly exasperated with this pattern.
This wasn’t a one-off. The Karnataka High Court has, in the past too, interjected in NCLT matters—only to be overruled by the apex court.
Why does this matter? Because it’s not just a spat over jurisdiction—it is a systemic issue that threatens the integrity of the Insolvency and Bankruptcy Code (IBC) and the mechanisms designed to resolve corporate disputes swiftly and expertly.
The entire architecture of the IBC is built on the premise of speed and specialisation. The NCLT acts as the front-line adjudicator for corporate insolvency, oppression and mismanagement cases, with appeals going strictly to the NCLAT.
The role of High Courts, as reaffirmed by the Supreme Court in landmark decisions like Embassy Property (2020), is limited and exceptional.
What’s unfolding in the Byju’s-Aakash saga is the real-world unraveling of that architecture. Here’s a quick recap: Byju’s, under siege from its lenders and grappling with internal leadership chaos, feared that Aakash—now controlled by Manipal Systems—was on the verge of diluting its stake through an amendment to its Articles of Association.
The NCLT stepped in, freezing the shareholding structure. Aakash countered that the amendment was essential to secure funding, and the Karnataka High Court, citing procedural infirmity, stayed the NCLT order. This stay, in turn, paved the way for a renewed corporate maneuver.
Even Singapore Topco, the Blackstone-backed investor holding a 6.8% stake, saw red flags and moved the Supreme Court. Their contention was simple: let the NCLAT decide.
That is what the law prescribes. That is what Parliament intended. But when High Courts turn themselves into parallel forums for insolvency justice, the result is not only chaos—it is a breach of federal comity.
A central problem here is the lack of institutional memory and consistent precedent adherence in High Courts, particularly on corporate and insolvency law matters.
The IBC was meant to be a break from this fragmentation, funnelling corporate disputes into an integrated, two-tiered resolution system. When that system is bypassed, we risk sliding back into the very delays and multiplicity the IBC was enacted to avoid.
This case also raises uncomfortable questions about judicial self-restraint. Should High Courts intervene even when an appellate tribunal is functional and accessible? Should litigants be encouraged to forum-shop when they don’t like the order from a specialised tribunal?
The Supreme Court, through its sharp yet cautious language in this matter, has answered in the negative.
Let us be clear: the NCLT and NCLAT are not flawless institutions. They are burdened with vacancies, infrastructural challenges, and an ever-increasing caseload. But these are not reasons to sideline them. The remedy lies in strengthening the tribunal system—not undermining it through judicial overreach.
The Byju’s-Aakash battle is not just a corporate fight—it’s a cautionary tale. It tells us that when the rules of the game are unsettled by those meant to uphold them, even the best-designed systems falter.
It is now up to the higher judiciary to send a firmer, unequivocal message: insolvency jurisprudence has its house, its gatekeeper, and its appeal path. All others—however well-meaning—must keep out.
(This is an opinion piece; views expressed solely belong to the author)
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