Aakash Accuses EY India Of Conflict Of Interest

SUMMARY

AESL has accused EY India of acting in a dual capacity by advising both BYJU’S and Aakash, “despite being fully aware of the hostile and litigated nature of their relationship”

Aakash’s legal team has now also asked EY India to disclose all documents, information, or communication it was privy to in connection with transactions involving AESL.

The coaching chain has warned EY India of “appropriate steps in law” for failure to confirm and provide the requisite information

Amid the ongoing rumblings at BYJU’S, Aakash Educational Services (AESL) has now reportedly accused EY India of conflict of interest and breach of professional conduct.

Sources told news agency PTI that AESL’s legal team, in a letter on May 17, accused EY India of acting in a dual capacity by advising both BYJU’S and Aakash, “despite being fully aware of the hostile and litigated nature of their relationship”. The letter terms EY India’s alleged conflict of interest as “unethical and legally untenable”.

For context, BYJU’S acquired coaching chain Aakash in 2021 in a cash and stock deal. However, the failed acquisition has been marred by governance issues and a fight over the control of AESL as troubled edtech faces insolvency proceedings. The control of the coaching chain, with majority stake, now rests with Manipal Group’s Ranjan Pai.

As per the report, Aakash’s legal team has now also asked EY India to disclose all documents, information, or communication it was privy to in connection with transactions involving AESL. Sources reportedly added that the coaching chain has warned EY India of “appropriate steps in law” for failure to confirm and provide the requisite information.

“We would be constrained to take appropriate steps if you do not appreciate the seriousness of the point made by us that EY was an advisor as well as participant in many of the decisions,” AESL added in the letter to EY.

Meanwhile, AESL’s counsel also reportedly alleged that EY India provided services to BYJU’S while also “interacting” with the coaching chain, terming it a “clear conflict in a case involving corporate control and shareholder disputes in AESL”.

Not stopping there, AESL’s legal head Sanjay Garg, in the letter, alleged that EY India, despite being put on notice, continued to allegedly act in disregard of fiduciary boundaries, adding that Aakash has directed EY India to cease all involvement and preserve all communication records for potential use in legal proceedings.

Garg also reportedly asserted that institutional integrity cannot be compromised, especially when it comes to firms “entrusted with sensitive and high-stakes advisory roles”.

“We have sufficient material in our possession to submit before any adjudicating/regulatory authority to suggest that any involvement in the CIRP process would conflict with independent professional functions to be performed by entities such as you,” the letter reportedly added.

Alongside, CrestLaw Partners, on behalf of Manipal Group, also approached EY India and flagged their involvement in advising the Manipal Group in material matters involving tax and regulatory implications, accounting treatment among others, pertaining to AESL.

“We would further like to point out that, as majority shareholder in AESL, our client has been apprised that there are considerable correspondences in the records of AESL, which show that EY was a constant factor, in both operations and advise rendered to Mr. Byju Raveendran/BYJU’S/AESL/Aakash Choudhry/Blackstone/our clients, the Manipal group,” the legal firm reportedly said on May 21.

CrestLaw Partners is also said to have told EY India that the latter’s association “in any manner, through anyone” in the corporate insolvency resolution process (referring to BYJU’S) was a “matter of considerable concern, regret and amounts to misconduct”.

In response to the allegations, EY India told Inc42, “We refute all allegations. We treat matters of client confidentiality and conflict with utmost seriousness. Therefore, we cannot comment further on this matter”.

Inc42 has also reached out to Aakash for comments on the development. This story will be updated with a response when it is received.

At the heart of the matter is the family office of Manipal Group chairman Ranjan Pai acquiring the $250 Mn debt availed by then-BYJU’S Aakash from Davidson Kempner in 2023. That year, he invested a total of $300 Mn in the company. However, the situation changed after Aakash’s board approved a proposal to convert this investment into a 40% stake in the company, thereby giving Pai the control of the coaching chain.

Thereafter, last year, Aakash moved to change its AoA to raise external funding, which it said was critical for its survival. However, stakeholder Singapore Topco (later withdrew) and BYJU’S financial creditor Glas Trust challenged it saying that the alteration will lead to their stakes getting diluted in the startup.

Earlier this year in February, Aakash, along with its investors Blackstone and Ranjan Pai’s Manipal Education & Medical Group, urged the National Company Law Tribunal (NCLT) to reject Glas Trust’s petition to become a party to a case that seeks to stop the coaching chain from removing the reserved rights of its minority shareholders. Last heard, the NCLT had ordered a status quo on the shareholding of the AESL.

Since EY India advises BYJU’S, the Manipal Group and Aakash see EY India overseeing their books and offering them services as a conflict of interest.