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Mumbai: Businessman Arun Bhatia is set to exit AirAsia India, ending an acrimonious partnership in which he alleged that the low-fare airline he jointly owns with Tata Sons Ltd and Malaysia’s AirAsia Bhd was controlled from overseas.

The airline, which started operations in June 2014, is a three-way joint venture with Tata Sons, AirAsia and Bhatia’s Telestra Tradeplace Pvt. Ltd holding 41.06%, 49% and 9.94% respectively.

Tata Sons, the Tata group holding company, said on Monday that it will buy a 7.94% stake from Bhatia; two Tata Sons executives—AirAsia India chairman S. Ramadorai and director R. Venkataramanan—will buy 0.5% and 1.5%, respectively, from him in their personal capacity.

Once the deal is complete, the holding of Tata Sons in AirAsia India will go up from 41.06% to 49% and that of Malaysia’s AirAsia, which has invested in the airline through AirAsia Investment Ltd, will remain at 49%.

In an interview that appeared in The Economic Times on 11 December, Bhatia was quoted as saying that the airline was being controlled by its Malaysian partner, and that he would take up the matter legally.

Indian rules allow foreign airlines to own up to 49% in local airlines, but stress that management control must be with the local partner.

Tata group seems to have decided to increase its stake in AirAsia India rather than having a relatively unknown entity in Indian civil aviation as minority partner, said K.G. Vishwanath, an independent aviation consultant.

“It also shows the serious commitment by Tata group to AirAsia India," he said, adding it remains to be seen whether the group will wield more meaningful control over day-to-day operations.

The Tata Sons statement said the agreement was signed on 14 March, and the transaction is proposed to be completed in April, subject to corporate processes.

Tata Sons’ decision to increase its stake comes 10 days after AirAsia India named Amar Abrol as its new chief executive officer (CEO) with effect from April, replacing Mittu Chandilya.

AirAsia India had also announced the appointment of Ankur Khanna as chief financial officer and Kiran Jain as commercial head.

In AirAsia’s case, the rule requiring local partners to wield management control has been complicated because AirAsia Bhd has been the largest shareholder.

Chandilya led AirAsia India from 1 June 2013. Under his leadership, the airline built a fleet of six aircraft, covering 12 routes and carried over 1.8 million passengers.

Tony Fernandes, group CEO of AirAsia, has dismissed allegations that his airline was exerting undue control over the Indian business.

The founder of AirAsia Group, whose father is of Goan origin, in mid-March said he applied to be an Overseas Citizen of India (OCI). Fernandes is seeking to sidestep criticism that the airline is controlled from abroad.

A non-resident Indian can hold 100% of a local airline.

Once he gets OCI status, nobody can hound him over foreign ownership, Fernandes said. “Maybe I should throw a party in Goa after I get the citizenship," Fernandes joked.

He pointed out that Jet Airways (India) Ltd chairman Naresh Goyal, despite living in London, was able to sidestep the regulations.

In February, Fernandes triggered a controversy by asking whether all promoters of domestic airlines were living in India, in an apparent reference to Goyal.

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