Rakesh Gangwal along with his affiliates have about 37% shareholding in InterGlobe Aviation while Rahul Bhatia and his affiliates (IGE Group) have around 38% stake (Photo: Reuters)
Rakesh Gangwal along with his affiliates have about 37% shareholding in InterGlobe Aviation while Rahul Bhatia and his affiliates (IGE Group) have around 38% stake (Photo: Reuters)

Bhatia, hitting back at Gangwal, says ‘pan ki dukan’ doing well

  • IGE Group tacitly admitted that there were some procedural laxities at IndiGo regarding related-party deals
  • Gangwal claims he had asked the company’s board to disclose the findings of the EY report on related-party deals

NEW DELHI : Rahul Bhatia and Rakesh Gangwal, the two estranged promoters of IndiGo Airlines, took their escalating power battle to a new level on Friday.

The Bhatia-controlled InterGlobe Enterprises (IGE) Group—the parent company of the country’s largest airline—condemned Gangwal’s charges over issues related to governance and those involving the allegedly superior rights of the Bhatia-led group as compared with the Gangwal group in IndiGo.

“Corporate governance is not about levelling baseless charges. It is about ensuring that the company’s interests as also those of other stakeholders are protected and not harmed. Mr Gangwal fails to cite a single concrete example where any act or omission has resulted in any loss or damage to Indigo. Paan ki dukan has apparently done well and continues to do well; it is financially sound; it is well-run and managed by a competent set of managers. Mr Gangwal’s allegations about lack of corporate governance are much ado about nothing," IGE said in a statement.

However, the IGE Group tacitly admitted in a press release that there were certain procedural laxities at IndiGo regarding related-party transactions (RPTs).

IGE stated that the minutes of the 4 March board meeting show that the new IndiGo chairman M. Damodaran had sought an EY report analysing the RPTs to get a better understanding of the issues. At the meeting, Damodaran said while there was nothing wrong with the transactions, he had identified certain procedural irregularities in RPTs. He suggested process improvements, following which the board was to constitute an internal committee to examine RPTs.

The IGE statement said IndiGo chief executive Ronojoy Dutta had accepted the responsibility for installing robust RPT processes and that the committee was given four months to make its recommendations. “Given the flow of deliberations at the meeting, no one asked for the report to be tabled and Gangwal agreed to the suggestions and offered to share a template of the process for dealing with on-going and future RPTs. And, indeed, just after the meeting he handed over a proposed approval process flow chart for RPTs. Even much prior to the four-month period (leading up to the board meeting), substantial progress had been made in the matter, as also admitted by Gangwal himself, until he scuttled the process on 28 May," claimed the IGE Group statement.

In his complaint filed to both the Prime Minister’s Office and Securities and Exchange Board of India, Gangwal claimed that he had asked the company’s board to disclose the findings of the EY report on RPTs submitted in January.

On Friday, Gangwal told CNBC-TV18: “I am trying to see if the Prime Minister would ask the government to intervene and fix the issues that I have raised at IndiGo because it is a security and economic matter, and the airline is part of the national fabric."

The IGE Group’s statement indicated that Gangwal’s primary objective of raising the RPT issues was to free his group from the obligations of the shareholder agreement, which was signed between the two promoters in 2006 and is due to expire this October.

IGE said while Gangwal talks about unusual rights of IGE as a shareholder and promoter, he fails to give even one instance where there has been any misuse of any such rights.

“Gangwal bases his allegations on whistleblowers who chose not to use the whistleblower mechanisms and procedures established by IndiGo," said the release by IGE Group.

In a somewhat sarcastic retaliation to Gangwal’s claims, IGE Group said corporate governance is not about levelling baseless charges, but about ensuring that a company’s and stakeholders’ interests are protected. “IGE Group deplores misinformation on corporate governance," read the release, terming Gangwal’s allegations on corporate governance as “baseless, fact-free and insidious".

IGE said Gangwal has labelled certain features of the shareholders’ agreement (SHA) as “unusual" at the time when IndiGo was founded and he came in as an “investor". The agreement was negotiated between Bhatia and Gangwal in 2006 and was amended twice in 2015 as a precursor to IndiGo’s initial public offering (IPO) that year to comply with regulations.

“Both Bhatia and Gangwal being seasoned business persons... signed a heavily negotiated SHA between IGE Group and RG Group," said the IGE release, adding that the SHA reflects the two promoters’ agreement and understandings on the governance, management and operation of IndiGo.

The Bhatia-led group also claimed the agreement always contained mutual rights and obligations of the parties. IGE said even though Gangwal was entitled to appoint a director on the board of IndiGo right from the inception of his investment in 2006, he chose not to join the board or to appoint any other nominee until June 2015 (prior to the IPO). As a precursor to the IPO, the SHA was heavily re-negotiated and amended twice to comply with regulations; disclosures were made in the IPO prospectus that IndiGo would remain a promoter-controlled company and the arrangements between the two promoters were made public.

In support of its contention, the IGE statement said: “Each time a name was proposed by a director for a potential appointee as an independent director and the board unanimously (including Gangwal) approved the appointment. To make a point, Dr. Anupam Khanna was introduced to IndiGo by Gangwal and was welcomed as a suitable independent director who would add value to the board. Khanna is chairperson of the nominations and remuneration committee (NRC)—which has unanimously approved the nominations of independent director and senior management including the CEO."

IGE also criticized Gangwal’s grievance over nomination of the chairperson. “…he (Gangwal) admits that the chairperson is independent but that the right to nominate will make the chairperson non-independent. The relevant issue is whether the director who is being nominated as chairperson is an ‘independent’ director as defined in the regulations or not," said IGE.

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