NEW DELHI :
The fragile truce between the two co-founders of InterGlobe Aviation Ltd, which runs budget airline IndiGo, appears to be all but broken, with Rahul Bhatia submitting an arbitration request against Rakesh Gangwal on Tuesday before the London Court of International Arbitration (LCIA).
IndiGo said in a BSE filing that InterGlobe Enterprises Pvt. Ltd (IGE Group) and Rahul Bhatia have submitted a request for arbitration to the LCIA under the shareholder agreement of InterGlobe Aviation on 23 April 2015 between the IGE Group and Rakesh Gangwal Group (RG Group) which comprises Gangwal, the Chinkerpoo Family Trust and Shobha Gangwal.
“The company (InterGlobe Aviation) has been named as a respondent, as it is a party to the shareholder agreement," IndiGo said.
The development follows Gangwal reaching out to the Securities and Exchange Board of India (Sebi) on 30 August, seeking directions on issues ranging from related-party transactions (RPTs) and chairman M. Damodaran’s conduct to curbing Bhatia-owned IGE’s “unusual controlling rights".
Gangwal and his associates hold nearly 37% in InterGlobe Aviation, while IGE group owns around 38%. Although the two groups own similar stakes, an initial agreement gave special rights to Bhatia’s company.
On 27 August, Mint reported that Gangwal had agreed to support the proposed changes at an annual general meeting after some of his demands, including on board expansion and RPTs, were accepted, ending months of public wrangling.
With both promoters refusing to back down, the dispute may prove to be a costly distraction for the airline, which dominates Indian skies with nearly 50% market share.
In July, Gangwal had first complained to Sebi that Bhatia’s IGE group’s outsized rights have helped it push through transactions and policy changes that violate corporate governance rules. Bhatia has denied the allegations.
Gangwal had also objected to the board expansion as he contended that in the absence or resignation of an independent director, Bhatia’s IGE group would have an unfair advantage in approving key policy changes since it has five directors representing it.