The protracted boardroom battle at Indigo has now shifted to the courts in the United States. The promoters are at loggerheads with each other and Rahul Bhatia who is controlling the airline has initiated legal proceedings against his co-promoter Rakesh Gangwal and a Director on the Indigo board Anupam Khanna. The gentlemen are currently residents of Florida and Maryland respectively in the US. There are already arbitration proceedings going on in London.
Gangwal has been crying foul for a long time, saying Rahul Bhatia is exceeding his brief in managing the affairs of the airline. Bhatia is seeking damages from him for making these remarks against him. Anupam Khanna too has joined the tirade against Bhatia and that is how he has also been called upon to share the information.
The main grievances that Rakesh Gangwal has been raising consistently pertains to related-party transactions and to the way the independent directors are appointed. On third party transactions, it was felt an agreement was arrived at in a special board meeting held in Mumbai some months earlier. As per this agreement, a committee within the board will be formed which will scrutinise the related party transactions. Related party transactions is a company giving out contracts to entities which have some connection, directly or indirectly with the promoter group. Under corporate governance, this becomes more of an issue of ethics than anything else. There are provisions which prescribe how all such transactions need to be reported and so on. But there is a threshold limit.
The Companies Act stipulates that all such transactions where the directors of a company have any type of interest and the value of which exceeds 10% of the turnover of the company or if an individual contract order is above the value of ₹100 crore, then such transactions need to be placed before the board of directors and the approval taken. This information has to be available to the shareholders as well.
Rahul Bhatia and his IGE (Interglobe Enterprises) which control around 50% of the equity in Indigo claim the value of related party transactions is way below this threshold limit. However, the warring promoters agreed to a solution where a committee from within the board of directors would be formed to vet these deals.
Obviously, Rakesh Gangwal is not happy with this solution and wants more. Bhatia’s allegation is Gangwal has breached the shareholders’ agreement as well as the Articles of Association. These are the grounds on which he had sought the arbitration in London.
The other issue that Gangwal has with Bhatia is that there is no transparency in the selection of independent directors on the board.
There does not appear to be any end to this dispute between the promoters of Indigo.