Highlights:
- Proposal to increase board strength to a dozen from the current six will be taken up on July 19 - The plan to add more directors follows allegations of corporate governance violations against co-founder Rahul Bhatia by his estranged partner, Rakesh Gangwal
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The board of InterGlobe Aviation, which runs IndiGo, India’s largest airline, will consider a proposal to induct new directors at its board meeting slated for July 19, said two people with direct knowledge of the matter.
A proposal will be placed before the board to grow its strength to probably a dozen directors from the current six when it meets to approve IndiGo’s quarterly results, the people cited above said on condition of anonymity.
The plan to add more directors follows allegations of corporate governance violations against co-founder Rahul Bhatia by his estranged partner, Rakesh Gangwal. The proposed board expansion has been a contentious issue between the two promoters.
According to a January 30 letter written by Rahul Bhatia and his wife Rohini to the company’s board, Gangwal has asked on several occasions for the board to be expanded. “Bhatia agreed to an expansion so long as the IGE Group’s representation on the board is maintained at the proportion mentioned in the shareholders’ agreement (SHA) and the Articles of Association of the company (AoA)," the letter said.
Also Read: Respond to Rakesh Gangwal’s charges in three weeks, MCA tells IndiGo
Bhatia heads InterGlobe Enterprises Pvt or IGE, one of IndiGo’s promoter entities. He owns about a 38 percent stake in InterGlobe, while Gangwal holds about 37 percent.
“Gangwal, being unhappy with IGE Group’s position on the expansion of the board, reacted by abruptly withdrawing from participating in aircraft and related acquisition activities of the company,” according to the letter.
The Companies Act, 2013, stipulates every listed public company to have independent directors comprise at least one-third of its board. SEBI norms require at least one woman independent director in the top 500 listed entities by market capitalisation by April 1 and in the top 1,000 listed entities by April 1, 2020. Further, at least 50 percent of the board should comprise independent directors.
“Bhatia has proposed that the board could be doubled to 12 members, with each promoter group maintaining its inter se nomination rights and let there be four independent directors,” said the first of the two people cited earlier.
IndiGo didn’t respond to Mint’s queries till press time. Gangwal also did not respond to text messages.
Gangwal, meanwhile, said he won’t sell his shareholding and will maintain his stake, according to Bloomberg. “I am here for the long haul,” said Gangwal. “I have no desire to sell my stake or raise my stake.”
IndiGo’s board comprises Rahul Bhatia and Gangwal, besides former Securities and Exchange Board of India (SEBI) chief M Damodaran, who serves as the chairman, Rohini Bhatia, InterGlobe Technology president Anil Parashar and former World Bank executive Anupam Khanna, an independent director.
“Bhatia and Gangwal had been discussing the idea of expanding the board for a while, more so to deal with the requirement of having an independent woman director and diversity on the board,” said the second person.
“Due to Gangwal’s insistence on dilution of the IGE Group’s rights, the expansion has been kept pending and the company is in technical default,” the person said.
The simmering feud between the two founders took an ugly turn in early July, with Gangwal seeking SEBI’s intervention to curb alleged corporate governance violations by Bhatia.
The charges were denied by Bhatia, who accused Gangwal of trying to dilute the controlling rights of his holding company IGE in the budget airline.
In a July 8 letter, addressed to SEBI Chairman Ajay Tyagi, Gangwal alleged several violations at IndiGo including those pertaining to related-party transactions; appointment of senior management personnel, directors and the Chairman, who has always been an independent director by convention.
Following Gangwal’s letter, SEBI has asked the airline to respond by July 19.
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