Shareholders of InterGlobe Aviation, the parent company of the country’s largest domestic carrier IndiGo, Wednesday rejected a special resolution of co-promoter Rakesh Gangwal — who is locked in a dispute with partner Rahul Bhatia over control of the airline — to amend the company’s Articles of Association (AoA).
“The special resolution has not been passed as the votes cast in favour (48.55 per cent) of the resolution are less than three times the number of votes cast against (51.44 per cent) the resolution,” InterGlobe Aviation said in a stock exchange filing after Wednesday’s extraordinary general meeting (EGM). The AoA specifies regulations for a company’s operations and how the company is to be run, governed and owned. The EGM was chaired by M Damodaran, chairman of the board of directors.
Gangwal’s RG Group sought the removal of the clauses that give the right of first refusal of shares to partner Bhatia whenever the former intends to sell. RG Group owns a 36.64 per cent stake in InterGlobe Aviation, while Bhatia holds over 38 per cent in IndiGo through his company InterGlobe Enterprises (IGE). Although the shareholder agreement between Gangwal and Bhatia expired in October, the AoA still continues.
According to the AoA, if any member of the Bhatia-led IGE Group wants to transfer shares to a third party, then the non-transferring group will have the ‘Right of First Refusal’ subject to certain conditions. Similarly, the non-transferring group will also have the ‘Tag Along Right’ wherein it would have the option to sell some part of the shareholding.
The differences between Gangwal and Bhatia – the co-founders and co-promoters – came to the fore in July 2019 after Gangwal sought Sebi’s intervention to address alleged corporate governance lapses at the company. In the wake of the feud, arbitration proceedings are also going overseas between the two promoters’ sides.
Gangwal had levelled allegations of corporate governance lapses against Bhatia and the IGE Group, stating that Bhatia had carried out related party transactions (RPT) without the approval of the audit committee. In his complaint, Gangwal had sought intervention of the Ministry of Corporate Affairs and the Securities and Exchange Board of India (Sebi). The allegations were, however, rejected by Bhatia, who insisted his IGE Group followed all the stipulated norms.
Earlier, the RG group had sought an EGM on May 22, 2019, requiring directors and senior management to follow the governance code and new policies on the RPTs. However, the request was turned down by the board of directors.
The AoA has been a flashpoint between the two, with Gangwal alleging it gives the Bhatia camp all powers over functioning of IndiGo. Bhatia, on the other hand, called it an attempt to dilute the controlling rights of the IGE Group.
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