Almost two months after it first came to the fore, the tussle between IndiGo's co-founders has escalated further with Rakesh Gangwal accusing Rahul Bhatia of “serious corporate governance lapses” and urging markets regulator Sebi to intervene. The Securities and Exchange Board of India (Sebi) has asked IndiGo - India's largest and most profitable airline - to respond to the concerns by July 19. On Wednesday, the share of IndiGo's parent company Interglobe Aviation Ltd opened 11 per cent lower than its previous close on the National Stock Exchange. What has Gangwal alleged? Rakesh Gangwal has alleged that Rahul Bhatia's entity Interglobe Enterprises, which has management control of the airline, has built an "ecosystem of other companies that would enter into dozens of related party transactions with the airline". This was among several other allegations levelled by Gangwal into lapses of corporate governance including appointment of independent directors, powers of the Nomination and Remuneration Committee of the company's board, among others. How has Bhatia responded? Prior to the letter Gangwal sent to Sebi, Bhatia had written to the Board of IndiGo that Gangwal's allegations into governance issues at the airline were part of a plot to "dilute" and "diminish" the control of Interglobe Enterprises in the airline. He also pointed out that the audit firm EY conducted a review of the related party transactions and did not find any "substantive" irregularities in it. Why is the timing of the tussle important? The shareholders' agreement between entities of Bhatia and Gangwal that determines the powers each of these co-founders have over the company's operations and management, is set for renewal in October this year and contention of disproportionate control over IndiGo could be one of the primary reasons behind the promoters going at loggerheads. What is the history of these promoters? Rahul Bhatia and Rakesh Gangwal founded IndiGo as a low-cost airline back in 2006. Bhatia worked in the hospitality sector while Gangwal, a US citizen was a senior executive at United Airlines. Both the promoters held nearly 99 per cent stake in the airline prior to its listing in 2013 and as of March 31, Bhatia held 38 per cent stake while Gangwal owned 37 per cent share in Interglobe Aviation, the parent company of IndiGo. While both Bhatia and Gangwal are directors of the company, Bhatia was also the airline's interim chief executive till January, taking over after Aditya Ghosh's exit last year.
