 "MCA seeks IndiGo reply on governance lapse charges made by Gangwal")
The Ministry of Corporate Affairs (MCA) has asked InterGlobe Aviation, which operates IndiGo, to respond to corporate governance-related allegations made by co-promoter Rakesh Gangwal within three weeks, a senior government official said.
“If there was any agreement contrary to the provisions of the Companies Act, then the Act shall prevail. One major partner has raised the issue and it has to be properly examined,” the official added.
In response to an email query, an IndiGo spokesperson said, “As of now, the company has not received any request for information from the MCA.”
IndiGo, India’s largest airline, is facing its worst crisis as co-promoters Rahul Bhatia and Rakesh Gangwal have levelled serious allegations against each other, forcing the Securities and Exchange Board of India (Sebi) to intervene. Gangwal has also notified the MCA of the alleged lapses.
Gangwal, who along with his family holds a 37 per cent stake in the company, has sought permission to hold an extraordinary general (EGM) meeting, alleging that the company has participated in objectionable related-party transactions (RPTs) and not complied with corporate governance standards.
“What is clear is that it is a dispute…In any dispute each side has a story. You have to ask both to explain. There is no panic issue,” the official said.
Bhatia and Gangwal together own more than 70 per cent of the company and IndiGo’s success has often been credited to their synergy.
According to Gangwal, Bhatia-owned InterGlobe Enterprises (IGE), which has greater control over the company, has misused its powers to enter into RPTs with IndiGo. RPTs relate to deals IndiGo entered into for the hotel accommodation of its crew, simulators for crew training, and the office space in the country.
In a 23-page letter to Ajay Tyagi, chairman, Sebi, with a copy to Prime Minister Narendra Modi, Gangwal wrote that besides questionable RPTs, fundamental governance norms and laws were not being adhered to and this would lead to “unfortunate outcomes” unless correctives were applied.
Corporate governance regulations prescribed by Sebi as well as those of the company’s code of conduct for directors and the senior management have been violated, Gangwal alleged.
“If there was any agreement contrary to the provisions of the Companies Act, then the Act shall prevail. One major partner has raised the issue and it has to be properly examined,” the official added.
In response to an email query, an IndiGo spokesperson said, “As of now, the company has not received any request for information from the MCA.”
IndiGo, India’s largest airline, is facing its worst crisis as co-promoters Rahul Bhatia and Rakesh Gangwal have levelled serious allegations against each other, forcing the Securities and Exchange Board of India (Sebi) to intervene. Gangwal has also notified the MCA of the alleged lapses.
Gangwal, who along with his family holds a 37 per cent stake in the company, has sought permission to hold an extraordinary general (EGM) meeting, alleging that the company has participated in objectionable related-party transactions (RPTs) and not complied with corporate governance standards.
“What is clear is that it is a dispute…In any dispute each side has a story. You have to ask both to explain. There is no panic issue,” the official said.
Bhatia and Gangwal together own more than 70 per cent of the company and IndiGo’s success has often been credited to their synergy.
According to Gangwal, Bhatia-owned InterGlobe Enterprises (IGE), which has greater control over the company, has misused its powers to enter into RPTs with IndiGo. RPTs relate to deals IndiGo entered into for the hotel accommodation of its crew, simulators for crew training, and the office space in the country.
In a 23-page letter to Ajay Tyagi, chairman, Sebi, with a copy to Prime Minister Narendra Modi, Gangwal wrote that besides questionable RPTs, fundamental governance norms and laws were not being adhered to and this would lead to “unfortunate outcomes” unless correctives were applied.
Corporate governance regulations prescribed by Sebi as well as those of the company’s code of conduct for directors and the senior management have been violated, Gangwal alleged.
Allegations made by Rakesh Gangwa
- IndiGo did not follow norms on related-party transactions
- Airline board not independent
- Independent directors failed to take independent decisions
- Shortage of independent directors
- No woman independent director on board
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