Sebi seeks IndiGo's response to Gangwal's letter over corporate governance

Co-promoter questioned chairman's independence again

The Securities and Exchange Board of India (Sebi) has sought a response from IndiGo on a fresh letter by the company's co-promoter Rakesh Gangwal regarding corporate governance issues.

In a filing to the stock exchanges on Wednesday, InterGlobe Aviation said the markets regulator has sought comments on a letter written by Gangwal on August 30. "The company will provide its response to the Sebi," the filing said.

On September 3, Sebi sought comments from the company on a letter received by the regulator from legal counsel of Gangwal.

According to the filing, the letter reiterates certain issues that Gangwal had previously raised with Sebi and seeks certain directions from the regulator against the company and the IGE Group. The issues are related to amendment to the company's Articles of Association (AoA) to remove the rights of the IGE Group, past related-party transactions, non-independence of the current chairman, refusal to hold the extraordinary general meeting when requisitioned by Gangwal, and certain public statements made by CEO Ronojoy Dutta, according to the filing.

The fresh letter from Khaitan & Co, which is advising Gangwal in his bitter public fight with co-promoter Rahul Bhatia, questioned the independence of the board's Chairman M Damodaran. It also sought action against the company for irregularities in executing related-party transactions.

However, the latest letter from Gangwal came just days after the company's annual general meeting held on August 27 in which Gangwal himself voted supporting extension of Damodaran's nomination as chairman for five years. The resolution was supported by 99 per cent of the company's shareholders.

Two days before the annual general meeting, Gangwal had also said with the company executing a new policy for related-party transactions and closing loopholes while expanding the board size to 10 members.

Gangwal and Bhatia who together hold 75 per cent stake in the company have been involved in a bitter public fight after Gangwal had complained to Sebi that Bhatia, using his control over the company, has executed multiple related-party transactions between IndiGo and his group companies which don't conform to law.

However, an independent audit by EY done at the behest of Damodaran found no major irregularities.

Sebi is already looking into alleged corporate governance lapses at InterGlobe Aviation after Gangwal, in July, wrote to the watchdog seeking its intervention to address certain issues.

The allegations were rejected by the Bhatia camp.

Gangwal, along with his affiliates, holds around 37 per cent stake in InterGlobe Aviation, while Bhatia and his affiliates (IGE Group) have about 38 per cent shareholding in the company.

Shares of the company rose nearly 1 per cent to close at Rs 1,641.20 on the BSE. IndiGo has largest share of India's domestic market.