Multiple related-party contracts between IndiGo and promoter Rahul Bhatia’s InterGlobe Enterprises have been questioned by co-promoter Rakesh Gangwal. In a sealed letter to market regulator Sebi, Gangwal has listed the agreements, accusing that they were entered without approval from the audit committee.
InterGlobe has, however, dismissed the claims, saying Gangwal has not provided any evidence supporting the charges. Bhatia and Gangwal, who together founded IndiGo in 2005, are at loggerheads accusing each other of fraud.
Taking a jibe at Gangwal’s labelling of IndiGo as “paan ki dukaan (betel shop)”, Bhatia said there was no abuse of rights, and Gangwal’s proposal for convening an extraordinary general meeting (EGM) was rejected on the basis of a legal opinion obtained by the board.
“Corporate governance is not about levelling baseless charges. Mr. Gangwal fails to cite a single concrete example where any act or omission has resulted in any loss or damage to IndiGo. Paan ki dukaan has apparently done well,” InterGlobe said.
In the notice for the proposed EGM, Gangwal had said that events go “far beyond just poor governance and even a paan ki dukaan would have handled these matters with more grace”.
Sources aware of the development said, in his submission to Sebi, Gangwal has said that for multiple related-party transactions, IndiGo didn’t take permission from the audit committee. He also raised questions about an audit done by EY, which was not disclosed to the board. “Under Sebi rules, whenever there is an issue of governance, the audit committee has to investigate, discuss and decide what they will study... And not get it done in two weeks. Also, why hasn’t the report been disclosed to the full board?” a person close to Gangwal asked.
Bhatia has, however, said that Gangwal himself agreed to the findings of the report at a board meeting on March 4, when chairman M Damodaran mentioned there was nothing wrong with the transactions but identified the procedural irregularities that had been noticed.
“Company’s CEO Ronojoy Dutta accepted the responsibility of putting in place a robust process for approval of related-party transactions. Given the flow of deliberations at the meeting, no one asked for the report to be tabled, and Mr. Gangwal agreed to the suggestions and offered to share a template of the process for dealing with on-going and future transactions. And indeed, just after the meeting he handed over a proposed approval process flow chart for related-party transactions,” InterGlobe said.
According to the Bhatia group, the committee led by Dutta was putting in place a system of improving the related-party transaction process but Gangwal scuttled it by taking the issue to the regulator.