The genesis of such a showdown between promoters of India’s largest airline lies in four related party transactions regarding IndiGo’s business office space, simulator training facilities, general sales contract and hotel for airline crews.
For instance the simulator contract signed with a Canadian company CAE was arbitrarily extended in 2013 for 15 years without a global tender, the person close to Gangwal said.
‘’When Gangwal objected, the reason given was that no other facility can accommodate IndiGo’s demand. There are 20,000 commercial aircraft flying across the world. Do all the crews get trained by CAE?” he asked.
IGE has rejected such claims. “There is a provision to review the terms of contract after every five years in terms of pricing and other factors. In 2018, it was found that CAE was providing services to IndiGo at a much competitive price than it provides to other Indian carriers,” another source close to Rahul Bhatia said.
“Interglobe Enterprises has nurtured and supported IndiGo through its formative years and during its course of expansion by providing these services at a lower rate. IGE has ensured that IndiGo has received more favourable treatment as compared to other customers,” the company reiterated in a late evening statement.
The person close to Rahul Bhatia said Gangwal’s intention was to gain control because with current terms and conditions, it would be difficult for him to find an investor to buy his stake. “This is why Gangwal wants to rewrite the terms and conditions which is unfair because the control structure was accepted by Gangwal during inception and again during public listing because Bhatia took the risk of infusing capital which was more than Rs 1,000 crore.’’
A senior Sebi official said there’s little scope for the regulator to interfere on the AoA matter. “Sebi will primarily inspect if the related party transactions were done according to the norms at an arm’s length distance. If irregularities are found, only then can the independent directors be questioned,” said a senior government official.
But the Gangwal camp is not willing to give up the fight. Sources said Gangwal has met Finance Minister Nirmala Sitharaman, and Sebi chief Ajay Tyagi in the last one week. “If necessary, we would go to the National Company Law Tribunal (NCLT),” the person close to Gangwal said.