But ever since the discord broke out, the 66-year-old aviation veteran, who once led US Airways as president and CEO, has removed himself from overseeing the operations of IndiGo. “I thought I will not be able to participate in a system which is not following governance standards,” he said.
However, Gangwal pointed out he was no longer comfortable with giving all powers to Bhatia and has asked the Securities and Exchange Board of India (Sebi) to intervene and amend a company’s rule which forces him to support appointing executives proposed by Bhatia.
According to the Articles of Association (AoA) of IndiGo, Bhatia’s holding company InterGlobe Enterprises (IGE) has the right to appoint key managerial personnel, including the chairman, MD, CEO, and president. It also has the right to nominate three non-independent directors, one of whom will be non-retiring.
“Along with other matters, I have requested Sebi to look at a particular clause that binds me to vote in support of the IGE Group to appoint certain executives. If that is not consistent with the regulations and the law, I think it needs to be changed. I am not comfortable voting along with someone if the system is already not following good governance,” Gangwal said.
In a letter to Sebi on July 8, Gangwal alleged several violations at IndiGo including those pertaining to related-party transactions; appointment of senior management personnel, directors and the chairman, who has always been an independent director by convention. He blamed unsubstantial powers held by Rahul Bhatia as the reason saying that Bhatia has used the powers to enter into illegal related party transactions with his group companies
In his letter, Gangwal indicated that he was unhappy with the appointment of both chairman M Damodaran, a former chairman of the regulator, and Ronojoy Dutta, chief executive of IndiGo.
He also told the market watchdog that consultancy firm EY was appointed by Chairman Damodaran to audit the related party transactions but the report was never shared with him.
Why did then Gangwal, a veteran at running global airlines agree to such a process which leaves him with no power?
Gangwal said he had put faith in the friendship with Bhatia to agree to such a contract but he regrets it now. “Back in 2005 my lawyers had asked how I could agree to all this. I had said “you don’t understand he is more than a good friend”. Gangwal added, “So, I let it go and now I regret it. I had a 25-year-old friendship with Rahul. He was like a blood brother. I never imagined something like this. He wanted control. So, I let it go but now I regret it.”
The public feud between the two founders has taken a toll on the company’s stock which has tumbled over 13 per cent in the last two days. Gangwal said he’s making this “sacrifice” to put in a system which would help the company in the long run.
“In the short term, I am paying a financial price and, regrettably, so are other minority shareholders. I have thought about this issue very hard. However, I am convinced that with good governance, we will emerge a much better company and that will be great for all of us,” he said.