IndiGo promoters' war: No listing norm violation, Bhatia may tell Sebi

Rakesh Gangwal (L), Rahul Bhatia (R). Illustration by Ajay Mohanty
Rahul Bhatia-founded InterGlobe Enterprises (IGE) is expected to tell the Securities and Exchange Board of India (Sebi) that the articles of mutual agreement signed with IndiGo co-promoter Rakesh Gangwal have been recognised in the market watchdog’s listing and disclosure regulations as having the force of law. Under the mutual agreement, control is vested with the IGE group. The company has to submit its reply before the July 19 board meeting of Sebi. 

Gangwal had recently approached Sebi, raising concerns linked to lapses in corporate governance at IndiGo, blaming co-promoter Bhatia for the same. 

Under the listing obligation and disclosure requirements regulations of 2015, Sebi has clearly enumerated under regulation 4(2) (d)(i) that a listed entity shall respect the right of stakeholders that are established by law or through “mutual agreements.” The clause has been cited while detailing out the role of stakeholders in corporate governance.

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.