“The board on July 20 decided to expand the board to a maximum of 10, including four independent directors. The amendment to the articles will be subject to approval by the shareholders at the forthcoming annual general meeting,” the company informed the exchange late Sunday night. The board had on Saturday issued a statement, agreeing to appoint a woman director in order to comply with regulatory norms.
While Rahul Bhatia’s InterGlobe Enterprises (IGE) wants the right to nominate five directors, Gangwal and one independent director on the board, Anupam Khanna, have objected to it, saying this will lead to dilution of Gangwal's representation on the board. Gangwal has pitched for two nominee directors on the board.
“IGE has said the proportion of its representation should remain the same at 50 per cent and hence should have the right to appoint five directors. However, since two directors (Gangwal and Khanna) have objected to that, Chairman M Damodaran has not agreed to finalise that. It will be clear by tomorrow (Monday),” said a person aware of the development.
The simmering tension between the promoters is far from over as the changed board structure would give power to the Bhatia group to pass or block any resolution in future, it is learnt.
The company’s promoters Rahul Bhatia and Rakesh Gangwal, who together hold 75 per cent stake in the company, have publicly fallen out after Gangwal wrote to the Securities and Exchange Board of India (Sebi) alleging lack of corporate governance in the company. Gangwal alleged that Bhatia, who holds controlling power of the company, has used it to enter into questionable related party transactions between group companies
of IGE and IndiGo.
“These controlling rights give IGE Group significant influence over the decisions of the company. Our concern is that such overarching control over the company by the IGE Group should not become a vehicle for them to enter into related party transactions with the company in the manner that may have taken place,” Gangwal had written on July 8 in a letter addressed to Sebi chief Ajay Tyagi. This was despite an independent forensic audit done by consultancy firm EY, which found no “substantial lapse” in the process.
However, the board on Sunday asked four top executives of the company including CEO Ronojoy Dutta, CFO Rohit Philip, General Counsel Priya Mehra and Company Secretary Sanjay Gupta to design procedures in order to strengthen the norms for related party transactions.
Sources close to the development said the board, led by former Sebi chairman Damodaran, took multiple breaks in order to give both sides time to negotiate with each other before putting the resolution to vote. “The primary issue that Gangwal raised again and again during the meeting is about related party transactions.
He said the company was not following proper set of corporate governance norms while entering into such transactions. The board will keep on discussing the issue till a proper set of procedures agreeable to both is designed,” a person aware of developments said.