Indigo crisis: Sebi starts probe, summons airlines’ company secretary

Ahead of the response it has sought from the company regarding complaints by co-promoter Rakesh Gangwal over alleged violations of corporate governance, the Securities Exchange Board of India (Sebi) on Thursday summoned IndiGo’s company secretary Sanjay Gupta.

Gupta has been company secretary and chief compliance officer at IndiGo since August 2016.

According to the sources, Sebi could also summon IndiGo chief executive officer Ronojoy Dutta to examine whether he deliberately misled the investors by downplaying the dispute as an administrative issue in his earlier statements.

“We want to confirm that there are absolutely no differences on the strategy and no differences in international expansion, and no differences on management selection. There is one issue that they are debating right now and we hope to resolve that in the very near future,” Dutta had told investors during post-earnings call on May 27, after the feud between the co-promoters had first come to light.

Meanwhile, the ministry of corporate affairs has got into the act and is likely to probe whether there has been any violation of the Companies Act.

As reported last week, Sebi has sought response of Interglobe Aviation, which runs the IndiGo airline by July 19.

Gangwal has accused his partner Rahul Bhatia of multiple corporate governance violations like carrying out related-party transactions (RPT) without the approval of the audit committee and breaching the code of conduct for appointment of directors and senior management. These charges have been refuted by Bhatia.

In his letter, Gangwal has urged the Sebi to amend the article of association (AoA) with Bhatia to ensure that he gets equal rights in the management of the company. While the shareholders’ agreement between Gangwal and Bhatia, who hold 36.69% and 37.9%, respectively, expires in October, the AoA extend beyond that.

Any amendments to the AoA requires nod from at least 75% of the shareholders since it is a special resolution; a situation that appears unlikely given the current shareholding pattern.

Gangwal has also demanded investigations into violations of corporate governance regulations and laws by Bhatia and his-controlled firm Interglobe Enterprises (IGE). He has been seeking board expansion by increasing the number of independent directors and an extraordinary general meeting to address his concerns.

While refuting Gangwal’s allegations, Bhatia has termed them as an agenda to dilute and diminish the controlling rights of the IGE group. In a statement on July 10, he said all RPTs have been executed at arms length basis. These transactions are in the areas of real estate, simulator training facility, general sales agents agreement and crew accommodations, and accounted for Rs 150 crore or 0.53% of the consolidated turnover in FY19, he said.

Experts feel the promoters’ battle could end up at the court’s door which will impact the airline’s functioning.

“Given the extent of public spat, it is unlikely that either party would be satisfied with the regulator’s response,” a corporate law expert said.

An e-mail to an Indigo spokesperson seeking comments on the story remained unanswered till the time of going to the press.

IndiGo commanded 49% market share of the domestic market at may end and has been expanding its overseas capacities by 25% year-on-year.