IndiGo: Failure to amend AoA could invite Sebi scrutiny
IndiGo co-promoter Rakesh Gangwal has fired another salvo at board chairman M Damodaran, asking him not to move the goal posts on his demand for a re-look at the board structure. He warned that failure to amend articles of association (AoA) could invite scrutiny from the Securities and Exchange Board of India (Sebi).
In an e-mail to Damodaran, who is also an independent director, Gangwal said checks and balances are important for corporate governance. His main grouse regarding the board expansion to 10 is that if a position of an independent director falls vacant at any time, the size of the board will be in favour of Rahul Bhatia’s InterGlobe Enterprises (IGE), which can during the interim period force through its policies.
Gangwal was responding to Damodaran’s letter in which he rejected the co-founder’s demand to increase the board size from the current six to seven, instead of proposed 10 members. Damodaran said his aspersions do no credit to the fiduciary responsibilities of the directors.
The proposal to expand the board of directors will be put forward for shareholders’ ratification on August 27.
“Checks and balances are important, and I ask why have an independent director as chair of audit committee or even have any independent directors on listed companies – we should leave it to the fiduciary responsibilities of the promoter directors,” Gangwal said in the e-mail uploaded on his website, governanceindia.com.
The independent director on IndiGo’s board, Anupam Khanna, has supported Gangwal’s apprehensions that the expansion of the airline’s board to 10 can give IGE more powers. Khanna alleged that Bhatia’s IGE group has trampled over opposition from other directors in the past.
The current six-member board of IndiGo has three IGE nominees, one Gangwal appointee and two independent directors. Once the board is expanded to 10 members, IGE’s nominees would go up to five, Gangwal’s will remain at one, while four independent directors would be appointed, one of whom would be a woman.
While Gangwal, his wife and his family trust own 37.02% shares in the airline, the IGE group controls 37.92% and the remainder is with the public. On July 8, Gangwal had made differences with his partner public when he alleged corporate governance violations by the IGE group along with illegal RPTs entered with it.
Bhatia has refuted all allegations and called these an attempt to dilute the controlling rights of the IGE group over IndiGo.