Government To Look Into Related Party Deals At IndiGo
Taking serious note of alleged governance lapses at InterGlobe Aviation Ltd., the government will examine related party transactions as well as shareholder and other agreements, a senior official said.
The promoters of the company -- Rakesh Gangwal and Rahul Bhatia -- are locked in a bitter battle over corporate governance issues, with Gangwal complaining to the Securities and Exchange Board of India and seeking its intervention to address the issues.
Against this backdrop, the corporate affairs ministry has decided to examine whether memorandum, articles, agreements and resolutions are in consonance with the Companies Act, the official said. In case violations are found, the ministry might invoke its powers under Section 6 of the Companies Act, 2013, he added.
Section 6 provides powers to override any memorandum, articles, agreements or resolutions passed at general meeting or by the board of directors in case they violate norms. According to the official, the ministry would also ask the company to give “para-wise comments” on Gangwal’s complaint filed with SEBI and marked to the ministry.
The related party transactions would also be looked into by the ministry, the official added. InterGlobe Aviation is the parent of IndiGo, the country’s largest airline. The carrier has more than 200 planes and operates around 1,400 flights daily.
On Friday, Bhatia’s group said that InterGlobe Aviation is well run, financially sound and managed by a competent set of managers as it termed Gangwal’s allegations as much ado about nothing. Flagging concerns about certain questionable related party transactions, Gangwal had alleged that shareholders’ agreement provides his long-time friend Bhatia unusual controlling rights over IndiGo.
“Beyond just questionable related party transactions, various fundamental governance norms and laws are not being adhered to and this is inevitably going to lead to unfortunate outcomes, unless effective measures are taken today,” he had said in the letter to SEBI.
A copy of the letter has also been sent to Prime Minister Narendra Modi, Finance Minister Nirmala Sitharaman, Civil Aviation Minister Hardeep Singh Puri, Commerce Minister Piyush Goyal and Corporate Affairs Secretary Injeti Srinivas, among others.
Gangwal and his affiliates have around 37 percent stake in InterGlobe Aviation while Bhatia and his affiliates have about 38 percent. On Thursday, officials said there are indications about violations of corporate governance, fair market trade and insider trading rules and SEBI needs to probe role of each and every entity associated with all board members and promoter-linked entities.