The Securities and Exchange Board of India (Sebi) is investigating if the InterGlobe Aviation Ltd's management misinformed the shareholders by underplaying the true extent of dispute between the two co-founders Rakesh Gangwal and Rahul Bhatia of India's largest airline. The markets regulator is probing if the management purposely misled the shareholders or it itself was ignorant of the exact level of differences between the two co-founders of IndiGo, Mint reported citing sources.
The spat between Gangwal and Bhatia played out in the open when Gangwal, one of the promoters of IndiGo, alleged serious governance lapses by its co-founder Bhatia, who had earlier termed his demands as unreasonable. With the issues brewing for nearly a year, Gangwal sought markets regulator Sebi's intervention to address the problem.
Alleging that the company has "started veering off" from the core principles and values of governance, Gangwal said that even a "paan ki dukaan" (betel shop) would have managed matters with more grace. Flagging concerns about certain questionable Related Party Transactions (RPTs), Gangwal said the shareholders' agreement provides his long-time friend Bhatia unusual controlling rights over IndiGo.
Gangwal made these allegations while he is engaged in a bitter tussle with co-founder Rahul Bhatia. Gangwal, along with his affiliates, holds around 37 per cent stake in InterGlobe Aviation. Co-founder Rahul Bhatia and his affiliates (IGE Group) has around 38 per cent stake. InterGlobe Aviation (or IndiGo) is also the parent of the country's largest airline IndiGo.
In his letter to Sebi, Gangwal has accused Bhatia of indulging in questionable related-party transactions. According to him, the shareholders' agreement provides 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," Gangwal said in the letter.
He also sent a copy of the letter to Prime Minister Narendra Modi, Finance Minister Nirmala Sitharaman, Civil Aviation Minister Hardeep Singh Puri and Commerce Minister Piyush Goyal among others.
After Gangwal wrote to the board seeking an extraordinary general meeting, Bhatia, on June 12, opposed the proposal. Bhatia wrote to the board alleging that the genesis of Gangwal's angst was his "hurt ego" and refusal of IGE Group to entertain his "unreasonable demands".
Meanwhile, SEBI has sought details from InterGlobe Aviation against the complaint filed by Gangwal. IndiGo's parent firm has been asked to furnish its response by July 19. In a stock exchange filing, the company has also confirmed that its board of directors had received a letter from Gangwal.