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Under The Scanner

Dipak Mondal     August 6, 2019

Related party transactions or RPTs, a term that has always been associated with corporate governance or lack of it, are not the cuss words in corporate world neither do they always insinuate corruption. However, they end up being at the centre of some or other controversy.

At the heart of the fight between co-founders of the IndiGo airlines are certain questionable RPTs. Rakesh Gangwal, one of the co-founders, said that the airline entered into RPTs associated with the other co-founder Rahul Bhatia.

Bhatia refutes these charges by saying that all RPTs were in accordance with the law and less than one per cent of the total turnover of the company.

As the name suggests, RPTs of a company are with those entities that are in some way associated with it - either subsidiaries or entities associated with directors, senior executives or their relatives.

There are stipulated norms for any transactions with such entities. All transactions have to be done at an arm's length pricing and disclosed properly.

Yet these are transactions through which many corporate frauds are committed, and though they are not illegal, RPTs are always under scrutiny.

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