InterGlobe Aviation Ltd. said it would seek shareholder approval to induct a woman independent director, responding to one of the complaints raised by Co-Founder Rakesh Gangwal.
“The board has decided to seek the approval of the shareholders at the upcoming annual general meeting for expanding the board to enable the induction of an independent woman director,” according to a statement released after the board meeting which spilled into a second day, amid a public dispute between Gangwal and Co-Founder Rahul Bhatia.
The absence of an independent woman director on the airline’s board was one of the issues that Gangwal had raised, while talking about the alleged lack of corporate governance in InterGlobe Aviation, parent of India’s largest airline by market share IndiGo. Last year, Securities and Exchange Board of India had asked top 500 companies to appoint at least one independent woman director by April 1, 2019.
The InterGlobe Aviation board currently has six directors. These include Chairman M Damodaran, Rakesh Gangwal, Rahul Bhatia, his wife Rohini Bhatia, Anupam Khanna and Anil Parashar. Of these, only Damodaran and Khanna are non-executive independent directors.
In a conference call to discuss June quarter financial results on Friday, IndiGo’s Chief Executive Officer Ronojoy Dutta had said the board discussed a “range of issues”, including appointment of a woman director. He had said the company’s Articles of Association would have to be changed to facilitate the appointment.
The board is also peculiarly constituted due to a shareholder agreement that the two promoters signed when the airline was founded. The agreement gives Bhatia the right to appoint three of the six directors on board, including a nomination for the chairman. The voting arrangement requires Gangwal and his affiliates to vote alongside Bhatia group on the appointment of directors.
Gangwal claimed these “unusual rights” are being abused to allow such related party transactions and governance failures.
Expanding the board was a point of contention between the two promoters, according to a letter Bhatia wrote to the board on June 12. The letter said Gangwal offered to expand the board to eight members. The offer, the letter said, was motivated by the fact that expanding the board would be subject to the Rakesh Gangwal Group being relieved of its obligations under the shareholder’s agreement that expires October 2019 and also under the Articles of Association of the company.
Bhatia owns about 38 percent stake in InterGlobe, while Gangwal holds about 37 percent.
Background
The rift between long-standing promoters of IndiGo became public earlier this month when Rakesh Gangwal wrote a letter to the Securities and Exchange Board of India. Gangwal accused Co-Promoter Bhatia of being involved questionable related party transactions and violations of governance regulations and the company’s code of conduct. InterGlobe Enterprises Pvt. Ltd., owned by Bhatia, has on its part said the allegations are “much ado about nothing”.
The Indian government, too, stepped in and told the regulator to go deeper into the promoter dispute and probe the role of all board members and entities associated.
In its financial results declared yesterday, InterGlobe Aviation said they had received letters from SEBI and the Ministry of Corporate Affairs seeking its comments on the complaints filed by Gangwal. “The company will respond to the authorities concerned within the prescribed timelines and believes that the aforesaid matter doesn’t impact its financial results,” it said.
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