The boardroom battle between the two co-founders of IndiGo is far from over, with Rakesh Gangwal making public his latest letter to the board opposing the resolution proposed to address his concerns over “unusual” powers enjoyed by Rahul Bhatia.
Last month, Rakesh Gangwal wrote to the Securities and Exchange Board of India (Sebi) seeking its intervention on “unusual powers” enjoyed by Mr. Bhatia in making key board and managerial appointments as well as related party transactions between the airline and Mr. Bhatia’s InterGlobe Enterprises (IGE).
Subsequently, the board met to work on a resolution package laying down the framework of a new composition of board, including 10 members (four IGE members, four independent directors, Rakesh Gangwal and his nominee) as well as preparing a policy that would govern related party transactions (RPTs). The enabling amendments were to be presented before the shareholders for their approval.
Mr. Gangwal now points out that the new board structure is heavily tilted in favour of Mr. Bhatia and will bestow additional powers on him.
“All of us realised that the proposed board structure created a large loophole that gives the IGE Group additional powers that they do not have today. Essentially, when there are less than four independent directors, it would allow the IGE Group to pass any company policy that they want just on the basis of their board numbers being larger than all the other board members combined,” as per Mr. Gangwal’s letter dated August 5, which has also been sent to the Ministry of Corporate Affairs, Sebi and Bombay Stock Exchange.
Mr. Gangwal says that the chairman of the board has now written to the members to get a shareholder approval for the restructuring of the board with this loophole intact till they find a solution to the problem raised. This, he says, is unacceptable as this will let IGE Group change the Related Party Transactions policy.
“Seeking shareholder approval for the new board size without closing this large loophole is governance negligence and tramples on the rights of minority shareholders.”
To break this impasse, Mr. Gangwal has proposed adding a woman independent director to the existing board of six directors.
“I suggest that the chairman have a board resolution passed (he is the tie-breaker in a vote) to raise our board size to 7 and allow for the addition of an independent woman director and then issue a resolution as a corrigendum to the AGM with the seven-director option to alter the Articles. Due to how the math and Sebi rules work, a seven-director board will close the large loophole automatically,” he says.
If this fails too, Mr. Gangwal says that the Sebi’s intervention must be sought to add the seventh member to the board.
