Mumbai: InterGlobe Aviation Ltd’s independent director Anupam Khanna has questioned chairman M. Damodaran’s style of functioning and stressed the importance of keeping shareholders and regulators informed of any uncertainty related to the ongoing feud between the founders of the airline.
In a 5 August letter addressed to Damodaran, Khanna asked the IndiGo chairman to defer policy decisions till the airline’s board has a full complement of four independent directors to safeguard the interest of minority shareholders.
“The safeguard is precisely for situations when the full complement of ID (independent directors) is not in place and the IGE Group with its numbers can ride roughshod over the opposition of all other directors," Khanna said in the letter, a copy of which has been reviewed by Mint.
Khanna’s letter indicates that the rift between board members and the founders of India’s largest airline is anything but resolved. Rakesh Gangwal, one of the airline’s two co-founders, has accused his partner Rahul Bhatia of violating corporate governance norms and has sought more independent directors on the board. Bhatia has denied the allegations.
Gangwal and his associates hold nearly 37% in InterGlobe Aviation, while Bhatia’s InterGlobe Enterprises Ltd (IGE) holds around 38%. Although the two groups own roughly similar stakes, an initial agreement gave special rights to Bhatia’s IGE group.
“A tremendous trust deficit has built up that we as a board must wring out, but that will take time and we need confidence building measures today," Khanna wrote in the letter.
Damodaran, however, said Gangwal’s apprehension that the Bhatia group could push through questionable decisions after board expansion does no credit to the fiduciary responsibilities of directors, news wire PTI reported on Wednesday.
In the letter, Khanna said: “If there is some distance to go before issues are resolved, then I believe we need to communicate the uncertainty immediately to the shareholders, financial markets and regulator."
He also questioned Damodaran’s decision to set meetings between directors and promoters after the upcoming annual general meeting (AGM) on 27 August and not before it.
“I do not see any reason that the RPT (related-party transaction) resolution has not been circulated for approval by the audit committee and board. If a meeting is necessary, it should be held before the AGM," Khanna said.
“... I might point to a flaw in your reference to the NRC (nomination remuneration and compensation committee)—the problem in the recent past has been that, as the committee’s chair, I was stymied from taking proper and timely action on inducting a woman director or indeed the second independent director (the position you filled)," Khanna added.
Damodaran had on Monday evening told directors and the chief executive of the airline that Bhatia and Gangwal have agreed on all the contractual language for a new policy on RPTs and the composition of the size of the board, but are yet to agree on “closing the loophole after transition period".
“I am separately initiating a proposal for scheduling meetings of the AC (audit committee), the NRC (nomination remuneration and compensation committee), and the Board, immediately after the AGM. At that meeting of the AC, followed by a meeting of the Board, the RPT policy will be cleared. At the meeting of the NRC, the selection of the woman independent director will be addressed," Damodaran said in the letter.
However, in a 5 August letter, Gangwal suggested directors of IndiGo consider increasing the board strength to seven from the current six, weeks after the board approved a proposal to raise the number of directors to 10.
Gangwal said he will oppose the special resolution at the AGM unless another resolution is passed by the board to prevent the IGE Group from attaining more power and until a new policy on RPT is adopted by the company.
On Wednesday, IndiGo’s shares rose 0.49% to ₹1,498.95 points on the BSE, while the benchmark Sensex fell 0.77% to 36,690.50 points.
