The rift between the co-founders of IndiGo
seems to be creating a divide in the board of India's biggest private airline as well.
Co-founder Rakesh Gangwal has asked the chairman of the board of IndiGo's parent InterGlobe Aviation Ltd, M Damodaran, not to "move the goal post".
Gangwal's latest salvo comes after a flurry of emails. The emails started with Gangwal pointing out a “large loophole”
in the proposed new structure of the board. Damodaran replied that the fears were unfounded.
But independent director Anupam Khanna joined the argument
, and asked Damodaran for "confidence-building measures" to remove "the trust deficit" in the board.
In a mail to Damodaran on August 6, Gangwal said he won't support an amendment to the Articles of Association (AoA) unless the “large loophole” was removed. The other co-founder, Rahul Bhatia's InterGlobe Enterprises (IGE), was unwilling to accede to the demand, sources said.
Gangwal shared the letter on his website GovernanceIndia on August 8.
The missive doesn't augur well for the much-talked about truce over issues such as related-party transactions and board composition, with the two feuding founders sticking to their demands.
Sourced told Moneycontrol that without Gangwal's support, the resolution to amend AoA will not get cleared at the AGM on August 25. "Such an amendment is a special resolution that needs approval from 75 percent of shareholders. Gangwal alone has a stake of about 37 percent," said an executive.
The amendment was needed to expand the board from six to 10 directors. But Gangwal, in his August 5 mail, said the new structure "will only add to the powers of InterGlobe Enterprises ."
The loophole, Gangwal said, was: "When there are less than four independent directors, it will 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".
The new structure would see the board expanded from six to 10 members, including four nominees of IGE. Gangwal has instead suggested that the board be expanded to seven directors, including a woman independent director. "Due to the math and SEBI rules work, a seven director board will close the large loophole automatically," said Gangwal.
Damodaran had said that these fears were unfounded but Khanna differed.Hitting hard
In the letter shared on August 8, which followed emails from Damodaran and Khanna, Gangwal, addressing the chairman, said, "With due apologies, let's not move the goal post to suit a different narrative."
Questioning the reason for holding meetings after the company AGM on August 25, Gangwal said the matter could be solved "in no more than a few days' work".
The co-founder had another question as he signed off the mail, "Why this insistence to allow the one remaining large loophole to exit?"Unresolved matter
From the letter, it is clear that the two sides have agreed on the new processes to check related-party transactions between IGE and IndiGo. The expansion of the board has also been cleared, and this includes appointment of a woman independent director.
The board expansion can come only with the amendments in AoA, which has to be cleared by shareholders. But Gangwal feared that the IGE would push through changes in the “transition period”, given its higher numbers in the board, sources said.
The fear had been addressed IGE, sources said. The privately held firm said its nominees on the IndiGo board will not supersede independent directors.
Gangwal wants the same assurance, but in writing, in the post-transition period. And, this will require changing the proposed new structure of the board, something which the IGE was not willing to agree, sources said.
The issues are being looked into by the market regulator SEBI, which may eventually have the final word to end the rift.
Original Source: https://www.moneycontrol.com/news/business/companies/dont-shift-the-goal-post-gangwal-tells-chairman-as-indigo-tussle-intensifies-4307141.html