The government has reportedly sought a reply from IndiGo's parent organisation InterGlobe Aviation after one of its co-founders, Rakesh Gangwal, came up with allegations of governance lapses in the airline, said media reports.
Amid an investigation by market regulator Securities and Exchange Board of India (SEBI), the ministry of corporate affairs (MCA) reportedly sought “comments” from InterGlobe Aviation on the allegations of lapses of corporate governance levelled at the company by Gangwal recently, according to to a report in Financial Express.
The MCA is expecting a detailed response from InterGlobe in two to three weeks time and after the company submits its reply, the ministry would examine if there was any violation of the Companies Act, said the report quoting people in the know of the issue.
Meanwhile, another media report claimed that the board of InterGlobe Aviation may consider a proposal to induct new directors at its board meeting scheduled to be held on Friday (19 July), reported Mint quoting two people with direct knowledge of the matter.
Accordingly, a proposal is expected to be placed before the board in order to increase its strength to probably a dozen directors from the current six when it meets to approve IndiGo’s quarterly results, the report said.
On 14 July, SEBI and the corporate affairs ministry had started digging deep into allegations of governance lapses and violations that could force the government to override existing arrangements and pacts at InterGlobe Aviation, reported PTI quoting officials.
The differences between Gangwal and Rahul Bhatia, co-promoters who were long-time friends, were out in the open when Gangwal sought SEBI's intervention into alleged corporate governance lapses. Gangwal flayed co-founder Bhatia and said the company the duo co-founded fared worse than even a paan ki dukaan (betel shop).
An official said the MCA would be seeking a "para-wise comments" from the company on Gangwal's complaint and would also be looking at the related party transactions (RTPs).
With the promoter feud igniting concerns over corporate governance practices at InterGlobe Aviation, the ministry would examine whether memorandum, articles, agreements, and resolutions are in consonance with provisions of the Companies Act.
The company could face strict regulatory action, including overriding of existing pacts, in case there are violations of the Act.
The official said the ministry can even invoke powers under Section 6 of the Companies Act, 2013.
Section 6 provides powers to override any memorandum, articles, agreements or resolutions passed at a general meeting or by the board of directors in case they violate norms. Following Gangwal's letter to SEBI, the ministry and others, the markets regulator sought a response from the company by 19 July.
On 10 July, Gangwal sought SEBI's intervention to address the problems in the company.
In a filing to the stock exchanges, InterGlobe Aviation said its board of directors had received a letter from Gangwal and SEBI has also sought a response on the letter.
The markets regulator has been probing the matter since reports surfaced about differences between the promoters in May, sources said.
Two days after Gangwal sought SEBI's intervention, the government wanted SEBI to probe the role of all board members and every entity associated with the two main promoter groups of InterGlobe Aviation and take strict action for all wrongdoings, said a PTI report.
There are indications about violations of corporate governance, fair market trade and insider trading rules and the regulator needs to probe the role of each and every entity associated with all board members and promoter-linked entities, according to officials.
— With PTI inputs
Updated Date: Jul 17, 2019 15:10:31 IST