The independent director on IndiGo’s board, Anupam Khanna, has supported co-promoter Rakesh Gangwal’s apprehensions that the expansion of the airline’s board from the current 6 to 10 can give the other promoter Rahul Bhatia’s InterGlobe Enterprises (IGE) more powers and has questioned chairman M Damodaran’s approach in dealing with the situation. In an e-mail to Damodaran, who is also an independent director, Khanna has alleged that Bhatia’s IGE group has trampled over opposition from other directors in the past.
Gangwal on Wednesday made public this letter from Khanna to Damodaran, which highlighted his discontentment with the way Articles of Association is to be amended at the annual general meeting (AGM) scheduled for August 27.
“The safeguard is precisely for situations when the full complement of independent directors is not in place and the IGE group with its numbers can ride roughshod over the opposition for all other directors. This has happened in the past and our fiduciary responsibility compels me that this risk must be avoided to safeguard the interests of minority shareholders as well as other stakeholders in the company and the national public,” Khanna wrote to Damodaran on August 5.
“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. In any case, what is the harm of having a guardrail as enunciated, namely no policy changes unless there are four independent directors on the board?,” he asked. As reported earlier, Damodaran has rejected Gangwal’s demand to limit the increase in size of the board to 7 instead of proposed 10 members. He said that Gangwal’s apprehensions does no credit to the fiduciary responsibilities of directors.
Gangwal’s main grouse regarding the board expansion to 10 is that if a position of an independent director falls vacant at any time the size of the board will be in favour of IGE, which can during the interim period force through its policies.
IndiGo currently has six members on its board including Damodaran, Khanna, Gangwal, Bhatia, his wife Rohini Bhatia and his nominee Anil Parashar. The board expansion needs the ratification of the shareholders’ at the AGM. Post this, the company board will fill the board vacancies and at a later date the policy relating to related party transactions (RPT) – which is the main bone of contention between Bhatia and Gangwal – will be taken up for changes.
Khanna has also questioned the delay in adoption of the new RPT policy. “I do not see any logic behind scheduling meetings after the AGM. We had agreed to complete the process by circulating resolutions. Indeed, I do not see any reason that the RPT resolution has not yet been circulated for approval by the audit committee and board. If a meeting is necessary, it should be held before the AGM,” Khanna wrote.
Gangwal had written that a seven-member board will be evenly balanced one while a ten-member one leaves a large loophole which can be used by IGE to further its agenda. In reply to Gangwal’s letter, Damodaran had written: “The first vacancy to be filled after the amendment of the Articles of Association will be filled by a woman independent director. The second vacancy to be filled will be by a wholetime/executive director. The third vacancy by an independent director, and the fourth by an IGE nominee. That is the sequence contemplated.”
While Gangwal, his wife and his family trust own 37.02% shares in the airline, the IGE group controls 37.92% and the remainder is with the public. On July 8, Gangwal had made differences with his partner public when he alleged corporate governance violations by the IGE group along with illegal RPTs entered with it. Bhatia has refuted all allegations and called it an attempt to dilute the controlling rights of the IGE group over IndiGo.