Arbitral award: Delhi High Court rejects Gangwal plea against IndiGo partner Bhatia

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October 09, 2021 4:45 AM

On September 23, LCIA had directed the parties to hold an EGM, and had asked Gangwal and Bhatia to arrive at a consensus for a resolution to remove the Articles of Association (AoA) that had restricted transfer of shares.

indigo airlines Delhi HCJustice Sanjeev Narula, while disposing of Gangwal’s petition, refused to direct IGE to call an EGM, holding that the directions in the award cannot be entertained at this stage as it would tantamount to enforcement of the arbitral award when both Bhatia and the carrier still had time to contest the findings of the award

The Delhi High Court on Friday rejected Rakesh Gangwal’s plea for directions to his estranged partner Rahul Bhatia and his company, InterGlobe Enterprises (IGE), to call an extraordinary general meeting (EGM) to vote on a resolution for removal of restrictions on the transfer of shares within 30 days. This plea was based on the London Court of International Arbitration’s (LCAI) September 23 award. The arbitration award is in relation to the dispute between Gangwal and Bhati who are co-promoters of IndiGo Airline.

On September 23, LCIA had directed the parties to hold an EGM, and had asked Gangwal and Bhatia to arrive at a consensus for a resolution to remove the Articles of Association (AoA) that had restricted transfer of shares.

The court, however allowed Gangwal to deposit $50,000 payable to Bhatia and IGE (in connection with the defamation claim raised by Bhatia) with the HC Registry in compliance with the direction in the Award.

Justice Sanjeev Narula, while disposing of Gangwal’s petition, refused to direct IGE to call an EGM, holding that the directions in the award cannot be entertained at this stage as it would tantamount to enforcement of the arbitral award when both Bhatia and the carrier still had time to contest the findings of the award.

It may be noted that the London arbitral tribunal has given 90 days time to both parties to enforce award.
While the court allowed Gangwal to pay each respondent damages of $25,000 as per the arbitral award, it noted IGE’s and Bhatia’s submission that they intend to challenge the arbitral award soon.

While seeking a direction to the airline to jointly requisition an EGM within 30 days in compliance with the tribunal’s directions, Gangwal alongwith and other two petitioners — The Chinkerpoo Family Trust and Shobha Gangwal — also wanted “the respondents to cooperate… and take all necessary actions, as may be required in law or otherwise, to convene and conduct the EGM” within the statutory timelines under the Companies Act, 2013, and also appoint a local commissioner/court receiver to supervise the same.

Senior lawyer Harish Salve, appearing for Gangwal, argued that he wanted action to begin on the draft resolutions and also the background work to be completed. “Gangwal is trying to pay the damages of merely $25,000, we’ll accept it. We have 90 days to consider legal options, we may consider a challenge. IndiGo was not a party to the dispute but is facing consequences of the arbitral award. Award can’t be enforced in this fashion,” Bhatia’s senior counsel AM Singhvi argued, adding that the petition is not maintanable.

Post the award, Gangwal had written to Bhatia and the aviation company for compliance and had attached the draft joint EGM requisition and draft board resolutions for approving amendment of the Articles by deleting the Transfer Restriction Articles and convening an EGM to seek the shareholders’ approval for deletion of the Transfer Restriction Articles.

After the order, IndiGo Airlines had informed the BSE that the arbitral order had issued directions to both the sides based on their dispute, including reimbursement of costs incurred in relation to arbitration. Disputes had risen between Gangwal and Bhatia over the April 23, 2015, shareholders’ agreement to govern their inter se rights in the affairs of InterGlobe Aviation. This resulted in Bhatia filing a request for arbitration with LCIA India in terms of Clause 8 of the SHA.

During the arbitration proceedings, Gangwal and others had also the filed their counterclaims in relation to Bhatia’s breach of obligations under Clause 2.3 of the SHA and the statements made in the IPO Prospectus on October 30, 2015, and in the subsequent IPP Prospectus on September 18, 2017, when Bhatia and the airline voted against a resolution to effect the removal of transfer restriction articles from the AoA at an EGM held on January 29, 2020.

Gangwal was re-appointed as a director of IndiGo on August 31. Though nearly one-third of public institutional investors rejected the re-appointment, the resolution was passed as promoters, non-institutional investors and other institutional investors voted in favour.

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