A war of words has broken out between Rakesh Gangwal and Rahul Bhatia, the two co-founders and Directors of IndiGo Airlines , the largest domestic carrier with a market share of over 49 per cent. 

Gangwal has alleged that the controlling rights of Inter Globe Enterprise Group (IGE), a minority shareholder, have not been “judiciously and prudently” used in the best interests of the company, and this has been countered by Bhatia.

Related-party transactions

Even a paan ki dukaan   (betel shop) would have managed matters with more grace, alleged Gangwal. In his communication to SEBI, he said he had not expected that, over the years, Bhatia “would start building an ecosystem of other companies that would enter into dozens of related-party transactions (RPTs) with IndiGo”. “We are not against RPTs as long as proper checks and balances exist and such RPTs are in the best interest of the company,” he said.

Countering this allegation, Bhatia said the Indigo Board Chairman, in March, had pointed out that an EY report on the RPTs of the past five years noted that there were no “substantive” irregularities but only “procedural irregularities”. 

“Had EY disclosed that any RPTs were not at arm’s-length or not in the ordinary course of business, that would have been highlighted,” said Bhatia’s communication.

Gangwal had decided to join hands with long-time friend Bhatia to build a large air transport network in India. Currently Gangwal, along with his associates, holds a near 37 per cent share in IndiGo. Bhatia, along with affiliates (IGE Group), owns an almost equal shareholding of approximately 38 per cent while the balance stake of about 25 per cent is held by public shareholders.

Call for measures

Beyond RPTs, Gangwal said, various fundamental governance norms and laws were not being adhered to, “and this is inevitably going to lead to unfortunate outcomes, unless effective measures are taken today”.

Bhatia reiterated that the requisition was a “proxy and subterfuge” to force a change in the governing structure of the company. 

Gangwal has also requested SEBI to look into the matter and, if it sees fit, ask the company to make necessary changes to the unusual controlling rights available to the IGE Group. 

Bhatia countered this, saying Gangwal was “perturbed” by the refusal of IGE to succumb to “his unreasonable demand to dilute the controlling rights”. 

IndiGo shares closed at ₹1,565.75, down 0.29 per cent, on the BSE on Tuesday. Information about the war of words between the two co-founders became public after the market closed.

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