The Delhi Court on Friday refused to allow the plea filed by IndiGo promoter Rakesh Gangwal against co-promoter Rahul Bhatia to enforce the arbitration award given by the London Court of International Arbitration in the feud between the two promoters.
The Delhi High Court on Friday refused to allow the plea filed by IndiGo promoter Rakesh Gangwal a day earlier against co-promoter Rahul Bhatia to enforce the arbitration award given by the London Court of International Arbitration in the feud between the two promoters. The court said Bhatia is likely to challenge the award.
The High Court also allowed Gangwal to pay damages of $25,000 as directed in the arbitral award.
The arbitral award given in September was held in favour of Gangwal and has directed for removal of Articles of Association (AoA) that restricts the transfer of shares. It has also directed for an extraordinary general meeting (EGM) to be held and requires Gangwal and Bhatia to arrive at a consensus on a resolution for the removal of restrictions on the transfer of shares.
IndiGo and Bhatia too clarified that they will be challenging the arbitral award. “IndiGo was not a party to the dispute but is facing consequences of the arbitral award. Award can’t be enforced in this fashion (as sought by Gangwal),” Bhatia’s counsel told the court.
What is the IndiGo promoters’ dispute all about?
*In July 2019, Rakesh Gangwal wrote to the Prime Minister’s Office (PMO) and the Securities and Exchange Board of India (SEBI) flagging corporate governance issues at IndiGo.
He had red-flagged transactions between IndiGo and Bhatia’s InterGlobe Enterprises Private Limited (IGE), the airline’s parent company, non-independence of the chairperson, and the refusal to call an EGM.
*In October 2019, IndiGo and Rahul Bhatia initiated arbitration proceedings against Gangwal.
*According to a BSE filing by IndiGo, the IGE group had sent a request for arbitration on October 1, 2019, to the London Court of International Arbitration, India under a shareholder’s agreement dated April 23, 2015 (amended on September 17, 2015).
*Gangwal has been seeking to remove AOAs on - 1. Right of First Refusal; 2. Tag-Along Rights Clause
In January 2020, Gangwal had floated a special resolution to amend the AOA and to remove these two clauses.
Gangwal's special resolution was defeated, with 51.44 percent of shareholders voting against it.
*IndiGo, in its filing said, "In the arbitration proceedings, the IGE group sought certain reliefs against the RG group, including in relation to compliance with shareholders agreement and company’s articles of association (articles) as well as damages.”
*Gangwal was re-appointed as a director of IndiGo on August 31, 2021. Though almost 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.
*On September 23, the London Court of International Arbitration gave the final award in the proceedings initiated by Bhatia against Gangwal. Both parties were granted 90 days to enforce the order.
*On Oct 7, Gangwal moved to the Delhi High Court and sought an urgent hearing to enforce the arbitration award. The court, however, has refused to entertain the plea as the 90 days for challenging the award is not over yet.
*As of June 2021, Gangwal Group holds a 36.63 percent share and Bhatia's lnterGlobe Enterprises Private Limited holds a 38.2 percent stake in IndiGo.