There are no signs of truce as yet at IndiGo as co-founder
Rakesh Gangwal has written a letter to the board of directors reiterating that there are still disagreements between him and R ahul Bhatia's InterGlobe Enterprises (IGE) on related-party transaction (RPT) policy and board composition.
"I again reiterate that I am no longer in a position to vote affirmatively on the special resolution for "alteration in articles of association of the company," unless as discussed in numerous emails (I) a complementary board resolution is passed to prevent IGE group from getting even more rights and abilities than they have today (ii) the new
RPT policy is adopted, language for which has already been agreed," Gangwal said in the letter dated August 5.
In the July 20 meeting, the discussion on currently proposed board size of 10 members did take place but with limitations and in haste. It was then proposed to add two new members from IGE and two new independent directors.
Currently, the board comprises of six members, including Chairman M Damodaran, Rahul Bhatia and Rohini Bhatia, Anil Parashar, non-executive independent director Anupam Khanna and Rakesh Gangwal.
"Instead now, there's a suggestion from the Chairman to get shareholder approval for a board of 10 Directors (IGE group with 5 directors), with a large loophole, while we try and get "a final view acceptable to all" sometime later. As for the agreed-upon RPT policy...there is only silence on when or if it gets adopted by the company. This was not our agreement at the board meeting and after the board meeting," Gangwal stressed adding that shareholder approval for new board size should only be sought after closing this loophole.
The board has still not signed off on a decision regarding the two contentious issues of board size and related-party transactions, Gangwal reiterated quoting an email from Dr Anupam Khanna, a non-executive independent board member.
Stressing that "unnamed sources" have created a false impression of promoter support to issues on RPTs and changes to Articles, Gangwal said that Chairman M Damodaran should have asked the company to flag this "material fact" in the annual general meeting notice.
While the final agreement on the language for the new RPT policy was achieved, it is yet to be sent out for board adoption and changes to the articles of association are still an "open issue," Gangwal wrote in the letter.
"I offered to not have any additional Gangwal group representatives on the board," Gangwal wrote to the board.
However, this created a large loophole that gives additional powers to the IGE group when there are less than four independent directors as they will be able to pass any company policy by their sheer board strength, Gangwal said in the letter.
"On July 24, IGE group proposed that appointment of their nominee directors would not precede the appointment of independent directors. Thankfully, IGE group's proposal acknowledges the governance problem.... However, IGE group has steadfastly refused to close this large loophole after the transition period," Gangwal wrote.
The board and the promoters have not resolved the governance loophole for the situations of resignations or retirements of independent directors, where there will be less than four independent directors, the industry veteran added.
Gangwal, who along with this associates hold nearly 36.7 percent stake in IndiGo, also mentioned an email from Chairman Damodaran on the matter."While this (appointing IGE members after independent directors) may be worked out by discussions, there is no final view available on this. After a final view, acceptable to all, emerges and is articulated in writing, the approval of the directors can be obtained by circulation. To my mind, this sequencing is not required to go to the shareholders," Damodaran said in an email dated July 26. Gangwal and his associates do not support this "sequencing idea."