The promoter dispute at InterGlobe Aviation Ltd. now seems to have spilled over to the two independent directors on the board.
Independent director Anupam Khanna, in a letter to board Chairperson M Damodaran, who is the other independent, has sided with co-promoter Rakesh Gangwal on certain governance issues. The letter, dated Aug. 5, was uploaded by Gangwal on his website.
The issue is about scheduling meetings of various board committees after IndiGo's annual general meeting on Aug. 27
In his Aug. 5 letter, Gangwal had earlier asked Damodaran to increase the board size to seven members, allow for the addition of an independent woman director and then issue a resolution as a corrigendum to the AGM to alter the Articles of Association of the company. He also wanted a new related party transaction policy to be put in place immediately.
However, Damodaran scheduled the meetings of the audit committee, the nomination and remuneration committee and the board after the AGM. It's only in these meetings will the board approve RPT proposals and appointment of the woman independent director.
Khanna has voiced his concerns on that. “Turning to the new governance issue that emerges from your approach, I don't see the logic behind scheduling meetings after the AGM,” he wrote. “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. On the other hand, if there is some distance to go before issues are resolved then I believe we need to communicate the uncertainty immediately to the shareholders, financial markets and the regulator.Anupam Khanna Letter Dated Aug. 5
Khanna, too, agreed with Gangwal's demand that more independent directors should be on board before there are policy changes. “In any case, what's the harm of having a guardrail as enunciated, namely no policy changes unless there are four independent directors on the board?” he questioned. “Why should it not be adopted forthwith especially since the need has been explicitly recognised for the initial transition period?”
The promoter fight at IndiGo may have led to friction between the two independent directors. Anupam Khanna agrees with Rakesh Gangwal on certain governance matters. pic.twitter.com/iAK7ZpK1Bx
Gangwal had earlier said he's unable to support the special resolution for expanding the company's board to 10 members in its present form as it will lead to a large governance loophole in favour of the Rahul Bhatia-controlled InterGlobe Aviation Enterprises Group.
Gangwal said while the board has agreed on all contractual language for the new related party transaction policy and the board size composition, the sequence of the adoption of these policies, as suggested by Bhatia, will benefit the IGE Group in terms of corporate governance. The RPT policy, too, hasn't been formally approved by the board, which may lead to its dilution once the IGE Group gets an upper hand, he said.
On July 22, the airline's operator told the bourses that it's expanding its board strength to up to 10 members, including up to four independent directors. The changes to Articles of Association will allow for appointment of two additional non-independent directors by the IGE Group, including a key managerial personnel and two independent directors.
InterGlobe Aviation's board currently has six directors. These include Chairman M Damodaran, Rakesh Gangwal, Rahul Bhatia, his wife Rohini Bhatia, Anupam Khanna and Anil Parashar. Of these, only Damodaran and Khanna are non-executive independent directors.
Shares of InterGlobe Aviation rose 0.1 percent today while the benchmark BSE Sensex fell 0.7 percent.
Here is Khanna's full letter:
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