specific clauses. Earlier, stock exchanges would advise companies to re-
move clauses giving preferential rights to one partner before listing. As
such, these clauses are, per se, against good governance practices. If one
shareholder has the right to appoint the CEO, what’s the independence of
the board? Now, they are talking about increasing the board strength. If
preferential treatment is given to certain promoters, the independence is
always compromised,” says Ankit Singhi, Executive Director, Corporate
Professionals – a New Delhi-based corporate law advisory firm.Game of Thrones – And More
The clauses in the SHA and related party transactions have been there for
years. Yet, Gangwal never cried foul. Until recently, the partners agreed
on almost every big decision – management appointments, international
strategy (though there are reports emerging that the partners differ onthe choice of aircraft for long-haul international operations), and even
relieving IndiGo’s longest-serving president Aditya Ghosh, last year. So,
what pushed Gangwal to wage a war against his long-time friend, put-
ting IndiGo’s reputation at stake?
The explanation lies in roles both promoters had demarcated for
themselves while starting the airline. Before a plunge in the Indian avia-
tion space in 2004, Gangwal had worked in the US aviation industry for
over two decades. The story goes that he was not convinced initially (to
start IndiGo) because of the high failure rate in the sector, but Bhatia,
who had already built a bunch of businesses around aviation, was keen.
His strong ticketing business gave him insights into the workings of the
market. InterGlobe had suffered a shock after the dip in air travel post
9/11 and saw diversification as the best way to survive. Bhatia managed
to get the licence for IndiGo at a time when policies favoured the politi-
cally connected. The airline took off.
Over the next few years, Bhatia’s private entities signed dozens of
deals with IndiGo that Gangwal now says are questionable. “Related
party transactions are mostly favourable to promoters. Promoters typi-
cally make money by way of remuneration and dividends. Since both of
them don’t have executive roles, Bhatia is making money from IndiGo
indirectly through his other companies,” says a company law expert,
adding that India’s biggest pharmaceutical company, Sun Pharma, was
caught in a related party transaction controversy last year after it was
discovered that its main distributor, Aditya Medisales, was owned by
Sun promoter Dilip Shanghvi.
Industry sources say Bhatia compensated Gangwal by giving him the
power to take calls on large engine and aircraft deals. Gangwal had done a
lot of aircraft leasing and purchase for United Airlines and US Airways. InAugust 25I 2019 I BUSINESS TODAYI 61EVER SINCE THE
FIGHT BECAME
PUBLIC IN MAY, CEO
RONOJOY DUTTA
HAS BEEN BRUSHING
IT OFF SAYINGTHE
DIFFERENCE IS OVER
JUST “ONE ISSUE”.
HE HAS BEEN ON THE
FOREFRONT OF
FIRE-FIGHTING
AND MANAGING
PERCEPTIONSwas expected. After all, even under
the reported truce agreement, the
Bhatia group will have the authority
to nominate five of the 10 directors.
Also, although some provisions of the
SHA are expiring in October, many
rights given to the Bhatia camp will
survive as they are part of the articles
of association (AoA), which cannot be
changed without Bhatia’s approval.
Apart from this, there’s no word on
dilution of rights by the Bhatia group,
the main bone of contention. “Listed
companies generally don’t have such
With IndiGo's growth in
operations, related party
transactions with Bhatia's
IGE Group are likely to
expand further
With Bhatia negotiating the
deals with OEMs, IndiGo has
institutionalised an area of
operations which was
Gangwal's core
expertise