IndiGo Broke Related Party Transactions Rules: SEBI Probe

A Securities & Exchange Board of India (SEBI) investigation has revealed that InterGlobe Aviation Ltd which owns IndiGo airlines violated corporate governance and listing guidelines in some of its related-party transactions (RPTs).

The SEBI has sent its findings to an internal committee for possible penal action.

According to the findings of the SEBI probe, some of the RPTs, which were considered “not material” by the company, exceeded 1% of its turnover, which is the threshold for materiality, and thus these transactions needed shareholder nod.

However, the SEBI probe revealed that these transactions were conducted without shareholders’ approval.

The SEBI investigation also found that only some of the transactions were approved by its audit committee after the transactions occurred.

It may be recalled that the SEBI had started investigating IndiGo after its co-founder Rakesh Gangwal complained to the SEBI in July 2019, alleging violation of governance and RPT norms by Rahul Bhatia, who is other co-founder of IndiGo.

In his letter to SEBI Chairman Ajay Tyagi in 2019, Gangwal had alleged that there were several violations at IndiGo, including those pertaining to RPTs and appointment of senior management personnel, directors and the chairman, who has always been an independent director by convention. Bhatia had denied the charges.

Earlier, Bhatia had maintained that his RPTs with IndiGo were worth only 0.53% of the airline’s annual revenue. He had also denied charges made by Gangwal against these transactions.

Later, IndiGo announced in October 2019 that InterGlobe Enterprises and Bhatia submitted a request for arbitration to the London Court of International Arbitration under the shareholder agreement of InterGlobe Aviation on 23 April 2015 between IGE Group and Rakesh Gangwal Group.