July 15, 2019

IndiGo Promoters' Spat: SEBI Likely To Summon Board Members; Might Even Invoke Section 6 Of Companies Act

[ By Bobby Anthony ]


The Securities & Exchange Board of India (SEBI) is likely to summon the officials of InterGlobe Aviation, the parent company of IndiGo airlines.

Incidentally, the capital markets regulator has already sought a response from the company by July 19 after its co-founder Rakesh Gangwal's letter to SEBI, the Ministry of Company Affairs and others.

The SEBI has also widened its probe, which was launched a few months ago, into suspicious insider trading violations in the shares of InterGlobe Aviation.

There are also indications that the Ministry of Company Affairs could even invoke powers under Section 6 of the Companies Act, 2013.

It may be noted that Section 6 provides powers to the government to override any memorandum, articles, agreements or resolutions passed at general meeting or by board of directors in case they violate norms.

The Ministry of Company Affairs could examine whether memorandum, articles, agreements and resolutions are in consonance with provisions of the Companies Act.

In case any violations of the Companies Act is discovered, the company could face strict regulatory action, including overriding of existing pacts.

It may be recalled that Rakesh Gangwal had flagged various related party transactions with the Rahul Bhatia-run InterGlobe Enterprises (IGE) Group, which were allegedly executed without seeking the audit committee's approval, without seeking competitive bids from third parties, and without non-appointment of an independent woman director.

Gangwal had alleged that legal requirements and basic governance norms were violated by not providing board members timely material facts prior to voting by the board.

However, on July 12, Bhatia' IGE Group had stated that the company is well run, financially sound and managed by a set of competent managers even as it had dismissed Gangwal's allegations.

Gangwal and his affiliates own around a 37% stake in InterGlobe Aviation, while Rahul Bhatia and his IGE Group has a shareholding of around 38%.

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