HC rejects Gangwal plea seeking Indigo EGM
Indigo co-promoter Rakesh Gangwal’s petition to direct his partner Rahul Bhatia and his firm Interglobe Enterprises ((IGE) to conduct an extraordinary general meeting (EGM) was disposed of by the Delhi High Court on Friday.
Gangwal’s petition was in reference to the ruling by the London Court of Arbitration. It said the company’s Article of Association (AOA) be amended to scrap a provision that gives the right of first refusal to both the promoters over each other’s shares in the company.
The court said that the arbitration order itself has allowed 90 days to implement it and pass directions as Bhatia may want to challenge the arbitration order.
Gangwal, who co-founded Indigo in 2006 with Bhatia, had also asked the court to tell Bhatia to jointly call for the EGM and support the resolution to amend the AOA.
Without Bhatia’s support, it’s impossible for Gangwal to pass the resolutions, as any EGM resolution requires support of 75 per cent shareholders.
Interglobe Enterprises, along with Bhatia’s family, owns 38.2 per cent stake in Indigo while Gangwal, along with family trust, holds 36.63 per cent stake.
Gangwal, who is being represented by law firm Khaitan & Co, argued that an EGM requires a notice of 21 days to shareholders. Hence, he wanted the court to direct the company to start preparatory works for the EGM.
The shareholders’ pact between Gangwal and Bhatia, according to clauses in the agreement, was valid for four years after the initial public offering (IPO) in 2015. A clause in the agreement conferred on the founders the right of first refusal for each other’s shares in case one of them wanted to sell.
The agreement also contains a ‘tag-along’ clause, which stipulates that the other promoter has the right to join any share-sale transaction and sell his stake along with the one who is exiting.
“If any member of either the RG Group (Gangwal group) or the IGE Group proposes to transfer its shares to a thirdparty purchaser (not being an affiliate), on a stock exchange or by way of a pre-negotiated sale on a stock exchange, then the other group will have the right of first refusal and tagalong right,” it says.
Gangwal has to comply with shareholders’ agreement and AOA, and voting during general meetings is to be dictated by the IGE.
On September 24, in a regulatory filing, Indigo said it had received the final arbitral award, issued in the arbitration proceedings, by which the company was named respondent.
The differences between the promoters became public in July 2019 after Gangwal wrote to the Securities and Exchange Board of India (Sebi), seeking its intervention to address corporate governance issues at the company. Bhatia’s IGE Group had rejected the allegations.