Shareholders of IndiGo have rejected a proposal by promoter Rakesh Gangwal to change rules on the sale and purchase of shares amid an acrimonious battle with his founding partner Rahul Bhatia in India’s largest airline, with 51.55 percent voting against the proposal and 48.56 percent in favour.

IndiGo had called an extraordinary general meeting (EGM) on Wednesday to vote on Gangwal’s proposal to amend IndiGo's articles that give Bhatia the right of first refusal should Gangwal decide to sell his shares. The airline informed the exchanges about the results of the voting.

Gangwal, who requisitioned the Extraordinary General Meeting, was not present at the EGM on Wednesday, upsetting many shareholders who were present at the venue. Several of them were angry at the loss "of time and energy" at being called for an EGM where the promoter who requisitioned it is not present.

The six-month-long bitter public spat between the promoters of IndiGo, India’s largest airline, took a new turn on January 3 when co-founder Rakesh Gangwal requested an extraordinary general meeting (EGM) on January 29 seeking to change the rules on the sale and purchase of shares by its main stakeholders.

Gangwal wanted to delete rules in IndiGo holding company InterGlobe Aviation's articles of association that give his partner Rahul Bhatia — with whom he developed sharp differences — the right of first refusal should Gangwal choose to sell his shares.

Gangwal also wanted to remove an article that restricts either of the co-founders from purchasing publicly listed shares in InterGlobe and tag-along right. While these changes could potentially trigger an open offer for the rest of the company, more importantly, they would allow Gangwal or Bhatia to increase or reduce their shareholding in IndiGo.

Gangwal and Bhatia each control stakes of a little less than 40 percent in InterGlobe along with their families. Their simmering differences became public in July after Gangwal, an aviation veteran, alleged that corporate governance rules are regularly violated at InterGlobe.

Bhatia and his family own the largest stake in IndiGo at 38.3 percent and Gangwal and family hold 36.7 percent. The remaining 25 percent of stake is held by the public.

While the shareholders' agreement between Gangwal and Bhatia expired on November 10, 2019, some clauses such as the right of first refusal and tag along right, among others, remained and became part of InterGlobe Aviation Ltd or IndiGo's articles of association.

Almost immediately after the shareholder agreement expired, Gangwal launched efforts to get the clauses he saw as detrimental to his interests changed.

On November 13, 2019, Gangwal group wrote a letter to IndiGo to delete articles 1.6 to 1.15 (transfer of equity Shares), 1.16 to 1.20 (acquisition of shares) and 2A (other provisions on equity shares) from the articles. InterGlobe chairman M Damodaran, who previously headed market regulator Sebi, directed the company to obtain a legal opinion on Gangwal’s letter. It was confirmed that Gangwal and family had the right to request a meeting of shareholders to decide whether the articles need to be amended, in light of the expiry of the shareholders' agreement.

With its fleet of over 250 aircraft, the airline offers over 1500 daily flights and connects 63 domestic destinations and 24 international destinations. The airline held a 47.1 percent share of the domestic air traffic market as per DGCA data for 2019.

First Published:Jan 29, 2020 5:55 PM IST