May 16, 2019

IndiGo headed for NCLT to settle shareholder differences

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India’s largest airline by market share IndiGo is headed for the National Company Law Tribunal (NCLT) for resolving deep fissures that have surfaced between major shareholders Rahul Bhatia and Rakesh Gangwal who along with other promoter entities hold about 75% in InterGlobe Aviation Ltd., the listed company that runs the airline.

Bhatia and Gangwal have hired law firms JSA Law and Khaitan & Co, respectively, for dispute resolution, The Times of India reported on Thursday. There has been no word on the nature of the differences.

In a response to an emailed query from Mint, IndiGo said the company has not made any statement on the subject yet but did not rule out the possibility of one in due course.

Major shareholders hiring law firms indicate the possibility of the dispute reaching the tribunal, said regulatory experts. The most recent high profile shareholder dispute to reach NCLT was of the Tata group when former chairman of Tata Sons Cyrus Mistry moved the tribunal in 2016 after he was removed abruptly from Tata Sons. Mistry claimed that the charter of the company was oppressive to minority shareholders, a claim rejected by NCLT when it dismissed the petition on behalf of Mistry last July.

“Hiring of law firms imply there is a possible dispute which may end up in NCLT. First, efforts will be to resolve the differences within the board room as one of the issues that arise is who controls the company. Control on decisions of a company may differ even among those with similar shareholding, as support from directors of the company including independent directors may differ. The stalemate cannot continue. Ultimately, the NCLT may decide on whether one shareholder can buyout the stake of the other,” said Pavan Kumar Vijay, founder of advisory firm Corporate Professionals.

The charge that shareholders usually make while moving NCLT against another shareholder is that the company is being run in a way prejudicial to their interests. This is done by invoking section 241 of the Companies Act, 2013 that deals with mismanagement and oppression. Besides deciding on a share transfer between shareholders, the tribunal can also decide on regulating the affairs of the company or terminating or modifying certain agreements between the company and any of its directors.

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