MUMBAI: A preliminary investigation by Securities and Exchange Board of India (Sebi) has found violations in governance and listing norms in some related-party transactions (RPTs) executed by InterGlobe Aviation Ltd, said two people with direct knowledge of the matter.
Sebi’s probe comes in the wake of the complaint filed by co-promoter Rakesh Gangwal, who had alleged corporate misgovernance by co-founder Rahul Bhatia at the company that operates IndiGo, India’s largest airline by market share.
Sebi has forwarded the probe to an internal committee for penal action.
“The regulator has found that some of RPTs, which were considered not material by the company exceeded 1% of the company’s turnover (threshold for materiality), and thus, needed shareholder nod,” said the first person, who did not want to be named.
The market regulator also found that some transactions were not approved by the company’s audit committee and some were approved by the committee after the transactions had occurred, said the second person, who also declined to be named.
Sebi typically frowns at RPTs if not properly vetted and approved.
Rakesh Gangwal had in July approached Sebi accusing Bhatia of violating corporate governance norms at the company.
In his letter to Sebi chairman Ajay Tyagi, Gangwal had alleged that there were several violations at IndiGo including those of related-party transactions, appointment of senior management, directors and the chairman, who has always been an independent director by convention.
However, Bhatia has refuted the charges. Bhatia had earlier maintained that his related-party transactions with IndiGo were worth only 0.53% of the airline’s annual turnover.
While Gangwal and his associates hold nearly 37% in InterGlobe Aviation, Bhatia’s InterGlobe Enterprises (IGE) owns more than 38%.
IGE did not respond to Mint’s queries on Monday. An email sent to Sebi also remained unanswered. Gangwal did not respond to an email query.
Some of the instances cited by Gangwal include an office lease rental agreement, which was to expire in 2019. To ensure an arm’s length, the company decided to negotiate with third parties for office space. Bhatia had said the lease agreement with the related party was favourable to the airline on several counts when compared to third parties.
