Not a win for Bhatia, rather shareholders may be trying to protect the value of the company, say analysts
The defeat of the special resolution moved by Rakesh Gangwal, one of the two co-promoters of IndiGo Airlines, seeking to amend the Articles of Association of IndiGo late on Wednesday, means that the bitter battle between Gangwal and the second co-promoter Rahul Bhatia is likely to continue.
This also means that the rights of the shareholders will continue as before. However, a cross-section of corporate lawyers that BusinessLine spoke to were of the opinion that this is unlikely to impact the airline’s operations. The EGM had been called by Gangwal and others who collectively own 36.64 per cent of the paid-up capital of IndiGo, after a bitter fight broke out between Gangwal and Bhatia over governance issues.
The EGM had been called to amend the AoA, which place restrictions on the two co-promoters.
Says Tarun Bhatia, Managing Director, Kroll: “From that perspective (the disagreement between the two largest shareholders of the airline continuing), it is not in the interest of anyone...be it the lenders, minority shareholders or employees.”
Bhatia also believes that these kinds of issues have an overhang, which distracts senior management, but adds that those on the ground responsible for running the operations of the airline will continue to go about the daily jobs allocated to them.
‘No material changes’
Pointing out that there were no “material changes” with the defeat of the special resolution, Siddharth Mahajan, Partner, Athena Legal, says, for now, the status quo continues.
“The shareholders and their rights will remain as before. Hence, nothing material changes. Which means that the dispute between shareholders continues. The approval of amendments would have given leeway to Gangwal or Bhatia to exit in a manner they wanted without the consent of the other partner,” he adds.
Mahajan is also of the opinion that the latest results do not alter the dynamics of the dispute, including the arbitration as it exists.
“However, if the amendments had been approved, one shareholder, most likely Gangwal, would have had an option to exit without Bhatia’s consent, and that could have put a quietus to the dispute,” he says.
Asked whether the latest decision could strengthen Bhatia’s position, Mahajan says it could strengthen the perception that shareholders are happy with the current arrangement on how the company is being run.
However, he adds that it is “tough to draw the inference” that it will now be easy to get Gangwal out of IndiGo.
“As per available information, the Articles of Association of the company provide for the right of first refusal to the remaining partner and that was intended to be diluted by the proposed amendments to the articles.”
Gaurav Dani, Partner, IndusLaw, says Bhatia’s position remains unchanged and this does not affect the minority shareholders.
“Not sure if this can be seen as a victory for Bhatia as the shareholders may be trying to protect the value of the company because the amendment to the AoA would have meant that Gangwal would have got an unrestricted right to exit at any value,” he points out.
Published on January 31, 2020