IndiGo Promoter Dispute: A good case for Sebi to revisit DVR issue, says Amit Tandon of IiAS

Shares of InterGlobe Aviation, the owner of IndiGo, plunged 15 percent on Wednesday after the tussle between its promoters intensified. Amit Tandon, Founder & managing director of corporate governance and proxy advisory firm IiAS, shared his views on the development.

"The main question on everyone’s mind is whether this feud is going to affect operations of the business and my sense is it is going to impact operations sooner rather than later unless this is resolved," Tandon told CNBC-TV18 on Wednesday.

"With regards to related party transactions (RPT), we will never know what is happening but clearly while as percentage terms they are relatively low, in absolute amount the number is pretty large and at the very least I would expect to be Rs 220 crore, which is the reported number."

According to Tandon, "There are two important lessons from this. First is the fact that a lot of shareholder agreements and the rights which are given inter se between shareholders are now embedded in the Articles and Association of Companies. It is a good wake up call for regulators, more importantly for stock exchanges to look at what the Articles of Association. Where does a specific individual have the right to become chairman for life where they have to right to appoint 3 out of the 6 directors? I think these need to be taken out of all the Articles of Associations, they should be purged,” he said.

“Secondly, this is a good case for DVRs. You have got a person who has got a great idea, who has got capability, they have got the money which in this case came from Gangwal. Suddenly you have got governance issues, you have got clauses which are embedded in Articles of Association. This is what will happen with DVRs going forward unless Sebi very quickly revisits its DVR guidelines, this is something which we will see going forward,” he said.

"As far as Sebi is concerned, I am not sure what they can do at this stage. At one end they would be looking at the fact that the Chairman of Interglobe is the former chairman of Sebi. Both the IGE group and RG group have a great deal of confidence in him. Hopefully, he would be able to balance out the two and resolve the issues but so, far there has been limited progress on this, and if at all it has been escalated by the letters which have gone out to Sebi and various ministers since he has taken charge," Tandon added.