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InterGlobe Aviation issue may land up in NCLT

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Legal experts believe that the erce battle at IndiGo may not end up at Sebi alone.

With inter-promoter feud intensifying at InterGlobe Aviation, legal experts believe that the erce battle may not end up at capital markets doors alone. While SEBI has asked the company to le its reply based on the complaint led by Rahul Gangwal pertaining to issues governing to articles of association and related party aspects of the company, legal experts are divided as to whether SEBI or NCLT is the right jurisdiction governing such issues.

As per the letter led by the company on stock exchanges, the para 16.16 of the articles of association says: Each Group shall at all times exercise their voting rights at the meetings of the shareholders, and shall cause their nominees on the Board to vote, in order to ensure the implementation of the terms of the AoA – which would include the rights of the IGE Group to nominate the senior management listed in Article 17.4.

Experts say that most of the time, SEBI has avoided to get in to the question of articles of association governing the rights of promoter shareholders unless they are having any adverse impact on the rights of the public shareholders.

“Issue of trust decit between promoters does not necessarily mean issue of corporate governance in a listed company. Without commenting specically on any matter, usually Sebi has limited jurisdiction on the issues that require analysis of rights provided under Articles of Association,” said Sumit Agrawal, Founder Regstreet Law Advisors & ex-Sebi oicial. “Sebi in the past also has limited itself to the non-disclosure on the stock exchange.”

KC Jacob, NCLT lawyer at Mumbai-based Corporate Law Chambers India says, “SEBI usually does not invalidate shareholder agreement. In fact, the Regulation 4(2)(d)(i) of the SEBI listing regulations clearly state that the listed entity shall respect the rights of stakeholders that are established by law or through mutual agreements. Given this background, SEBI may only be able to review only to the extent that whether preferential rights are against the interest of minority shareholders. On a broad basis, preferential rights are largely exercised by shareholders and is more of a NCLT matter is matter of legal interpretation.”

According to Article 17.3, each Group shall ensure that its nominee Directors cause the appointment of Directors and the alternate Directors to be made in accordance with the provisions of the Articles and that each Group and its nominee Directors(s) shall vote at the General Meeting and the Board meetings, as the case may be, to ensure such appointments.

As per the letters on the stock exchange, in the Board meeting on 28 May 2019, Gangwal said that Article 16.16 (which contains the voting rights agreement between the promoters) should be removed or suitably amended as there should be no binding obligation on each group to exercise their voting rights and each group should be free to exercise their voting rights.

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