A disclaimer: nothing in the narration even remotely suggests any violation of any of the provisions of the applicable laws to the extent known to the author! Remember the references relate to a former chairman of the Securities Exchange Bureau of India, the regulator and watchdog of securities affairs!
Newspapers on 17 July carried a news item on M Damodaran’s induction into the board of the company, Interglobe Aviation Ltd, as a non-executive-non independent director. While such appointments are rare, they are not exceptional by any means and well within the purview of the legal and governance frame work.
It’s different…
But the case of Damodaran is a little different. He was appointed initially by the board as an additional director (independent) effective 23 January 2019. His appointment as an independent director was confirmed by the members of the company for a period of five years in the annual general meeting held on 27 August 2019.
He resigned from the board of the company on 3 May 2022, hardly ten weeks back. The resignation came on the anvil of his completing seventy-five years.
The resignation was hardly necessary since the resolution appointing him as an independent director had clearly anticipated that he would complete seventy-five years midway in the tenure and provided for his continuing in office even after completing seventy-years with a special resolution being passed duly.
It was surprising that as a measure of good governance the company didn’t think of securing a special resolution for the appointment knowing fully well that the requirement would arise midway in the tenure.
Even then the special resolution could have been passed before 3 May 2022. Going by the fact that he was serving only his first term as an independent director, there should have been little challenge in getting the special resolution passed.
The Re-entry
Yet he resigned. It appeared that he wanted to uphold the true spirit of the law which imposed the age limit as a measure of better governance and prompting corporate boards to be populated with younger persons!
Seventy-five years is by no means an early retirement though medical science has made it possible for people to be functional well beyond that age.
Anyway, the above has become academic with the re-induction of Damodaran as a non-executive, non-independent director from 16 July 2022.
It is to be noted that Damodaran was serving as a chairman of the board from 24 January 2019 filling in the void occasioned by the demise in office of the previous chairman Devadas Mallaya Mangalore.
Damodaran in his capacity as the chairman of the company, signed the balance sheet and the profit and loss account for the year ended 31 March 2019, being the first such annual accounts post his appointment.
However, for the subsequent two periods – the years ended 31 March 2020 and 31 March 2021 – he did not sign the balance sheets and the profit and loss accounts!
The above is unusual as in the past years the Interglobe Aviation Ltd the chairman appended the signature to the said items forming part of the annual report. As stated Damodaran himself did so for the year ended 31 March 2019.
The financials are the heart of the annual report. The board report and the other voluminous appendages are but ancillary information about the operations. It is difficult to find another parallel where the chairman did not sign the key part of the annual report. If the chairman was reluctant to sign, is it too much to expect the general public to trust it?
However, it should be clarified that as per Section 134 of the Companies Act, 2013, there is no mandatory requirement for the chairman to sign these items mentioned.
Another aspect that needs to be noted is the special structure of the board of the company in which the promoters are two independent groups with distinct interests and not necessarily seeing eye-to-eye on all matters.
To better appreciate this aspect the resolution indicated as 17.1 in the notice to the AGM held on 27 August 2019 is presented below-
Number of Directors
Subject to the provisions of the Act and until determined by a special resolution at a General Meeting of the Company, the number of Directors shall be 10 (ten) to be constituted in the following manner: (i) IGE Group shall collectively have the right exercisable by it directly or through its nominee to (a) nominate 5 (five) non-independent Directors (one of whom shall always be an officer nominated by the IGE Group under Article 17.4) and 1(one) of these 5 (five) non-independent Directors, at the option of the IGE Group, may be appointed as a non retiring Director, and (b) remove from office any of such Directors and to nominate or appoint, as the case may be, any other Director to fill the vacancy caused due to removal, resignation, death or for any other reason. It is clarified that, the Director nominated or appointed on the Board from the officers identified under Article 17.4 shall be replaced only by another officer identified in Article 17.4. The Chairman of the Board shall be appointed on the nomination of the IGE Group which nomination by IGE Group shall not affect RG Group’s right in Article 17.1(ii). (ii) RG Group shall collectively have the right exercisable by it directly or through its nominee to (a) nominate 1 (one) non-independent Director, who shall be appointed as a non-retiring Director, and (b) remove from office such Director and to nominate or appoint, as the case may be, any other non-retiring Director to fill the vacancy caused due to removal, resignation, death or for any other reason. (iii) 4 (four) independent Directors.
It can be noticed from the extract above in italics, mentions that the chairman of the board is actually a representative of one of the promoter groups (IGE).
In the light of this, it needs clarification from the company how Damodaran and his predecessor, who were designated independent directors, actually qualified to be one when they held the post of the chairman, ostensibly as a nominee of IGE group!
Unprecedented events
Damodaran’s return is preceded by two other events. The first is the appointment on 4 February 2022, of Rahul Bhatia as the managing director, stated to be the first time the company has filled this position.
This preceded the resignation of Damodaran by nearly three months. It is not clear but an inescapable speculation that the change in the board structure came in the way of Damodaran’s continuance?
The second event is the stepping down of the current CEO Ronojoy Dutta, made public on 18 May 2022. This is post the resignation of Damodaran.
Could it be that the above exit has caused a rethink for Damodaran to return? Of course, the two possibilities conflict to some extent and may have nothing to do with all that happened though in a nice sequence!
Lastly, the company’ website which is more designed to book air tickets and views persons interested to pry for statutory information as intruders, carries at this moment the biodata of Damodaran along with other directors though he resigned on 3 May 2022.
It mentions the fact that he served as an independent director till the above date and doesn’t mention his recent reappointment. Is it attributable to the clairvoyance of the company secretary, or whoever is managing the website, that his name was retained though he had resigned?
Best to end the article here and confirm that nothing stated above even remotely suggests any violation of any of the provisions of the applicable laws to the extent known to the author! Remember the references relate to a former chairman of the Securities Exchange Bureau of India, the regulator and watchdog of the securities affairs!
