Daggers drawn at Infosys as Bansal wins arbitration

Bangaluru: In a serious setback to Infosys, known for its ethical way of conducting business, an arbitration tribunal has directed the tech major to pay an outstanding exit allowance of Rs 12.17 crore with interest to its former CFO Rajiv Bansal.

The verdict of the tribunal turns the spotlight again on the old street battle over why Bansal was given such a huge pay out completely out of proportion with Infosys policies. But the more Infosys fights this case, the longer it would stay in news for wrong reasons. The charges of “excessive” and “hush money” given to cover up certain secrets in the company are also expected to resurface, throwing the IT major in a turmoil.

The company has so far withheld payment to Bansal after co-founder NR Narayana Murthy and others raised objections.

Infosys will take legal advice for necessary actions to be undertaken in respect of the award, it said in the filing to bourses. Infosys’ share price dropped 1 per cent on BSE.

Legal experts said it is unlikely that Infosys will go for an appeal as the company would have only very limited grounds for such a move. Also, proving that something went wrong fundamentally with the arbitration procedure itself is going to be a tough thing.

Sajai Singh, senior partner, J Sagar Associates, is of the opinion that in most cases the award of the arbitrator is final and that leaves Infosys with little scope (limited grounds) of pursuing the case further.

“Let’s see what are the grounds available for Infosys? Was there anything fraudulent, corrupt or fundamentally wrong involved in the arbitration proceeding? Was the subject matter such that it was not doable through arbitration? Was the agreement between parties void and basic context was missing? The defendant has to prove some level of incapacity of the tribunal, or prove that something fundamentally was wrong in the proceedings followed,’’ Sing, also an expert in tech law, said.

The tribunal headed by a single judge RV Raveendran had some 15 sittings in Bangalore over the past 18 months before it came out in favour of Bansal on Tuesday by awarding him almost a full payment.
Bansal was promised a huge severance package of Rs 17.38 crore — the equivalent of 24 months’ pay — of which Rs 5.2 crore was paid at the time of his exit in October 2015 after a three year stint with the company. “The award acknowledges that Infosys had bona fide disputes and that its counter claim for refund of previously paid severance amount of Rs  5.2 crore and damages, has been rejected,” Infosys said in a filing to the stock exchanges on Tuesday.

Industry observers say it was not fair for Infosys to withhold the money after offering it to their outgoing senior executive in writing.

Speaking on condition of anonymity, a former top executive of Infosys said, “It looks like the tribunal court has handled the matter only as an employment dispute and did not go into the details of the case. The earlier board did not follow the process and it promised obscene payout without any logic. The current board, on the other hand, completely failed to incorporate its point of view and did not clarify it to the court which now led to the company losing the battle. The company is now left with no option but to pay up the money to Bansal and end the matter once and for all.’’ He further said: “However, the company should recover the money from the board that is responsible for this fiasco and punish it for its failure in fulfilling its fiduciary duty to the company.’’

By fighting this case, Infosys probably was trying not to establish a precedence by paying such a huge severance package.

“But the fact is it signed up an agreement and committed a payment. So it’s an open and shut case. It is not good for the corporate image of Infosys to chase a former employee with any vendetta. Tech is a volatile market. Exits and entries of senior executives come with a cost and it is common in the US and Europe,’’ said industry observer and HR expert BS Murthy.