Bengaluru: The ghost of Panaya, the $200 million acquisition of former CEO, Vishal Sikka, has come back to haunt Infosys with its shadow still hanging over the IT bellwether after Infosys Ltd lost an arbitration over the severance package of Rajiv Bansal, the former Chief Finance Officer of Infosys' who must be smiling from ear to ear.
He was awarded the outstanding amount of Rs 12.17 crore, with interest, the firm said Tuesday.
The pay was so far withheld by the IT firm after co-founder N.R. Narayana Murthy and others raised objections and termed the severance pay "excessive" amid speculation it was "hush money’’ to ensure the company's operating procedures were not made public.
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.
He later challenged the company and the matter went to an arbitration tribunal headed by a single judge, R. V Raveendran.
Over the past 18 months, the tribunal has held 15 sittings in Bengaluru before it came out in favour of Bansal on Tuesday by awarding him almost a full payment.
The tribunal has asked tech major Infosys to pay an outstanding exit allowance of `12.17 crore with interest.
The tribunal ruling certainly came as a shock to Infosys, but the company is putting up a brave front. Infosys’ share price dropped 1% on BSE. Bansal believed that Panaya was an expensive, ill-though-out deal that would not bring any value to Infosys. The board chaired by R Seshasayee gave a blind approval to acquire Panaya for a “hyped” price. Bansal was forced to quit and was offered a heavy severance pay. Following which company founder Narayana Murthy and others went into a long drawn public battle with Sikka and Infosys board. Eventually, Sikka resigned in August last year and the board was also dismantled. Nandan Nilekani former MD and CEO of Infosys and also one of the founders of the company was brought back to the company as its non executive chairman to save the sinking ship.
“The award acknowledges that Infosys had bona fide disputes and that its counter claim for refund of previously paid severance amount of `5.2 crore and damages, has been rejected,” Infosys said in a filing to the stock exchanges on Tuesday.
Infosys will take legal advice for necessary actions to be undertaken in respect of the award, it said in the filing to the bourses.
Industry observers say it was not fair for Infosys to withhold the money after offering it to their outgoing senior executive in writing. Bansal now stands vindicated and the tribunal could not find any merit in Infosys' argument.
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 precedence by paying such a huge severance package.
“But the fact is it signed up an agreement and committed to 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.
Now will Infosys explore an appeal? Legal experts say it is unlikely that Infosys may 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, an expert in tech law, at 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.