Setback for Infosys as ex-CFO Rajiv Bansal wins severance pay case3 min read . Updated: 18 Sep 2018, 10:25 PM IST
Infosys says it will take legal advice for necessary actions to be undertaken in respect of Rajiv Bansal's severance pay
New Delhi: An arbitral tribunal’s ruling ordering Infosys Ltd to pay its former chief financial officer Rajiv Bansal ₹ 13.58 crore, including ₹ 12.18 crore in severance and ₹ 1.4 crore in interest, revives questions about the decision made by the company’s board to arbitrarily halt the payment.
Infosys’s board led by former chairman R. Seshasayee had decided two years ago to stop the payout reportedly after some of its founders expressed their unhappiness.
Arbitrator retired Supreme Court judge R.V. Raveendran looked only into the employment contract of Bansal and if the company’s decision to halt outstanding payment was fair, an executive familiar with the development said on condition of anonymity. Justice Raveendran did not go into the merits of Infosys’s decision to pay Bansal a severance.
Founder N.R. Narayana Murthy had raised the issue of the severance payment in the past, saying that the payout had the appearance of hush money to buy Bansal’s silence.
Calls and text messages to Bansal and Seshasayee seeking comment went unanswered. An email sent to Murthy seeking comment went unanswered.
“The arbitrator only looked into if Bansal’s employment contract with Infosys was watertight and if Infosys’s decision to halt the payment was valid. The ruling by the arbitrator clearly suggests that the ground of stoppage was not substantive enough," said Shriram Subramanian, founder of proxy firm InGovern Research.
“While the award acknowledges that Infosys had bona fide disputes, its counter claim for refund of previously paid severance amount of ₹ 5.2 crore and damages, has been rejected. The arbitral award is confidential," Infosys said in a statement to the exchanges on Tuesday. “Infosys will take legal advice for necessary actions to be undertaken in respect of the award".
“I don’t think Infosys will fight the case anymore because it is closed-door proceedings in arbitration and the company won’t like to again go through this in public, when it takes this to a court," said Subramanian.
The Rajiv Bansal severance pay drama surfaced in May 2016 when Mint reported about the company agreeing to pay ₹ 23.02 crore in severance pay, salary and other benefits to Bansal. Although Bansal had resigned in October 2015, Infosys first disclosed the severance payments as a footnote in its annual report. At the company’s annual general meeting (AGM) on 18 June, Infosys for the first time disclosed—seven months after Bansal quit—that he had been paid two of the 10 instalments as part of ₹ 17.38 crore in severance.
However, some of Infosys founders’s repeatedly expressed their displeasure on the board’s decision to make severance payments, which forced the earlier board to arbitrarily halt the payments, a development which was again reported by this paper in September 2016.
Up until then, Infosys had paid ₹ 5.2 crore.
Subsequently, in January 2017, Bansal invoked the clause of arbitration proceedings against Infosys.
Until Infosys decided to suspend the severance payments, the company maintained that the severance payment reflected the “enhanced non-compete and non-disclosure agreement" the company signed with Bansal, although the board continued to shy away from clarifying what this enhanced non-compete agreement meant.
A Mint investigation found that Infosys board did not record the proceedings of a 12 October 2015 meeting where it discussed paying ₹ 17.38 crore in severance pay to Bansal. Later, this paper reported that Bansal had differences with Infosys former’s CEO Vishal Sikka over the company’s decision to buy Panaya, prompting Bansal to walk out of a board meeting. Tensions between Sikka and Bansal finally prompted Sikka to ask Bansal to leave, with a severance package.
Law firm Indus Law was hired by Bansal while Nishith Desai Associates represented Infosys in the arbitration proceedings.