Infosys losing arbitration against Bansal was expected: Experts

'Infosys management unlikely to create further roadblocks for Rajiv Bansal'

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With IT major Infosys losing an arbitration over the severance package to its former Chief Financial Officer (CFO) Rajiv Bansal, the management is unlikely to create any further roadblocks for Bansal to get the balance amount. Infosys on Tuesday was directed to pay the outstanding amount of Rs 12.17 crore, with interest by the arbitral tribunal on Tuesday.

THE WEEK had earlier reported that the arbitration was expected to be in favour of Bansal because a proper contract was in place with the company with regard to the severance package. The exit contract signed between Bansal and Infosys was water tight. “We should not forget that Bansal is a strong legal and commercial person, who was forced to resign by the then management and he took steps to protect his interests. They wanted Bansal to quit due to disagreements on policy issues, like valuation. They were willing to pay a suitable compensation equal to two years CTC for his silence" said Kris Lakshmikanth, CEO of Bengaluru-based executive search firm Head Hunters India Ltd. "However, things got complicated because of Infosys founder N.R.Narayana Murthy's belief that the compensation paid was abnormal and beyond contractual norms. Bansal was compensated 24 months CTC against the norm of three months, i.e., eight times the norm.” 

He added that Murthy was influenced by the information that the Panaya acquisition was uncalled for and at a very high price. “Infosys is a services company and this was the first time they were buying a product or a platform company for which valuation multiples were significantly much more higher. This, coupled with the over valuation of Panaya and the extraordinary compensation paid to Bansal, triggered a big battle that made Infosys the leading headline in the media. The result was that the old management resigned and a new chairman took over,” explained Lakshmikanth. 

However, Lakshmikanth felt that Nandan Nilekani, the current Chairman of Infosys, being a pragmatic person, was well aware that the contract signed with Bansal was strict on conditions, but at the same time the founder's view had to be given due consideration. “Nilekani fully knew that Infosys had no case. Yet, the issue of payment could be postponed through an arbitration mechanism. I feel that the current management will abide by the law of the land and honour the contract. In any case, Bansal has filed a caveat in the courts that he has to be called for by the judiciary if there is any legal action taken by Infosys. I am sure Nilekani will close the matter without much complications,” remarked Lakshmikanth. 

Alok Shende of Mumbai-based Ascentius Consulting said the result of the arbitration case was on expected lines because once Infosys came into an agreement on the severance package, there was no scope for violation available to Infosys to terminate the agreement. “One of the most noteworthy aspect is that, though the founders and the board did not support the CFO who questioned the merits of the Panaya deal, which eventually cost Infosys $200 million, it is surprising that when it came down to the severance package of Rs 17 crore for the CFO, the board and founders backed out of their legal commitments,” Shende added.

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