Infosys refutes Phaneesh Murthy''s charge about ADR issue

Our Convergence Bureau
13 May 2003

Bangalore: Infosys Technologies has said that the out-of-court settlement that it reached with a former employee, Reka Maximovitch, in a sexual harassment and wrongful termination suit could not be linked to its proposed American Depository Receipt (ADR) issue as alleged by Phaneesh Murthy, a former director of Infosys.

Infosys terms the assertions made by Murthy as blatantly false and states that he "voluntarily" signed the settlement clauses put forward by it. The company had offered Murthy the right to stay in the legal battle and fight the case himself to clear his name even as the company was ready to settle it out of court.

Infosys' corporate counsel and legal head R Nithyanandan says Murthy agreed to the clause of Infosys retaining the right to sue him, that he would not have recourse to insurance in case such legal actions were initiated against him and the company would not be bound by any term of confidentiality with respect to the settlement of the case. Infosys also says it has not received any notices on demand of shares vested to Murthy and it was unaware of the lawsuit filed by him in this regard.

Under the company's 1994 employee stock option plan (ESOP), every employee is required to meet all the liabilities, including taxes, on the grant of the options, says Nithyanandan. "Every employee has entered into an agreement with the Infosys Employees Welfare Trust (EWT) to indemnify the EWT and the company for any tax liability and as part of such indemnity agreed to keep a part of his/her shares with the EWT to meet any tax liability."

The EWT holds 25,600 shares belonging to Murthy as part of a tax indemnity he had signed on 15 December 1997, he says. "The company has not singled him out for this indemnity or withholding of shares. More than 1,000 employees, who received stock options under the 1994 ESOP plan, have signed the same indemnities and their shares are also being withheld under a similar tax indemnity."

The tax liability is not settled and is currently being agitated in the Karnataka High Court. As a result, the EWT has retained this indemnity till the matter is resolved fully and finally, the company says. "Signing such an indemnity is a condition for participation in the ESOP. Murthy has been aware of these facts since 1997 and his lawyers were again given this data in March 2003."