No merit in Infosys whistleblower charges: Sebi

Regulator conducts preliminary probe into allegations; meets management

The Securities and Exchange Board of India (Sebi) will not pursue allegations of corporate governance violations against information technology giant Infosys.

Earlier this year, an Infosys whistleblower had written to Sebi alleging corporate governance lapses by Vishal Sikka, the company’s chief executive officer and managing director, and other board members.

Sources said Sebi conducted a preliminary probe into the allegations and did not find merit in investigating further.

The whistleblower, in a letter to Sebi and the US Securities and Exchange Commission (SEC), had alleged Infosys had overpaid for the acquisition of Israeli firm Panaya. The letter also raised the issue of the severance payout to Rajiv Bansal, former chief financial officer at Infosys.

Sources said a Sebi official conducted a probe into the accusations and the findings were discussed internally. Sebi Chairman Ajay Tyagi, along with other officials, met the Infosys management last week to discuss the findings, the source added.

The regulator concluded that requisite procedures and disclosures were in place during the acquisition of Panaya and in the severance payout to Bansal, said a Sebi official. The probe did not come across any corporate governance violations by the Infosys management, he added. 

Sebi relied on reports of the audit and remuneration committee of Infosys, which it had sought soon after the allegation was made.

The whistleblower’s letter stated that Panaya was struggling to raise money and employees were leaving the company when the acquisition took place and the Infosys board overlooked the decision to buy the firm at a premium.

It alleged that Bansal received 30 months’ salary, which was not according to his contract, which allowed only a three-month payout. The whistleblower alleged Bansal’s contract was changed purposely to keep the deal secret. 

“It is widely known in Infosys circles that Panaya founders paid a kickback to Vishal for inflating the deal value. Rajiv knew this through his deputy Burhan, who worked on the deal and inflated the valuation so that Panaya’s owners would get more than they should, the extra being passed over to Vishal in some way,” the whistleblower wrote in the letter.

“Sebi must have done its due diligence before concluding the matter. I am sure that Infosys complied with all the regulations,” said Shriram Subramanian, managing director of InGovern.

“Being a listed company, investors could have different views on what practices should be pursued within the organisation,” he added.

This is the second high-profile corporate governance case in which Sebi has taken a view that the allegations made do not warrant further intervention.

In the Tata Sons case, too, the regulator found no merit in former chairman Cyrus Mistry’s allegations.