Entering into business transactions between the parties leaves a scope for the occurrence of clashes between them. Opting for legal proceedings in the Court of law are often time consuming and expensive.  Heading towards arriving at a settlement, the parties often incorporate, in their agreement, provisions of dispute resolution by taking recourse to cost effective measures such as arbitration, conciliation and mediation.

Guiding light

In India, law promotes the resolution of disputes between the parties through alternate dispute redressal mechanisms. The arbitration and conciliation proceedings are regulated under the provisions of the Arbitration and Conciliation Act, 2015 (hereinafter referred to as the “Act”). Arbitration provides procedural flexibility, saves valuable time and money while avoiding the stress of a conventional trial.

Infosys lost arbitral battle against former employee

The former Chief Financial Officer (hereinafter referred to as the “CFO”) of one of the leading information technology companies, Infosys Limited (hereinafter referred to as “Infosys” or “the company”), took recourse to arbitration by exercising the said clause of the severance agreement between himself and the company in April 2017 in order to resolve the dispute pertaining to the halted pay-outs. [1]

A severance agreement enumerates the rights and obligations of the employer and the employee in the event of termination of such relation between the parties. At the time of execution of the aforesaid agreement between the company and its CFO, a sum of INR 173,800,000 (USD 2416405 approx.) was agreed to be paid to the ex-employee in lieu of severance pay, salary and other benefits.[2]

In furtherance of the dues, the company paid INR 52,000,000 (USD 722975 approx.). However, discrepancies arose regarding the decision to make severance payments, which resulted in halting the further payments. The founders of the company raised the issues that the pay-out had been made without adequate disclosures and financial loss was suffered by the company when the ex-CFO deleted vital content from the company issued laptop.

Arbitral Tribunal of the former Supreme Court judge Mr. R.V. Raveendran acknowledged that the company had a bona-fide dispute, however, rejected its claim seeking refund of the payment already made. Further the Tribunal ordered the company to pay its former employee INR 135,800,000 (USD 1888077 approx.), including INR 121, 800,000 (USD 1693430 approx.) in severance and INR 14,000,000 (USD 194647 approx.) in interest. 

The arbitral awards issued are generally final and binding on the parties as per Section 35 of the Act and can be enforced as the decree of the Court under the provisions of Section 36 of the Act. However, the same may be subject to challenge on grounds such as incapacity of the party, arbitration agreement is not valid, improper appointment of Arbitrator, issue not within the scope of arbitration agreement, etc.

With the ease and facilitation offered by arbitration, more and more people are increasingly taking recourse to such measures in order to settle their disputes.