In a swift retaliation to Phaneesh Murthy's response to the out-of-court settlement reached by the company with Reka Maximovitch in the sexual harassment lawsuit, Infosys on Monday termed every one of the assertions made by the company's former director as blatantly false.

In a statement mailed to rediff.com in Bangalore, Infosys' corporate counsel and legal head R Nithyanandan clarified that Infosys settled the matter because it believed that it was in the best interest of the company.

Reacting to Phaneesh's assertion for Infosys settling the matter, Nithyanandan said the company had disclosed in all its SEC (Securities Exchange Commission in the US) filings, as early as October 2002, that the case with Reka may materially impact the earnings of the company.

"As the company had already disclosed the risk in its filings, there is no connection between the settlement and the proposed ADR (American Depository Receipts) offering.

"This case was settled on April 25, 2003, as the depositions were to start on the same day.

"A reading of the many public filings in this case would bring forth, the grave nature of the allegations made against Phaneesh," the counsel stated.

On Phaneesh's claim that he was an unwilling party to the settlement, Nithyanandan said in the settlement discussions, Infosys had made it clear that it was willing to settle with Reka, without Phaneesh.

"For Phaneesh to participate in the settlement, Infosys had clearly specified that:

• He agree to Infosys having the right to sue him for all his actions and lack of contribution;
• He further agree that if Infosys sued him for his actions, including for breach of fiduciary duties and indemnification, he would have no recourse to the insurance company; and
• That the company was not bound by any terms of confidentiality with respect to this settlement or the case.

"Initially, Phaneesh refused to participate in the settlement on these terms.

"When Infosys confirmed to him that the company was anyway going ahead with the settlement alone, Phaneesh came back voluntarily and signed the settlement and agreed to every condition that the company had set," the counsel affirmed.

As the company retained its right to sue Phaneesh for his actions and lack of contributions, it went ahead with the settlement without any contribution from him.

"If Phaneesh believed he was innocent and wanted to clear his name, he should have stayed in the lawsuit by himself and defended his position. We had given him this option. Instead of fighting to clear his name, he elected to settle," Nithyanandan claimed.

On Phaneesh's claim that Infosys was withholding his 28,000 vested and paid-off shares, and that he has initiated legal action to retrieve them, Nithyanandan said Infosys had not received any notice of demand in respect of these shares from him, and the company was unaware of any lawsuit filed by Phaneesh in this regard.

Nithyanandan said the company has not singled out Phaneesh but was withholding shares of over thousand employees who received stock options under a 1994 ESOP plan due to an indemnity for the company against tax liability, which is presently being tried in the Karnataka high court.

"Phaneesh has been aware of these facts since 1997, and his lawyers were again given this data in March 2003," the counsel added.