Cognizant pays Rs 4 crore to settle Dalal's lawsuit with Wipro

BENGALURU: Cognizant has paid Rs 4 crore to its CFO, Jatin Dalal, to settle the lawsuit and related arbitration with his former employer, Wipro. Cognizant paid Dalal even though the company was not named in the order from the Bengaluru Civil Court in January, where he invoked his rights to an arbitral tribunal. Cognizant wasn’t named in the arbitration proceedings either.
In its press release, Cognizant said that the terms of the settlement, which was reached without any admission of liability by either party, are confidential.It also mentioned that the settlement resolves all pending disputes between Dalal and Wipro. “The settlement was reached without admission of liability by either party. The company’s payment covers Dalal’s settlement payment to Wipro as well as reimbursement of his legal fees,” Cognizant said in a filing with the SEC on Tuesday.
Wipro had sought Rs 25 crore from Dalal for breach of contract after he joined Cognizant as CFO immediately after leaving Wipro in November last year. The claim is based on the value of RSUs and PSUs granted to Dalal since he became CFO in 2015.The company had said in the court filing that every one of the grants came with the condition that for a period of 12 months after his last date of employment, Dalal could not directly or indirectly engage with a competitor, could not solicit a Wipro customer to move the existing business to another party, and could not solicit a Wipro employee to be associated with a competitor, supplier, or customer.
"I am grateful for my journey with Wipro, and I am pleased to have this matter behind me. I’m looking forward to continuing to drive Cognizant’s growth agenda while delivering value to our clients, employees, and shareholders,” said Dalal in a statement. Saurabh Govil, president and CHRO at Wipro, said, “We are glad this issue has been resolved, safeguarding our contractual rights.” When TOI asked Wipro whether a compromise between Dalal and Wipro was reached, given that the settlement amount is much smaller compared to what Wipro had sought, the company didn't respond to TOI's queries.
Some proxy advisory experts have said that this settlement has raised questions about whether it has set a certain precedent in the industry regarding non-compete contractual obligations. Shriram Subramanian, founder and managing director of the proxy advisory firm InGovern Research Services, said it’s not clear why, in the arrangement between Wipro and Dalal, the settlement amount was reduced. “Wipro should inform its shareholders what the eventual settled amount is, in comparison to its claim over its erstwhile CFO.” Cognizant, Subramanian said, has set a bad precedent by poaching a senior executive of a rival company with explicit knowledge of a breach of contract in the non-compete and confidentiality arrangement. “By agreeing to pay the settlement amount, Cognizant has further set a precedent that contracts may be broken by the poaching company paying off the breakage amount. Cognizant would have been aware of the terms of Dalal’s employment contract. It would have taken a conscious decision to hire by breaking a contract, rather than wait out the contract period. Headhunters and search firms should advise their clients against such practices,” he said.
In another development, Cognizant said it has entered a similar settlement regarding the lawsuit between Wipro and its former SVP and healthcare head, Mohammad Haque. Wipro moved court against Haque, who then sought arbitration. Wipro has filed a complaint against Haque for violating non-compete clauses in his employment contract by joining Wipro’s direct competitor, Cognizant.
Haque took charge as the chief commercial officer at Cognizant on August 1 last year, and he cited that the new role involves a more expansive portfolio of responsibilities, the potential to earn more money, and more opportunity for growth. He relocated to California after taking up the new position with Cognizant. A US court filing on Monday showed that Wipro and Haque have agreed that all claims and causes of action have been amicably adjusted between the parties, and without costs.