Tech services giant Infosys has been issued a show-cause notice by SEBI seeking clarification on whether the company failed to follow proper process for related party transactions and disclosure norms under stock exchange listing agreement.

Sources close to the development told BusinessLine that it is following this show-cause notice that Infosys approached SEBI for a settlement under consent mechanism.

Infosys is under SEBI scanner for alleged lax in corporate governance practices and non-disclosure of key information to its shareholders. Among the aspects that SEBI is looking at includes sequence of events that led to the resignation of its former CEO Vishal Sikka followed by a major stock price crash on the back of huge built-up in derivative positions.

Non-disclosure of information with regard to severance pay to its former CFO Rajiv Bansal is also on the market regulator’s radar, the sources said.

Infosys agreed to pay ₹23.02 crore severance pay, salary and other benefits to Bansal in 2015 and while such an information was disclosed to the market regulator in US, it was not disclosed to exchanges in India. Around ₹5 crore was paid to Bansal but the rest was held back after objections were raised by Infosys co-promoter Nayarana Murthy.

Controversy first erupted after a whistle-blower letter to SEBI had highlighted that Bansal’s pay was ‘hush money’ being paid to him as he had reservations about Infosys acquisition of Panaya, an Israeli firm.

Murthy sought full details of the probe and wanted complete disclosure on the relationship between executives of Infosys and investors of Panaya. This issue first came up when an anonymous email was sent to SEBI and the US Securities and Exchange Commission alleging that the acquisition was overvalued and that there was a possibility of some Infosys executives benefiting from the deal. This year, Sikka resigned as Infosys CEO as the Panaya and Bansal controversy dragged.

Infosys share price crashed

The share price of Infosys crashed by 10 per cent in a single trading session in August this year just a day after Sikka resigned wiping out ₹22,500 crore in investor wealth. The shares fell another 5 per cent in the following session despite a buy back announcement. There were reports that a few foreign investors sold the shares ahead of Sikka’s resignation and also there was a built-up of huge short position in the counter. After Sikka’s resignation, SEBI chairman Ajay Tyagi had said that the regulator was tracking the price movement in Infosys shares closely.

“SEBI seems to have woken up a little late in the day to the happening in Infosys,” said Anil Singhvi, Chairman, Ican Investment Advisors. “The happenings at Infosys are an iconic case and delayed action has only hurt minority shareholders. Also, it is not understood as to why Infosys has a Brahminical treatment for regulators in the US and untouchable like treatment for shareholders in India when it comes to following disclosure norms.”

Infosys said it did not want to comment on email seeking its response to SEBI’s show casue notice.

In a filing to stock exchanges, Infosys last week said it has approached SEBI with an application to settle the issues under consent arising out of alleged disclosure lapses on the severance package paid to Bansal.

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