Wipro's lawsuit against former chief financial officer (CFO) Jatin Dalal was referred to arbitration by the Bengaluru City Civil Court in a hearing on January 3. The court's decision, thereby, allows the admission of a counter petition moved by Dalal.
Wipro had sued Dalal accusing him of violating non-compete clause in his employment contract by joining rival Cognizant within 12 months from his last date of work. In a countermove, Dalal in his application had requested the court to refer the matter to arbitration.
The lawsuit filed against Dalal also demands Rs 25.15 crore in damages to be paid by him, along with 18 percent interest per annum till the date of payment.
Arbitration is a mechanism to resolve disputes between parties without going to court; wherein a neutral person (an arbitrator) is appointed to adjudicate the dispute, and the judgment will be legally enforceable.
For parties to resolve their dispute through arbitration, they must necessarily have an agreement expressing their intention to arbitrate.
What happens next?
Arbitration is a quicker dispute resolution method usually preferred by large business houses. Once a dispute is referred to arbitration, it comes to court only when a judgment by an arbitrator is challenged or when the parties are unable to agree on who the arbitrator will be.
In Dalal’s case it is anticipated that his terms of employment had an arbitration clause, hence the matter was referred to arbitration.
The lawsuit was filed on November 28, two days before Dalal's last day at Wipro on November 30. Dalal's resignation was announced in September, shortly after Cognizant revealed his appointment as their new chief financial officer, effective December.
This move did not sit well with Wipro. In the lawsuit, Wipro claimed that Dalal, who assumed the CFO role in 2015, had been a core decision-maker and signatory on the company's acquisitions, strategies, and major deals exceeding $100 million. This positioned him with access to various sensitive information regarding how Wipro operates.
The IT services major is thus seeking a permanent injunction to prevent Dalal from sharing any company-sensitive details with Cognizant.
IT companies' non-compete concerns
Wipro has also filed a lawsuit against another former senior executive, Mohd Haque, in a US court for joining Cognizant, allegedly breaching the non-compete clause in his employment contract. Haque served as Wipro's former Senior Vice President (SVP) and Head of Healthcare and Medical Devices for the Americas.
He is also facing accusations of possessing seven files containing confidential information, which were sent from his personal Gmail account and flagged by Wipro’s IT team. Wipro claims that additional files were also uploaded and sent outside the company to his personal email account.
Wipro saw 10 top executives depart in 2023, as CEO Thierry Delaporte navigates a challenging market and attempts to turn the company around.
Infosys, too, found itself in a similar situation as it continued to lose senior executives to rivals, including Cognizant. Moneycontrol had exclusively reported on December 27 that the IT services giant sent written communications to deter Cognizant after a few of its senior leaders departed to join the firm.
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