It said that its former marketing chief, Phaneesh Murthy, had signed the settlement.

R. Nithyanandan, corporate counsel for Infosys, said the company had clearly set out terms for Murthy to participate in the settlement, including the right for the company to sue him for his actions.

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

"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 Infosys had set," he added.

Former employee Reka Maximovitch last year filed the case in a California court against the Nasdaq-listed company and Murthy, alleging wasteful termination and sexual harassment.

Murthy, the highest paid employee of Infosys when he resigned following the suit in July, has denied his involvement with Maximovitch.

He said he did not favour the settlement and alleged that Infosys was withholding his shares.

Murthy alleged the out-of-court settlement was reached by Infosys as it had to close an American depository receipt (ADR) issue coming up in the US market with "considerable sums at stake".

Nithyanandan said Murthy could have contested the suit on his own, if he wanted to clear his name.

He also said that the proposed ADR had no connection with the settlement of the sexual harassment case and added that the company had already mentioned it as a risk factor in its filings with US regulatory authorities.

Nithyanandan said Infosys had withheld Murthy's 25,600 shares under a taxation provision being debated in a local court.

Infosys has agreed to pay 1.5 million dollars towards the settlement while the other half will be paid by insurers.

SPACE.WIRE