Friday the 13th was a bad day for Polaris Software Labs, which suddenly made
the news for what appeared to be all wrong reasons. Company chairman and
managing director Arun Jain, Bankware head Rajiv Malhotra and a couple of junior
executives were arrested by the Jakarta police following a complaint by Bank
Artha Graha. The bank, which signed a $1.3-million deal with Polaris six months
ago to automate a range of functions, served a termination notice on Polaris on
27 November 2002. The notice was served verbatim, across a table–when Jain was
in Jakarta to sort out a commercial dispute with bank officials.
The detention of Arun Jain, the man credited with steering one of the biggest
mergers in the country in recent times, was a rude shock. While the content of
the first information report (FIR) is not known, there’s been widespread
retaliation from the powers that be in India. The first to react was Nasscom,
which has assured the company that it is taking all possible efforts to secure
Jain’s release. The Indian government, meanwhile, has also been lobbying with
its Indonesian counterparts. Union IT, telecom and parliamentary affairs
minister Pramod Mahajan hinted that Prime Minister Atal Behari Vajpayee is
likely to speak with the Indonesian President in this regard shortly.
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Polaris sources say the contract had been drawn in consonance with the laws
of Singapore –and not Indonesia–and hence the arrest is a clear violation of
the terms and agreements. However, the issue, probably the first of its kind in
the Indian IT industry, raises some issues and concerns. Among them, those
voiced by the IT industry–the risk factors involved in operating out of
South-East Asian geographies.
Most of the countries in this sphere have a powerful military influence on
government decisions. For instance, in the case of Polaris, the Artha Graha Bank
has close ties with the Indonesian military. Its CMD–Letjen Tni Kiki Syahnakri–is
currently the deputy chief of staff of the Indonesian Army. And some political
observers say that given the bank’s influential status, securing Jain would
not be that easy. At the same time, the issue also brings to table issues of
transparency and corporate governance of companies. For instance, Polaris has
not yet told mediapersons the actual details of the contract with Artha Graha.
While Polaris has appointed Lucas Partners as its legal counsel for the case,
the element of secrecy from the Indonesian side over the whole issue is
surprising. It has also come at time when Indonesia is on the brink of economic
liberalization. Despite the likely fallout in bilateral relations between India
and Indonesia, some analysts feel that even president Megawati Sukarnoputri will
take a wait-and-watch approach, given the military links of the bank. Meanwhile,
the impasse continues, and the Indian IT industry is watching...