BUSINESS

'Indonesian Safari' — a lesson to learn: Polaris chief

CHENNAI DEC. 25. The Christmas bells lifted the veil of gloom for the Polaris family as its Chairman and Managing Director, Arun Jain, and his colleague Senior Vice-President, Rajiv Malhotra, held in captivity for 11 days by the Indonesian police, returned home to join the carol minutes before midnight.

The two took the first flight to Singapore and left Jakarta after the Indonesian police returned their passports early Tuesday morning. They returned here late last night from Singapore. Immediately upon arrival, Mr. Jain walked straight into a hotel to address a large gathering of newspersons in the wee hours.

After making a brief statement on the events that led to their unwarranted detention on the evening of December 13 following a failed one-on-one encounter with the President of the Bank Artha Graha, Mr. Jain went on to rationalise his offer to cough up $662,000 that Polaris had thus far received from the bank for a $1.3 million project, slated to be implemented by July next year. The contract for the project was penned sometime in the middle of last year. The Indonesian client had since served a notice for termination of the project, citing, among others, slippages in the implementation schedule.

Mr. Jain insisted that he had gone to Indonesia only to sort out the differences with the bank management. The Polaris CEO was convinced that the Indonesian bank had taken a pre-meditated decision and refused to hear him out on the issue. Mr. Jain said he was unable to fathom as to why the Bank's President had chosen to make a complaint to the police rather than sorting out the matter across the table as was done in such commercial disputes or through the arbitration mechanism. The agreement in this particular instance provided for arbitration only in Singapore. Terming the11-day ordeal that he and his colleague were forced to undergo in Jakarta as `Indonesian Safari', Mr. Jain claimed that they felt safer, nevertheless, in police custody than when held hostage inside the board room at 28th floor of the bank. Even as the tense drama was unfolding at the boardroom, he said, they were able to sneak out a message soliciting help from the Citi Group security wing.

Mr. Jain asserted that Polaris always cared for its clients, justifying his decision to go to Jakarta himself to sort out the issue. Likewise, he said he laid much store by the shareholder value. Hence, he refused to `bend backward' to accommodate the bank when it demanded a compensation of $10 million outside the contract. The result: He and his colleague were cornered to undertake this unscheduled `Indonesian Safari' as part of his Jakarta visit. Mr. Jain said his unilateral offer to pay $662,000 was unavoidable. Yet, he claimed that the offer was well within its decision-making capability and responsibility as the CEO of the company. Polaris, officials claimed, had already honoured the commitment made by its CEO and handed over a cheque to the Indian embassy in Jakarta. "The maximum liability under the agreement is limited to the money paid to us by the bank," Mr. Jain said, and insisted that no money was paid to the bank for their release.

What really was the problem in the contract? According to Mr. Malhotra, Polaris, perhaps, had run into trouble because it chose to accommodate the client who did not bother to `freeze its needs'. "We can't really work with moving targets," Mr. Malhotra said. Nevertheless, in his reckoning, "the elephant was through but only the tail is left".

In hindsight, Mr. Jain regretted that Polaris went to Indonesia independently "without getting the embassy and the government in the loop". The events of the past few days, he said, had clearly proved that the software firms, which pined to garner overseas business, could not simply wish away the role of the Government and Embassies. `The Indonesian Safari', he said, had opened his eyes for the dangers of doing business in developing countries where the laws were not defined in a watertight way as distinct from the ones in developed world. Post-Bank Artha Graha episode, Mr. Jain clearly saw the need for undertaking an elaborate due diligence of customers before penning a contract.

Mr. Jain and his colleague may have found their freedom. But the Jakarta incident has dealt a blow to the image of Polaris Software Lab and the reputation of Mr. Jain and his official. Will Polaris move to file a damage suit against the bank? Mr. Jain insisted that the board of the company would take an appropriate action on this.

The Jakarta incident had seen two distinct cases raised. One is the commercial dispute case between the bank and Polaris. This could be resolved through the arbitration mechanism. The other is the case filed by the Indonesian police against these two charging them with embezzlement and deception. The Polaris chief maintained that he would value the guarantee given by the Government of India to the Indonesian authorities and, accordingly, make himself and Mr. Malhotra available in Jakarta if required at all.

Will Polaris be perceived favourably post-Jakarta incident? Mr.Jain said the incident would have no adverse fallout on its clients. He insisted that its clients across the globe were appreciative of the Polaris's predicament in this specific instance.