The share price of Infosys declined in Thursday trade after US-based rights litigation firm announced filing of a class-action lawsuit against the IT major and accused Chief Executive Salil Parekh of avoiding standard accounting scrutiny.
The lawsuit comes amid the whistleblower complaints written by an anonymous group of employees, which could make matters worse for the tech services major.
Following the release on the law firm's website, Infosys stock fell 3.58% intraday to the low of Rs 695 on Thursday, against the previous closing value of Rs 720.80.
With more volume traded close to low price, 16 lakh and 72 lakh shares of Infosys are changing hands on BSE and NSE today. Infosys share price is trading lower than 5, 20, 50, 100 and 200-day moving averages.
The lawsuit has been filed for violations of 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by the US Securities and Exchange Commission, the company said.
Accusing the Indian IT major of making "false" and "misleading" statements to the market, the lawsuit alleged that Infosys used improper recognition of revenue to boost short-term profits and said that company's finance team was pressurised to hide details on these deals from auditors.
Filed by Schall Law Firm, the lawsuit also accused tech services giant's CEO-Salil Parekh of avoiding standard reviews of mega deals to get rid of scrutiny. The law firm further invited investors with losses of over $100,000 to contact the firm.
"Based on these facts, the company's public statements were false and materially misleading throughout the class period," said the law firm in the news release.
"When the market learned the truth about Infosys, investors suffered damages," it added.
The whistleblower complaints earlier filed to the audit committee on October 10, alleged Parekh and Chief Financial Officer Nilanjan Roy of 'unethical practices' and 'non-compliance to accounting standards'. The complaint was placed to the company's non-executive board members on October 11, the day when Infosys announced its second-quarter results.
Since then, the stock has deteriorated 11% (from the closing of Rs 815 on October 11 to closing of Rs 720 on December 11) on BSE.