1MDB's board and shareholder – the Finance Ministry – had agreed to let company president Arul Kanda Kandasamy go in March 2016, but rescinded the decision a month later, his lawyer N Sivananthan said today.

"By March 2016, the framework for the 1MDB rationalisation plan was substantially in place. Accordingly, my client offered to resign during that time and the board and shareholder of 1MDB agreed to the same.

"However, as a result of the legal dispute with International Petroleum Investment Company (IPIC) in April 2016, my client was asked to remain, pursuant to the terms of the original employment contract," he said in a statement.

Arul Kanda was recruited from Abu Dhabi Commercial Bank, where he was the head of investment banking and was involved in financial restructuring exercises. His three-year term began on Jan 5, 2015.

Sivananthan also pointed out that Arul Kanda was asked to consider a one-year contract extension in December 2017.

"After some negotiations, my client agreed to an extension of only six months... Among others, the terms included a discretionary ex-gratia payment, which was approved by the board and shareholder of 1MDB.

"I wish to make it absolutely clear that during the period my client was employed as the president of 1MDB, he was legally bound to execute the decisions, directions and instructions of the 1MDB board and the shareholder, which was to deal with the pre-existing and critical debt situation of 1MDB," said the lawyer.

Parliament was told last week that the Najib Abdul Razak administration had given Arul Kanda an RM5 million ex-gratia payment for the six-month extension on top of his salary.

Arul Kanda has received only half of the golden parachute because his tenure was terminated by the Pakatan Harapan administration, two days before the end of his contract.

The government is now trying to recover the RM2.5 million payment.

Although Sivananthan said that Arul Kanda was "legally bound to execute the decisions, directions and instructions" during the tenure of his contract, the latter had told the Finance Ministry that he was technically on "garden leave."

Arul Kanda's legacy includes shifting 1MDB's debt to the Finance Ministry – which has had to redeem funds from Khazanah Nasional Bhd last August and engineer a land transaction with Bank Negara in order to service the investment firm’s debts.

He also engineered the sale of 1MDB's only profitable asset – energy arm Edra – to China, which Damansara MP Tony Pua said was sold at a loss.

In all, the Finance Ministry said it has had to cough up RM6.98 billion over the past year on behalf of 1MDB to various creditors.