Rundle -- who settled suits of sexual harassment against Davidar and wrongful dismissal against Penguin out of court on Tuesday -- will return to work "in a few weeks' time" and "is happy to resume her responsibilities" as the company's rights and contract director, the publishing firm announced.
The company also said that Mike Bryan, who most recently served as president of Penguin India, will take over from Davidar as head of Penguin Canada, 'Toronto Star' reported.
Bryan, 54, is a British native and will assume his new post next month.
On hiring back of Rundle, the international publishing giant's global CEO John Makinson said that it was both practically and ethically "the right thing to do."
He also credited the advice of Penguin Canada publisher Nicole Winstanley in the decision to reinstate Rundle.
"Nicole Winstanley had a very high opinion of Lisa and hoped that we would find a way for her return," Makinson told 'Toronto Star'. "We thought that this was not only commercially the right thing to do but ethically the right thing to do as well."
Makinson, like all the other parties to the settlement, is prevented from offering details of the settlement with Rundle, who was seeking 523,000 dollars in damages from the company and Davidar together.
Rundle left the company in May and filed the lawsuits against the company and Davidar on June 10. Before Rundle filed the suits, Davidar had announced he was voluntarily returning to India to write novels.
However, after Rundle's claims, Penguin stated that Davidar had been asked to quit.
"It's not been a chapter in the company's history that I'll look back on and think that I'll want to go through that again next month," Makinson said. "It has been a very difficult time for everybody who works in the company.
"What we've tried to be clear about is that the values that the Penguin brand represents in terms of decency, integrity and concern for the welfare of people are the concerns that have guided the course of action that we've taken on this."
While no Canadian was considered as Davidar's replacement, Makinson said, "it was not out of lack of respect for any of the Canadians who could have done the job."
"I did think that Mike was really well qualified to do it because of his experience in international markets. So Mike was the first and only person I approached about this," he was quoted as saying.
The report said a restructured Penguin Canada will now have its own board of directors, including Makinson, US CEO David Shanks and a Canadian Chairman to be named in the coming weeks.
"(Bryan's) skill set is different from (Davidar's) skill set," Shanks said. "David was more of an acquiring literary publisher. Mike is more of a sales, marketing and business person. To that extent the job will be different, but certainly Mike's mandate will be the same as David's."
Davidar, 52, who is the author of two successful novels, reaffirmed his intention to resume his career in India.
"I am going to take the next few months to finish up a novel I have been working on, following which I will decide on which of several options I should be pursuing," he told the Star.
"The one I'm most attracted to at the moment is an offer to set up a major publishing company in India with funding from India and the UK," he was quoted as saying.