company’s workers cannot be transferred to amalgamated concern without consent: High Court

Ahmedabad, March 24 In a landmark judgment, the Gujarat High Court has held that the workers of a company cannot be transferred from one company to another, when two companies are merged or amalgamated, under the Indian Companies Act. It has said that the workers must have the option to join or not join the new company, and in the case of the latter option, the workers are entitled to retrenchment compensation.
The judgement by Justices M S Shah and K A Puj on last Wednesday came out in the wake of the amalgamation of Indian Petrochemicals Corporations Limited (IPCL) and Reliance Industries Limited (RIL). The scheme of amalgamation along with the transfer of entire undertaking of IPCL also provided for the transfer of all employees of IPCL to RIL.
While IPCL approached the Gujarat High Court for the sanction of the scheme, the Employees Association of IPCL objected to the move and challenged it. Noted lawyer Girish Patel, who appeared for the employees association told Newsline that the judgement will have far-reaching impact in the courts, as till now, the workers had no role to play in the cases of company amalgamations. "This judgement upheld the position of the workers in the company mergers and amalgamations," said Patel.
In its order, the High Court held that the "contract of employment being personal in nature cannot be transferred from one employer to another employer without the consent of the employees; and as such a transfer is a tripartite agreement between the transferor company, the transferee company and the workers of the company."
Express news service
Posted online: Tuesday , March 25, 2008 at 12:56:04Updated: Tuesday , March 25, 2008 at 01:18:43