WELCOME

Philips India-Labour
Problem at Salt Lake
Nikhil Verma
Sec-C, MBA-Ist
2016-17

Contents
Introductions of Philip.
Expansion plan and its result.
Facts of the cases.
Judgements of HC & SC.
Conclusion.

Introduction of Philip

Philip Electronic (India) Pvt.Lts has started its work

in 1930.
Philip Electronic (India) Pvt.Lts is a subsidiary co.
of Holland based Philip NV.
In 1956 Co. name was changed from Philip
Electronic (India) Pvt.Lts to Philip India Pvt. Ltd.
In 1957 Co. converted into a public co and co.
called by Philip India Ltd (PIL).

 PIL initially involved into trading after that PIL

setup manufacturing facilities in various product
line
Co, started manufacturing of Lamp in 1938.
Co, started manufacturing of Radio in 1948.
Established unit for making electronic
component(in Pune).
Then PIL started manufacturing in
telecommunication equipment in Kolkata.

Expansion Plan & its result

During Booming trend in the market, PIL decided to
modernize its salt lake unit situated at Kolkata.
At this point, PIL has to tackled various
challenges.
First increase the production from 40,000 to
2,50,000.
Get Philip world wide award for quality
Become the source of Philip export in Asia.
For manufacturing audio & video product on
the basic of different geographic regions.

 PIL relocated its audio product line to Pune,

result displacement of 600worker but there was
no discard.
In 1996, PIL Expansion plan was failed due to
slow down in CTV market.
At this point, Philip employee union (PEU) and
Pieco worker union(PWU) realized that their job
might be in danger due to this failure and they
started to demand hike in wages by Rs.2000.
For fulfilling their demand workers stared using Goslow Tactics for 20 month.
Which result huge losses to PIL.

Facts of the Cases

After having huge loss, PIL took decision for
closing all its operation at Salt lake(Kolkata).
Due to this threat, PWU taken U-turn and agreed
for the proposal of Hike in wages by Rs. 1178.
But PEU rejected the offer.
After the announcement of closing, 390 worker
adopted VRS scheme out of 750 worker.

 PIL appointed HSBC to look out for buyer for the

PIL.
Videocon was highly interested in buying PIL
and expressed reservation about buying staffed and
underutilized plant.
To make an attractive buy PIL spent Rs.7.1cr,
additional to modernized the Salt lake plant.
Now total value of PIL was ascertained Rs.2830cr but Videocon want to pay Rs.9Cr. Along
with Rs.21Cr. Liability(Including VRS, PF,
Gratuity).
PIL Passed a resolution at AGM of selling Salt
Lake for this resolution PIL got 51% vote in favor
and most of the favorable votes came from Philip

 Group of FI(LIC, GIC,UTI) initially opposed the

offer of sale stating that term of the deal not clearly
stated to them.
but after some period the FI gave vote in favor of
sale.
S.N.Roychoudhary of the Independent Employees
Federation in Calcutta said, The sale will not profit
the company in any way. As a manufacturing unit,
the CTV factory is absolutely at good capacity.
It is near to Kolkata port, making shipping of
components from Far Eastern countries easier. It
consistently gets ISO 9000 certification and has
skilled labor. Also, PILs major market is in the
eastern region.

 The Unions made lot of effort to stop this

deal, which are as follows The Unions decided to buy PIL by paying
Rs.10Cr but Out of their savings, gratuity and
provident fund.
But PIL rejected their proposal by stating that it
would not let the workers use the Philips
brand and that the workers could not sell
the CTVs without it.
The workers were taking a great risk by using
their savings to buy out the plant. Countering
this, the workers said that they did not trust
Videocon to be a good employer and that it might

The Union approached the Videocon requesting

them to withdraw from the deal as they were
unwilling to have Videocon as their employer.
Videocon refused to change its decision.

The workers then filed a petition in the Kolkata

High Court challenging PILs decision to sell the
factory to Videocon.
In view of the rejection of its offer by the
management, the union stated in its letter that
one of its objection to the sale was that the objects
clause in the memorandum of association of
Kitchen Appliances did not contain any
reference to production of CTVs.

 The union also pointed out that the deal which

was signed by Ramachandran should have been
signed by at least two responsible officials of
the company.
In 1998, employees of PIL spoke to several
domestic and multinational CTV makers for a
joint venture to run the Salt Lake unit. Kiron Mehta
said, We can always enter into an agreement with
a third party. It can be a partnership firm or a joint
venture. All options are open. We have already
started dialogues with a number of domestic and
multinational TV producers.
The union had also talked to several former PIL
directors and employees who they felt could run
the plant and were willing to lend a helping hand

 The unions challenged PILs plan of selling the

CTV unit at such a low price of Rs 9 crore as
against a valuation of Rs 30 crore made by
Dalal Consultants independent valuers.
PIL officials said that the sale price was arrived
at after considering the liabilities that Videocon
would have along with the 360 workers of the plant.
This included the gratuity and leave
encashment liabilities of workers who would be
absorbed under the same service agreements.

HC & SC Judgments
Frist High court judge S.K.Sinha, passed an
order restraining any further deals on the sale
of the factory by stating that the transfer price
was too low and PIL had to view it from a more
practical perspective
Then PIL moved towards the Supreme Court.
And Supreme court passed judgement in favor
of the PIL.

 The Judge said that though the workers can

demand for their rights, they had no say in any
of the policy decisions of the company, if their
interests were not adversely affected.
Following the transfer of ownership, the
employment of all workmen of the factory was
taken over by Kitchen Appliances with immediate
effect.
Accordingly, the services of the workmen were to be
treated as continuous and not interrupted by the
transfer of ownership. The terms and conditions of
employment too were not changed. Kitchen
Appliances started functioning from March 2001.

Conclusion
There are various reason of happening this problem
few are as follow
1)Lack planning before modernizing salt lack unit.
2)Lack of communication with its Unions.
3)Unions have not proper knowledge about terms of
sale.

THANK YOU