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 Go-slow 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.28-30cr 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 NV who held a major stake in the co.
 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, PIL’s 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
not be able to pay their wages
 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 PIL’s 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 PIL’s 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