Philips India - Labor Problems at Salt Lake
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SELLING TROUBLES contd...It is close 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.”
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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. The management
contended that a VRS offer at the CTV unit would have cost the company
Rs 21 crore. Refuting this, senior members of the union said, “There is
no way that a VRS at the CTV unit can set Philips by more than Rs 9.2
crore.” |
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They explained that PIL officials, by their own
admission, have said that around 200 of the 360 workers at the CTV unit are
less than 40 years of age and a similar number have less than 10 years work
experience. The unions also claimed that they wrote to the FIs' about their
objection.
The workers then approached the Dhoots of 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.
The unions approached the company with an offer of Rs 10 crore in an attempt
to outbid Videocon. They claimed that they could pay the amount from their
provident funds, cooperative savings and personal savings. But PIL rejected
this offer claiming that it was legally bound to sell to Videocon and if the
offer fell through, then the union's offer would be considered along with
other interested parties.
PIL said that it would not let the workers use the Philips brand and that
the workers could not sell the CTVs without it. Moreover 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.
They followed it up with proofs of Videocon's failure to make payments in
time during the course of its transactions with Philips. 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.
This makes it incompetent to enter into the deal. 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. As regards their financial
capability to buy out the firm, the union firmly maintained that it had
contacts with reputed and capable businessmen who were willing to help them.
In the last week of December 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.”
It was added that 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. Clarifying the point that the employees did not intend to
takeover the plant, Mehta said, “If Philips India wants to run the unit
again, then we will certainly withdraw the proposal. Do not think that we
are intending to take over the plant.”
In March 1999, the Kolkata High Court passed an order restraining any
further deals on the sale of the factory. Justice S.K.Sinha held that the
transfer price was too low and PIL had to view it from a more practical
perspective. The unrelenting PIL filed a petition in the Division bench
challenging the trial court's decision.
The company further said that the matter was beyond the trial court's
jurisdiction and its interference was unwarranted, as the price had been a
negotiated one. The Division bench however did not pass any interim order
and PIL moved to the Supreme Court. PIL and Videocon decided to extend their
agreement by six months to accommodate the court orders and the worker's
agitation.
JUDGEMENT DAY
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