Presently, I'm working in a Private Limited Company, which has two sister companies under different names, all registered under ROC and MSME.
Company's Financial Challenges
In 2013, the company suffered a significant loss on a project and has continued to incur losses every year since, although the balance sheet was shown as profitable each year to gain some government facilities. The payments to sundry creditors and employee benefits have been severely affected since then. The company faced NCLT allegations by one of its sundry creditors in 2018, and in 2020, it was declared an NPA by its primary bank. During this period (from 2013 to the present), the management neither terminated any employees nor provided regular employee benefits. A substantial amount of employee benefits has accumulated and remains unpaid. Whenever we, the employees, confronted the management (Managing Director), they falsely assured us that the dues would be paid.
Current Management Activities
Presently, the management is attempting to engage in dubious activities by developing a similar business under the name of one of the sister companies to avoid the unpaid dues of the parent company.
Employee Concerns and Queries
Under these circumstances, my questions are as follows:
i) Can the company conduct the same category of business under the name of a sister company at the same office address while ignoring the parent company?
ii) How can employees recover their substantial dues when the company has been declared an NPA by the bank?
iii) As employees of the company, should we proceed with legal actions against the company?
iv) Can the company terminate any employee under these circumstances?
My earnest request to the senior members is to kindly respond to my queries to help us proceed further.
Thanks & Regards,
S. Banerjee
From India, Mumbai
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Company's Financial Challenges
In 2013, the company suffered a significant loss on a project and has continued to incur losses every year since, although the balance sheet was shown as profitable each year to gain some government facilities. The payments to sundry creditors and employee benefits have been severely affected since then. The company faced NCLT allegations by one of its sundry creditors in 2018, and in 2020, it was declared an NPA by its primary bank. During this period (from 2013 to the present), the management neither terminated any employees nor provided regular employee benefits. A substantial amount of employee benefits has accumulated and remains unpaid. Whenever we, the employees, confronted the management (Managing Director), they falsely assured us that the dues would be paid.
Current Management Activities
Presently, the management is attempting to engage in dubious activities by developing a similar business under the name of one of the sister companies to avoid the unpaid dues of the parent company.
Employee Concerns and Queries
Under these circumstances, my questions are as follows:
i) Can the company conduct the same category of business under the name of a sister company at the same office address while ignoring the parent company?
ii) How can employees recover their substantial dues when the company has been declared an NPA by the bank?
iii) As employees of the company, should we proceed with legal actions against the company?
iv) Can the company terminate any employee under these circumstances?
My earnest request to the senior members is to kindly respond to my queries to help us proceed further.
Thanks & Regards,
S. Banerjee
From India, Mumbai
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My response to the queries is as follows:
1. A registered company is a legal entity and is distinct and different from its shareholders. So, there can be two companies under the same roof doing the same or similar business.
2. When the parent company is declared as NPA, the stakeholders, including employees, are only entitled to a proportionate share of its liquidated assets. This probably would require some proactive steps from the employees to get their share.
3. Yes, to protect your interests, you need to become a party in the case at hand.
4. When the company is not functioning and is declared NPA, there is de facto termination. It is better to search for an alternate job.
From India, Mumbai
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15931. A registered company is a legal entity and is distinct and different from its shareholders. So, there can be two companies under the same roof doing the same or similar business.
2. When the parent company is declared as NPA, the stakeholders, including employees, are only entitled to a proportionate share of its liquidated assets. This probably would require some proactive steps from the employees to get their share.
3. Yes, to protect your interests, you need to become a party in the case at hand.
4. When the company is not functioning and is declared NPA, there is de facto termination. It is better to search for an alternate job.
From India, Mumbai
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Guj HC on recovery of PF dues within appeal period.pdf