Legal Challenges of Leasing a Company: How to Handle Closure Notices and Compliance?

Legal Implications of Leasing a Company

One company has more than 100 workers. The management has retrenched all of them, paid all their legal dues, and settled their Full and Final (F & F) accounts. Now, the employer has leased this company to another company. The new company has engaged its own workers for the execution of work.

The factory inspector is enforcing us to issue a closure notice first, but the management has refused to do so as the unit is in a running condition.

Please guide on how to tackle this situation. What will be the legal implications? What will be the right procedure and legal formalities to give the company on lease to another party?

Regards,
Sacheein

You can contend that this is not closure within the meaning of Sec. 2(cc) of the Industrial Disputes Act as you have not closed any place of employment. This is only a transfer of undertaking within the meaning of Sec. 25-FF of the Industrial Disputes Act. Hence, there is no need to issue a closure notice.

Regards,
B. Saikumar
HR & Labour Law Advisor
Mumbai

You might have complied with provisions relating to the Industrial Disputes Act, but what the Inspector of Factories and Boilers wanted to say might be the Notice of Closure as required under Section 110 of the Factories Act. This notice is supposed to be served prior to the closure of the factory. The rules would clearly state in which form it should be served. For example, under Rule 127(3) of the Kerala Factories Rules, it is to be submitted in Form 32. The form required may vary from state to state, but the general provisions will be the same. Therefore, please refer to the rules of your state, and you may serve the notice post-dated after consulting with the Inspector.

Regards,
Madhu.T.K

If you have 100+ workers, then you surely had to opt for permission for retrenchment. But my question is, on what grounds did you opt for the permission? Verify it first. If your intention was to close the factory, then the government is right here.

Regards,
Mangesh Wakodkar
Aurangabad