Understanding Transfer of Undertakings and Ownership in Chapter VB under ID Act

Understanding Chapter VA and VB of the ID Act

I have a confusion in interpreting Chapter VA and VB of the ID Act.

Section 25FF of Chapter VA

25FF. Compensation to workmen in case of transfer of undertakings.

Where the ownership or management of an undertaking is transferred, whether by agreement or by operation of law, from the employer in relation to that undertaking to a new employer, every workman who has been in continuous service for not less than one year in that undertaking immediately before such transfer shall be entitled to notice and compensation in accordance with the provisions of Section 25F, as if the workman had been retrenched.

Section 25S in Chapter VB

25S. Certain provisions of Chapter V-A to apply to an industrial establishment to which this Chapter applies.

The provisions of Sections 25B, 25D, 25FF, 25G, 25H, and 25J in Chapter V-A shall, so far as may be, apply also in relation to an industrial establishment to which the provisions of this Chapter apply.

My question is whether we can transfer the ownership of the undertaking which employs around 150 workmen without seeking the permission of the appropriate government since, as per the act, Section 25FF provisions can be applied for Chapter VB companies also.

Kindly share your view on the above.

Regards,

No need for prior permission for the transfer of an undertaking.

Regards,
Varghese Mathew

Since the company has 150 employees, Chapter VB will apply to it. Transfer of undertaking by itself has two elements, namely closure and retrenchment, and retaining the continuity of service and maintaining conditions of service of workers in the new company. The former is part of retrenchment and therefore, will attract Section 25F or 25N, as the case may be. The latter will decide whether the compensation at the rate of 15 days' pay for every year of service and one month's notice (three months' notice in the case of companies coming under Chapter VB) or payment in lieu of notice will have to be paid or not. No such compensation is required to be paid if the service of the workers is not going to be interrupted due to such transfer and if the service conditions of workers of the old company are going to be the same or superior in the new company.

In the absence of an agreement either bilateral or settlement under Section 12(3) (which is always preferred), it will be treated as if there is retrenchment and payment of retrenchment compensation by either the old company or by the new company. That means, if you do the transfer by settling the dues of workers, paying their retrenchment compensation, etc., as on the date of transfer, without taking approval, things will lead to attracting penalty and punishment as per Section 25Q of the Act. Therefore, it is advisable to take permission and proceed. Moreover, if you decide to retain the service of the workers, it would be better if you have a settlement to this effect before the Conciliation Officer.

Regards,
Madhu.T.K