Bonus/Exgratia/other type of payments after Merger date
skg
(Querist) 10 October 2009
This query is : Resolved
Dear legal experts,
please give your valuable advice on "bonus/exgratia/other type of payments to employees of transferor company" issue on amalgamation and mergers of two companies having synergies in their businesses.
Facts : A sick company(transferor company) gets merged with a profit making company (transferee company) thru a scheme of amalgamation as per approval of MCA AND HIGH COURT ORDER AS PER PROCEDURES LAID DOWN DURING MERGERS.
The transferee company is getting several benefits worth crores under Income tax and sale tax heads due to this merger.
For employees of transferor company there is a clause which states that "due to this merger their benefits will not be less favorable then those they were getting before this merger".
The transferee company convert the salary structure of employees of transferor company as per salary structure of transferee company wef merger date.
Now at the time of releasing bonus/exgratia the transferee company did not give the same percentage of bonus/exgratia to employees of transferor company by saying that they were only entitled to that minimum bonus which they were getting before this merger and in this way this is not less favorable to them as per clause of amalgamation.
My question is on this very issue.
Since wef merger date employees of transferor company have become employee of transferee company why the employees of transferor company not entitled to that percentage of bonus (which as per definition do not constitute part of salary but is derived from profitability of companies).
If the merger permits the transferee company to enjoy benefits of several crores wef merger date then why after this merger date the employees of transferor company are treated differently from employees of transferee company.
Isn't this a discrimination between employees and hence can this merger be challenged by emoployee(s) of transferor company on grounds of this discrimination i.e. employees are given different bonus/exgratia percentages after merger date.
Broadly speaking my question in general will become :
Whether the quote in the clause "will not be less favorable to them after this merger" implies that in future also i.e. even after this merger date the employees of transferor company are not eligible for those benefits enjoyed by employees of transferee company and will be on mercy of management of transferee company and they will always remain employees of sick transferor company and accordingly the benefits of profits of transferee company will not be passed to them as passed on to existing employees of transferee comapany.
Whether the revival of sick company due to mergers is not the revival of its employees?
Please provide some case laws/judgements against this discrimination on Bonus/benefit to employees of transferor company after mergers.
Rgds
skg
Raj Kumar Makkad
(Expert) 11 October 2009
It is true may be a sad state of affairs for you that as per terms of merger, the transferee company is right and you are legally not entitled to demand more bonus which you were getting on the day of merger. Though crores of benefits have been taken by tranferee company but is it not liable to pay the employees of tranferror company more than agreed (though it may pay and there is no hurdle in this regard) so no right though I am agree that because transferee company is profitable company and it has given more bonus to its original employees than the newer one coming from transferror company so no discrimination should be made from the day of merger of two companies. Rather going for demerger, it shall be better if you make representation, then legal notice and then move before same High Court which decided earlier merger matter.
