The Sikkim High Court has ruled that employees who had ceased to be on the rolls of a transferor company before an amalgamation became effective cannot claim employment benefits under a clause providing for the continuation of the transferor company’s employees in the transferee company.
The bench of Chief Justice A. Muhamed Mustaque dismissed a writ petition filed by three employees seeking absorption as permanent employees of NHPC Limited following its amalgamation with Lanco Teesta Hydro Power Limited (LTHPL).
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The Court held that the employee-continuity provision contained in the amalgamation scheme could be invoked only by persons who were employees of LTHPL on the date the scheme became effective. The petitioners, having accepted fixed-tenure appointments with NHPC in 2019, could not subsequently seek permanent absorption based on the amalgamation completed in 2025.
The petitioners were initially recruited as regular employees of LTHPL and were subsequently granted promotions. They contended that they were entitled to permanent employment with NHPC following the amalgamation of LTHPL with the government-owned power company.
Reliance was placed on the Ministry of Corporate Affairs’ order dated January 2, 2025, approving the scheme of amalgamation. The order stipulated that, upon the scheme becoming effective, employees of LTHPL would be deemed to have become employees of the transferee company and would be entitled to all benefits for which they were eligible.
The High Court observed that the petitioners’ entitlement depended on whether they continued to be employees of LTHPL on the effective date of the amalgamation. If they were on the rolls of the transferor company at that time, they could have claimed the benefits available under the scheme, subject to its terms.
The Court, however, noted that insolvency proceedings had been initiated against LTHPL before the National Company Law Tribunal, Hyderabad, in 2019. The proceedings arose from an application filed by ICICI Bank Limited under Section 7 of the Insolvency and Bankruptcy Code, 2016.
Following the approval of the resolution plan, LTHPL became a subsidiary of NHPC with effect from October 9, 2019. Consequently, it also became a government company within the meaning of Section 2(45) of the Companies Act, 2013.
Thereafter, NHPC offered the petitioners employment on a fixed-tenure basis for one year with effect from December 26, 2019. The petitioners accepted those appointments and continued as NHPC employees.
While they were serving under NHPC, a joint confirmation petition was filed before the Central Government on October 9, 2023, proposing the amalgamation of LTHPL with NHPC. The proposal was ultimately approved, with the scheme protecting the continuity of employees of the transferor company.
The High Court found that the petitioners had ceased to be LTHPL employees much before the amalgamation took effect. Their fixed-tenure appointment letters demonstrated that, after the NCLT approved the resolution plan, they opted to become NHPC employees in 2019.
“Much before amalgamation, the Petitioners had ceased to be employees of the LTHPL,” the Court observed, adding that they had become fixed-tenure employees of NHPC immediately after approval of the resolution plan.
The Court clarified that an employee-continuity clause in an amalgamation scheme does not extend to persons who were no longer employed by the transferor company on the scheme’s effective date.
“The provision in the scheme relating to continuation of the employees of the transferor company cannot be invoked by persons who were not employees of the transferor company on the date on which the scheme became effective,” the Court held.
Since the petitioners had been working as fixed-tenure employees of NHPC from 2019 onwards, the Court concluded that no relief could be granted to them on the strength of the 2025 amalgamation order.
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