Authority: High Court of Judicature at Madras

Order Date: 03-09-2026

Case Overview

  • The dispute involves eleven former employees of Henkel India Limited, a subsidiary of Henkel AG & Co KGaA, who were terminated on 01‑11‑2011 after the transfer of 50.9% shareholding to Jyothy Labs Limited and subsequent amalgamation.
  • The employees filed writ appeals under Clause 15 of the Letters Patent Act, invoking Section 41(2) of the Tamil Nadu Shops & Establishments Act (TNSE) for reinstatement, back wages, and later amended their prayer to seek severance compensation under Section 25FF of the Industrial Disputes Act, relying on settlements dated 28‑07‑2012 and 10‑08‑2012.
  • The Appellate Authority (Deputy Commissioner of Labour, Minimum Wages) initially awarded severance compensation calculated at 90 days’ salary per completed year of service with 12 % interest per annum.
  • A Single Judge later modified this award to 70 days’ salary and 6 % interest, citing an alleged prior agreement for 65 days’ salary.
  • Both the Management (Jyothy Labs) and the Employees filed intra‑court appeals challenging the Single Judge’s modification and the Appellate Authority’s original award respectively.
  • The Court examined extensive submissions on the applicability of the Industrial Disputes Act, the definition of “workman”, the doctrine of functional integrality, and the relevance of the Tamil Nadu amendment to Section 41(2‑B) (effective 01‑04‑2017, post‑dating the terminations).
  • The Court concluded that the employees, largely occupying managerial/designated positions, do not satisfy the statutory definition of “workman” under Section 2(s) of the Industrial Disputes Act, and that the doctrine of functional integrality was incorrectly applied.
  • Consequently, the Court found the earlier awards (both the Appellate Authority’s 90‑day award and the Single Judge’s 70‑day award) to be legally untenable.

Final Outcome

  • The orders of the Appellate Authority dated 16‑12‑2015 and the common order of the Single Judge dated 19‑07‑2023 (covering W.P. Nos. 8323‑8344 of 2016 and W.P. Nos. 30373, 30380 of 2018) are set aside.
  • The Court directs that severance compensation be fixed at 15 days’ salary for each completed year of service, with 9 % interest per annum from the date of termination until payment, as a gesture of goodwill and in line with Section 25F of the Industrial Disputes Act and Section 41(2‑B) of the TNSE Act.
  • Both the Management’s and the Employees’ writ appeals are disposed of without any order as to costs.
  • All connected miscellaneous petitions are closed.

Topics: Labour Law, Severance Compensation