Contractual Staff Cannot Claim Permanency Under Amalgamation Scheme: Sikkim HC

The Sikkim High Court slammed the door on regularisation claims by fixed-term employees, ruling that benefits under a corporate amalgamation scheme are strictly reserved for those on the transferor company's rolls at the time of merger. The Bench clarified that voluntary transition to contractual roles with a parent entity prior to amalgamation forfeits any statutory right to be absorbed as permanent staff under the merger terms.

Chief Justice A. Muhamed Mustaque presided over the matter, examining whether former regular employees of a private entity who transitioned to fixed-tenure roles with a government undertaking could later claim permanent status following a formal scheme of amalgamation.

Key Takeaways

Amalgamation Benefits are Roll-Specific

Only individuals who are active employees of the transferor company on the effective date of amalgamation can invoke the protective clauses of the merger scheme.

Voluntary Contractual Transition Forfeits Prior Status

Employees who accept fixed-tenure appointments with a transferee company prior to a merger lose their standing to claim regularisation based on their historical service with the transferor unit.

NCLT Resolution Impact

Corporate restructuring via the Insolvency and Bankruptcy Code, 2016 alters employer-employee dynamics, and subsequent employment contracts supersede previous regular service conditions if the corporate identity changes.

Contractual Shift Prior to Merger

The Sikkim High Court observed that the petitioners, originally regular employees of Lanco Teesta Hydro Power Limited (LTHPL), had moved to the rolls of NHPC Limited on a fixed-tenure basis as early as 2019. This transition occurred after LTHPL became a subsidiary of NHPC following proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016.

Consequently, when the formal amalgamation scheme was approved in 2025 under the Companies Act, 2013, the petitioners were no longer employees of the transferor company (LTHPL). The Court emphasized that the protection offered by the Ministry of Corporate Affairs' order was contingent upon the employee's status at the time the scheme became effective.

The Sikkim High Court reasoned that "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. As noted above, the Petitioners were fixed tenure employees of the NHPC Limited from 2019 onwards. In that view of the above, no relief can be granted to the Writ Petitioners."

Ratio

A scheme of amalgamation that protects the service conditions of the transferor company's employees applies exclusively to those who maintain an employer-employee relationship with the transferor entity on the date the scheme becomes effective. An employee who has already transitioned to a fixed-tenure contract with the transferee company prior to the merger ceases to be on the rolls of the transferor and cannot retrospectively claim permanency under the amalgamation provisions.

Background

The dispute arose after M/s Lanco Teesta Hydro Power Limited (LTHPL) faced insolvency proceedings initiated by ICICI Bank. Following a resolution plan, LTHPL became a subsidiary of NHPC Limited in 2019. During this period, the petitioners accepted one-year fixed-tenure appointments with NHPC.

Later, in 2023, a joint petition for amalgamation was filed and subsequently approved by the Central Government, stipulating that all employees of LTHPL would become employees of NHPC. The petitioners filed a writ under Article 226 of the Constitution of India, seeking permanent absorption into NHPC by relying on this clause. However, the Sikkim High Court found that by accepting fixed-tenure roles in 2019, they had effectively severed their regular employment link with LTHPL, rendering them ineligible for the benefits of the 2025 amalgamation scheme.

Case Details:
Case No.: WP(C) No.30 of 2025
Case Title: Homnath Neopaney and Others vs. NHPC Limited and Others
Appearances:
For the Petitioner(s): Dr. (Mrs.) Doma T. Bhutia, Senior Advocate; Mr. Saurav Rai, Advocate; Mr. Sonam Topden Bhutia, Advocate
For the Respondent(s): Mr. Jorgay Namka, Senior Advocate (for R1); Mr. Lahang Limboo, Advocate (for R1); Ms. Sangita Pradhan, Deputy Solicitor General of India (for R2); Mr. Amit Kumar Sharma, Advocate (for R2); Ms. Pema Bhutia, Assistant Government Advocate (for R3)

Source: 2026 CaseBase(SIK) 65