Lufthansa Employees’ Union Case: Supreme Court Rules Parent Company Not Liable for Subsidiary’s Retrenchment

The Supreme Court of India, in its judgment dated April 23, 2019, addressed a long-standing labor dispute between the Globe Ground India Employees Union and Lufthansa German Airlines. The case revolved around the closure of operations by Globe Ground India Pvt. Ltd., a company providing ground-handling services at various airports, and the termination of 106 employees. The employees’ union argued that Lufthansa German Airlines, being the parent company, should be held liable for the retrenchment. The Supreme Court, however, ruled that Lufthansa was neither a necessary nor a proper party in the dispute.

Background of the Case

The dispute began when the management of Globe Ground India Pvt. Ltd., a joint venture between Globe Ground Deutschland GmbH (a subsidiary of Lufthansa) and the Bird Group, decided to shut down operations on December 15, 2009. The termination of employees led to an industrial dispute, which was referred to the Industrial Tribunal-cum-Labour Court for adjudication by the Central Government on February 4, 2010. The reference question was:

“Whether the action of the Management of M/s Globe Ground India Private Ltd., New Delhi, a subsidiary of Lufthansa German Airlines (Carrier), in closing down their establishment on 15.12.2009 and retrenching the services of 106 workmen is justified and legal? To what reliefs are the workmen entitled?”

Arguments by the Employees’ Union

• The union argued that Lufthansa was effectively controlling Globe Ground India Pvt. Ltd. and was responsible for its closure.
• They claimed that another company, Bird Worldwide Flight Services Ltd., formed by the Bird Group in December 2008, took over the ground handling services using the same equipment and continued operations without the retrenched employees.
• They asserted that the retrenchment violated Sections 25-F, 25-G, 25-O, and 25-N of the Industrial Disputes Act, 1947.
• They demanded that the first respondent, Lufthansa German Airlines, should be held responsible for the reinstatement of retrenched workers with continuity of service and full wages.

Arguments by Lufthansa German Airlines

• Lufthansa contended that it was never the employer of the retrenched workers and had no direct involvement in the closure of Globe Ground India Pvt. Ltd.
• It argued that the notice of termination was issued solely by Globe Ground India, and the reference order by the government did not name Lufthansa as a party.
• The airline claimed that the Bird Group had independently formed another company, Bird Worldwide Flight Services Ltd., which was operating ground handling services post-closure.
• Relying on Section 10(4) of the Industrial Disputes Act, Lufthansa asserted that the Tribunal must confine its adjudication to the parties named in the reference.

Supreme Court’s Observations

• The Court noted that Lufthansa’s subsidiary, Globe Ground Deutschland GmbH, held a 51% stake in Globe Ground India Pvt. Ltd., with the remaining 49% owned by the Bird Group.
• The Bird Group later floated Bird Worldwide Flight Services Ltd., which took over ground handling operations.
• The Court observed that while corporate veil lifting is permissible in cases of fraud or wrongdoing, no such allegations were substantiated against Lufthansa.
• The Industrial Disputes Act mandates that a Tribunal can only adjudicate on matters and parties specifically mentioned in the reference.
• The Court ruled that merely being a majority shareholder in a subsidiary does not make a parent company responsible for its employment decisions.

Final Judgment

• The Supreme Court dismissed the appeals filed by the employees’ union.
• It held that Lufthansa was not a necessary or proper party in the industrial dispute.
• The Court upheld the decision of the Delhi High Court, which had earlier set aside the Industrial Tribunal’s order for impleading Lufthansa.
• The employees’ retrenchment dispute would remain between the union and Globe Ground India Pvt. Ltd.

Legal Implications

• The ruling reinforces the doctrine of corporate separateness, ensuring that parent companies are not automatically held liable for their subsidiaries’ actions.
• It clarifies the limitation imposed by Section 10(4) of the Industrial Disputes Act, restricting tribunals from expanding the scope of adjudication beyond the named parties.
• The decision sets a precedent for similar cases where employees seek to hold a foreign parent company accountable for actions taken by its Indian subsidiary.

Conclusion

The Supreme Court’s verdict underscores the importance of legal corporate structures and employment liabilities. The decision ensures that companies are held accountable within their corporate boundaries while protecting foreign investors from unwarranted liability in subsidiary matters. The ruling is a landmark for multinational corporations operating in India, reaffirming the principle that mere shareholding does not create an employer-employee relationship.

Petitioner Name: Globe Ground India Employees Union.
Respondent Name: Lufthansa German Airlines & Anr..
Judgment By: Justice R. Banumathi, Justice R. Subhash Reddy.
Place Of Incident: New Delhi.
Judgment Date: 23-04-2019.

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