The Lal Imli: The Closure Story of Giant Public Sector Company – A Branch of British India Corporation Limited

Introduction

Lal Imli, was established in the year 1872 in Kanpur, Uttar Pradesh, India, by five residents of Kanpur, and then the city was named as “Cawnpore”. Lal Imli was established as small mill for production of textiles and blanket. The company was registered with the name of “Woolen mill Cawnpore” having it’s headquarter at Kanpur. Lal Imli with the passage of time changed its name and nature of management several times. The name “Lal Imli” was given by the people of the Kanpur, because a huge tamarind tree was inside the premises of the mill which bore reddish tamarind. Management of the company established this mill seeing the future demand of the textiles for the defense forces after the First World War. It manufactured its famous woolen products popularly known as Lal Imli and Dhariwal, which were primarily being supplied for armed forces later on for civilians also in India. After independence the company was undertaken by the Government of India in 1981 and it has worked on a no profit no loss model since 1989. Prior to the nationalization the company was blooming in the country and it become a brand of textiles industry.

After nationalization the company start incurring losses and the production of Lal Imli ceased in the year 2005.The matter was referred to the BIFR (Board for Industrial and Financial Reconstruction)¹ on 31^st March 1991 under the provisions of Sick Industrial Companies Act, 1985 (SICA) and the company was declared as sick company. The BIC projected a loss of Rs.550.00 million in the year 2011 bearing a responsibility of approximately 2000 employees and required Rs. 3380 million costs for its revival. The Central and State Government took several steps for revival and rehabilitation of BIC on the basis of recommendations given by BIFR but nothing was helpful to boost its operation and finally, in 2017 the NITI Aayog recommended the closure of the company. The order for winding up was passed by Hon’ble High Court in Allahabad in 1999. Official liquidator was appointed and he submitted its report and physical possession was taken by the High Court in 2012 and 2013. The final note for the closure of the Lal Imli was prepared in the year 2022². The employees which were not retired were waiting for their payment of wages and still on fight. Employees of Lal Imli were fighting for their wages and finally an amount of 1000 million was passed by the Government in the budget for the year 2023³. In the year 2024 one more scam of Rs 2.5 million was came in to light. Several BIC officers were transferred and an enquiry was set up against them while the union leaders are demanding for a CBI enquiry⁴.

The Case study present the situation under which a giant public sector undertaking sunk down after nationalization. The strategies of the management of company adopted to cop up the situation and to save the company. The effort of government for revival of the company but nothing could prove fruitful and finally a company was still struggling for happy ending.

Indian economy prior to independence

Public sector enterprises had a key role to play in the economy of countries like India. The Indian economy was solely an agricultural economy prior to independence. When the industrial revolution started in England, a few glimpses were also envisaged in the Indian economy. However, this did not increase rapidly due to the British regime and its policy in India. When India got freedom and India got its own constitution, the government started a program for the welfare of the people and state policies were framed in order to achieve socio-economic justice for the people of the Country and as a result the Indian economy accelerated by introducing the public sector. Prior to independence the economy was seen as underdeveloped and at low per capita income. The reason behind it was the poverty spread all around the country. Agriculture and its products were the main sector of the economy. Source of livelihood of about 85% of the population of the country was dependent on agriculture. However, the contribution of the agriculture sector to the national income was only 50%. Mainly food crops such as wheat, rice, millets, sugar cane and cotton were sown to the land. India was producing 32% of groundnut, 41% of jute and 27% of rice out of the total production of the world. It was also the third largest producer of cotton after the USA and China. Under British rule there was no support for other professions like artisans and craftsmen. All of these were also dependent on agriculture for their livelihood. Prior to the period of British regime only few industries were working in certain area such as mining, and cotton textiles but they had high regional variation and lack of uniformity in production. These industries were providing employment to a small number of workers.

At the time of independence, a heavy push was given to Indian industries such as coffee and tea plantations and sugar mills. But in the second half of the nineteenth century, the use of machines for production came into existence and it created a competition in the market as the products made by machines were much cheaper and more finished than the handmade industry. Therefore, the use of Indian resources gradually reduced in the industries. Many finished products and raw materials for industries were imported from other countries even though they were amply available in the country.

The introduction of railway in 1957 provided an expansion to the industry as it provided easy, safe and fast means for transportation of goods and raw materials from one part of the country to another and therefore, regional concentration of industry was reduced. The railway had a high demand of coal in its early phase but it was imported from Britain rather than mine from India. But in the later years mining sector found a high growth in the country. There were 42 rail systems in India up to the period of 1947. The world war first proved to be a catalyst to the Indian industry. A new shape was seen in the cotton textile and jute industries up to the period of 1905. Major Cotton and textiles industries were set up in Maharashtra and Gujarat. Several other sectors of industries such as chemicals, cement, fertilizers, mineral acids, etc. also paced during the early decade of 20^th century. The opening of the Second World War gave a deep foundation to Indian Industrial history. Industrial products of large-scale industries were explored with certain diversification and consequently the general index of products of large-scale industry increased from 100 to 161.60. The employment in these industries also increased from an index of 100 to 159⁵.

After independence, the partition of India gave a negative thrust to the cotton and jute Industries. These industries required agriculture products as a raw material but the most areas producing this raw material were located in Pakistan and Bangladesh.

During the time of partition total 112 jute mills were operating in the country but due to partition around 85% of the total jute producing area were earmarked in eastern Pakistan (presently in Bangladesh). The cotton mills of the country also suffered with this situation as most of the cotton producing area became part of Pakistan (Sindh and western Punjab). Therefore, after independence the labor of these mills became unemployed and resultantly the poverty in new independent India prevailed in the country.

During the period of 1948-49 the secondary sector had contributed only 6.6% to the GDP. Employment was merely 18% of the total population (around 274 million in 1941 of which 60.2 percent were in the working age group of 15-59) in the secondary sector industries which were producing consumer goods. This was the base reason for the higher dependency on the imported goods particularly for capital goods. Government of independent India faced substantial trade deficit because of these factors.⁶

Historical background and establishment of lal imli

The province of Uttar Pradesh was divided in two parts namely Oudh and Doab before the period of 1857. The Kanpur city, being the center between these two provinces had its strategic importance of location. The river of Ganga was seamlessly flowing throughout the year and proving to be medium of transportation through medium sized boats. The Britishers realized the strategic and central importance of the Kanpur. A conference of senior army officers was held in 1859 at Bithoor in Kanpur. The recommendations were sent to the British government for making Kanpur a army station. Since the Army operations from Kanpur could be easily carried out in various directions. The military establishment of Britishers was come in the Kanpur. The climatic conditions of Kanpur were humid and suitable for textiles Industry and further during period of 1857 labor force was amply available in Kanpur and its adjoining cities. Textile was the basic needs for the Armed forces prior to the independence period. The British Diplomats realized that any global war may disrupt the supplies of textiles from Manchester and Liverpool further transportation cost was also very high. In the 1860 indication for switching over to the textiles industry in India was also given in British parliament.

Realizing the needs and future demand of textiles, the five residents of Kanpur namely, Mr. George Allen, Mr. W.F.Coopered, Mr. Garions Jones, Dr. Caoden and Mr. Bewan Betman jointly established a Small factory for production of woolen blanket and named it “Woolen Mill Cawnpore” in the year 1876. This name of the company continued till 1882, thereafter the first Companies Act was introduced in India. In order to avail the benefit of provisions of the Companies Act, the management of the company converted it into a public company. The name of the company was changed and it was registered as “The Cawnpore Woolen Mills Army Clothes Manufacturing Co. Ltd. a name which continued until 1914. In 1912 a building reconstruction was done and the small factory was converted into a huge manufacturing plant. During 1914 to 1918 the plant was run in order to fulfill the demands made by the government.

In 1920 the Kanpur woolen mills became the branch of the British India Corporation which was registered as limited company on 24 February 1920 by Sir Alexender McRobert⁷ who combined its six companies into one so that they could be managed by a single board of directors. The company became the branch of British India Corporation (BIC) in the year 1920. At first it started with only 250 workers but before the Second World War it was working with about 2000 employees and till March 1947 its manpower strength crossed 4000 employees. As gradually the demand of British and Indian Army increased the plant to its present strength and structure and a new branch of Lal Imli was established at Gurudashpur district in Punjab namely “New Egerton Woolen Mills of Punjab” popularly known as (Dhariwal)⁸.

The management of the BIC was in the hands of Sir Alexender McRobert till the year 1955 and thereafter under Mr. Robert. However, in 1957 majority shares of Lal imli were purchased by Sri Haridash Mundra and then management came into his hands. In 1960, a “Mundra Scam” came into limelight and he was imprisoned.⁹This is how the management of the BIC again reverted back to the Board of directors appointed by the shareholders in1962.

The Indian government issued a notification on 11 June 1981 and nationalized the BIC and the company became a Central Government company.¹⁰ The BIC since 1981 started sustaining loss year by year and till 1995 the loss was approximately of Rs 2578.5 million, which was only Rs 196.2 million in 1981.¹¹This was a tragic situation for the government to shoulder this responsibility while various other competitors of BIC were gaining outstanding profit. The BIC was continuously facing labor management disputes regarding wages and workload in spite of all the efforts made by the government to make them smooth and harmonious, the company could not sustain for a long time and this adversely affected its health and the government decided to close down the BIC.

Manpower in lal imli

The Company was the first textile industry established in India. Prior to the establishment of this company, there was no organised industry to supply the needs of textiles, and demands of textiles were satisfied either by imports from other countries or from local unorganized small textile production the country, and only hand-woven textiles were available to the public. The main strength of any organization is its manpower, which keeps its wheels running by producing quality products. The company started with 250 workers and increased its strength up to 2000 workers before the Second World War, and this figure reached 4,000 workers by 1943. Until 2005 around 8,000 workers were working in Lal Imli. During the Rajya Sabha debate in 2008 it came to light that a voluntary separation scheme was offered to the workers of Lal Imli, and 6,260 workers opted for this scheme, and they were paid their dues. In 2008 about 1,334 workers were working with Lal Imli.¹²

Product positioning of lal imli

The Lal Imli is the only composite woolen mill in Kanpur, Uttar Pradesh, with the latest technology and machines of his time. The company had a monopoly in the textile market at the time. The mill was producing woolen / blended suits, serge-battle dresses, uniform cloths and shirting as per specifications of the Armed Forces and Police, & DGS &D, etc. and lohis, shawls, tweeds, blazers, rugs, and blankets both for the civil and the armed forces / Police / DGS&D and civil markets. Its product is in high demand and in popularity among the armed forces and civilians. It’s product name, Lohi no 60 is a premiere woolen blanket and a high priority in upper middle class. It was said that no marriage can be celebrated in eastern UP and Bengal, without Lohi number 60. It was said that its product blanket and Lohi number 60 were of such a high quality that after using them people started sweating even in freezing cold. Its product was in high demand not only in India but also in England, America, Russia and Germany.

Wage structure in lal imli

Wage structure of the Lal Imli mills was based on the minimum wages prescribed by the government by notification issued under the Industrial Disputes Act, 1947 and Minimum Wages Act 1948.¹³ A high cost allowance was also admissible to the clerical staff which ranged from Rs 7.50 to Rs 25.00 per month based on their basic salary. Lal Imli was paying house rent allowance of 15% per month, which was increased for higher categories.(See Appendix 1) The company also provided incentive schemes for their staff when the company required higher production. The company always paid attention to job satisfaction to maintain a healthy labor-management relationship.

Workers welfare activities at lal imli kanpur

The welfare activities for workers were adopted by the British promoters from their inception at the Mills. Later on, the provision related to labor welfare was provided under The Factories Act, 1948.¹⁴ In compliance with section 42 of the 1948 Act, adequate washing and cleaning facilities were established in the factory separately for male and female workers and it was always kept accessible and clean. Storing, washing, and dying of clothing were not available to the workers regularly; these facilities were only arranged in cases of emergency in company. In compliance with section 44 of the 1948 Act, the facilities for sitting were arranged for the workers who were required to work in sitting position. In compliance with section 45 of the 1948 Act, the first aid facility in the company was also made available. There were two medical centers that were operated by the company, one at labor colony and other inside the mill.

There was no provision for free medicines to the workers and staff. The workers were referred to the ESIC. Only compounders and nurses were appointed in medical unit and doctors were appointed on part time basis in the company. In compliance with section 46 of the Act, the facility for canteen was there in the premises and tea was offered twice to the workers during working hours free of cost. However, food was available at the prescribed rate in the canteen for workers. The Lal Imli did not provide separate shelter, restroom or lunch room facilities in their place, only sheds were provided to the workers. They had to eat lunch either in their respective departments or in the canteen. If the employees complained about the quality of the food there was provision for action to be taken by the welfare officers. Apart from these mandatory provisions, the company encouraged sports which focused mainly on cricket. The company used to send its team for many events organized in Uttar Pradesh all the expenses were covered by the company and an allowance of Rs. 30/- per day was given to the player for each day during the period for the workers were involved in sports activities.

The selection of the team was done by a committee headed by welfare officers. The company made a provision for imparting workers education and organized various training and skill development programs for its workers in order to make them future ready. The Company always arranged for festival celebrations, and the money was arranged by the workers for each festival on the premises of the company. The company also established a welfare fund for the employees’ emergency needs. The supervision of this fund was done by the management of the company. Only a confirmed employee could become a member of this society and a deduction of Rs. 50 was made from their salary. After paying the six installments the member was eligible to take loan from the fund. However, the welfare fund facility was not running properly because the dues of the society were not paid by the management.

The company took insurance policy for each worker and the amount of premium was deducted from the workers’ salary. On the death of the worker the insurance amount was given to the family of the worker. This insurance amount was revised from time to time as Rs. 10.5/- thousand during the year 1982 to 1989 and later on it was Rs. 35 thousand from 1993 onwards. After 1992 the company did not pay the premium to the Life Insurance Company and this made dissatisfaction among the worker. The company started a school for the children of its employees up to class VIII standard. The strength of the students in the school run by the company for the child of the workers is around five hundred and it had only 10 teachers. The Lal Imli spent enough money for their welfare activities as it increased yearly (See Appendix 2).

Labor management relation in lal imli

Labor and management are the key parts of any industrial unit. The healthy and conducive relationship between them paves the way for the growth of industrial units and increases wealth management for any organization. Many of the time, several other external factors affect the relationship between management and labor, and these situations are completely out of the control of the management of the company. Lal Imli was situated in Kanpur, and this city was the centre of the national movement for freedom. A great national revolutionary, the late Ganesh Shankar Vidhyarthy, was heading the movement in Kanpur. The workers of Lal Imli were participating in the fight for freedom, and they participated in several movements, such as the Ashahyog andolan led by Gandhi Ji, and many other leaders. In 1942, a large number of Lal Imli workers were put behind bars, and in this way political turmoil started in Lal Imli. After independence, a democratic form of government was set up in the country, where the leaders knew the power to vote and found labor to be an active part of the community. Therefore, the concept of trade unions came into existence. Local issues were always key factors in strikes and lockouts in Lal Imli and these issues were supported by political parties. The local issues were confined to wage hikes, payment of bonuses, working conditions and holidays. The wage structure of Lal Imli had been revised by U.P. Government in Lal Imli and other textile mills.

Shri Raj Mangal Pandey, the then labour minister, awarded on an ad hoc basis an increase in the textiles industry in 1972, but the same was disputed by the management of the companies. The management of Lal Imli filed a writ petition before the Hon’ble High Court at Allahabad, The British India Corporation Ltd. Vs. The Presiding Officer, Industrial Tribunal ¹⁵challenging the award that was decided in 1988 and the High Court rejected the petition of the management of the companies. The most contentious local issue was the demand for bonuses at a high rate in Lal Imli. Workers were demanding payment of a bonus at the rate of 15%; however, they were entitled to only 8.33%. There was a strike staged by the labor unions. The management took strong action, and more than 150 union leaders were arrested from the mills, and the situation became normal within 48 hours. This action gave Lal Imli peace for more than 10 years; however, the management voluntarily paid the additional bonus of 1.67% for the year 1970.¹⁶

Industrial relation

Until 1957 British promoters had full control over this unit, and industrial relations became very smooth, but after independence, industrial relation could be attributed only to fair wages, satisfactory working conditions and welfare activities. When the government acquired 39% in BIC, dual management started and industrial relations were adversely affected. There were more than 47 small and big labor unions in the BIC and each union had not a clear-cut vision or centralized policy. They used to go on strike for trivial issues. Some of them were AITUC, CITU, INTUC, HMS and BMS. The multi-union system in Lal Imli worked both ways and finally caused great harm to the company. In the year 1971, there was strike for a demand of 15% bonus in place of 8.33%, and agitation took a violent turn. The administration arrested 100 workers and union leaders. The post nationalization of the company in the year 1981, strikes and lockouts became more frequent which affected the production of the company severally and the company started sustaining losses year by year (kindly refer Appendix 3).

Winding up and rehabilitation measures for lal imli

The Company was sustaining continuous losses since nationalization in 1981. The situation at the mill was such that it was continually sustaining losses running into about 258 Cr. Approximately up to 1995-96, with capacity utilization between 15 to 20 percent. In the year 1986-87 the Central government spent about Rs 20 Cr. on the modernization of certain sections of the mill, and several latest machines were brought and installed in the mill. But due to lack of management support, absence of policy regarding fixed work load for labor and also due to the engagement of one labor in several machines, the job satisfaction of the labor and became the cause of protest. The training program for employees was also not conducted which adversely affected their strength and production. It became necessary to consider the economic viability of the firm. The company was referred to BIFR in 1991 and was declared sick in 1992. The Government approved revival schemes in 2001, 2005 and 2011 at the cost of Rs. 20.11 million Rs. 4.73 million and 33.80 million respectively. The Government of India gave Rs.3.7 million as an interest free loan, apart from waiving off old interest and converting unsecured loan into equity as part of the rehabilitation program.

The corporations had paid the entire outstanding amount except the interest of Rs. 1.15 Million on the loan from SBI. During the implementation period of the rehabilitation program in the year 2004-2005, the production was increased to 3.4 Kg of yarn and 1.22 million meters of cloth valued at Rs 271.40 million which was much more than the production during the last year 2003-04. This did not prove to be successful, as permission for the conversion of land was not granted by the State government, due to which fund generation for working capital could not be done. Finally, in 2017 the NITI Aayog recommended the closure of the company. The winding up petition was filed before the Hon’ble High Court in Allahabad. The order for winding up was passed, and a liquidator was appointed in 1999. A voluntary retirement scheme was launched for the employees in 2001 and all the employees of mill except 47employees chose VRS. However, the remaining 47, including school employees were paid by BICL from July 2011 to October 2014. On the basis of the report submitted by the official liquidator, the high court took physical possession of the assets of the company in 2012 and 2013. After disposal of the assets, the official liquidator paid all the dues of the company.¹⁷ The final note for the closure of the Lal Imli was prepared in the year 2022¹⁸. The employees which were not retired were waiting for their payment of wages and still on fight. Employees of Lal Imli were fighting for their wages and finally an amount of 1000 million was passed by the Government in the budget for the year 2023¹⁹. In the year 2024 one more scam of Rs 2.5 million was came in to light. Several BIC officers were transferred and an enquiry was set up against them while the union leaders are demanding for a CBI enquiry²⁰.

This is how Lal Imli, a name synonymous of love and trust for the people, not only of central India but also eastern India, that served the public for more than 100 years with trust in quality and fashion of its time was eloped and become a history for the people. It not only bring glory to it and its people of the Kanpur but because of it the city of Kanpur was also known as “Manchester of the East”. The remaining workers in Lal Imly were still on fight for their wages and facing a misfortune. Although there are several changes had been introduced in the Company Law from time to time but still after a certain period of time a pain full story strike in mind of the people raising a question that how this company is waiting for its happy ending till date.

Appendix-1

Figure 1 - Building Structure of Lal Imli

Source: https://www.architectandinteriorsindia.com/projects/light-up-the-legacy-of-lal-imli-mills-heritage-in-kanpur

Appendix-2

Figure 2- Buliding structure of Lal Imli

Source: https://heritagehackathon.weebly.com/lal-imli-mills.html

Appendix-3

Wage Structure admissible in Lal Imli for the Workers.

Source: Annual Reports of BIC from Office at Kanpur.

Appendix-4

The Amount expended on well fare activities by the Lal Imli.

Source: Annual Reports of BIC from Office at Kanpur. (* Data not available for the year)

Appendix 5

Post nationalization losses of the Lal Imli

Source: Annual report of BIC at its office Kanpur. (* Data not available for the year)

Footnotes

1. BIFR was established under the Sick Industrial Companies Act, 1985 for the reconstruction of sick or potentially sick companies which has now been abolished as the Act has been repealed.

2. “News 18, Uttar Pradesh” Hindi dainik samachar, Kanpur, Dated 18 Aug. 2022. Available on https://hindi.news18.com/news/uttar-pradesh/kanpur-kanpur-now-lal-imli-will-become-history-soon-public-industries-department-has-prepared-cabinet-note-4479096.html

3. “News Uttar Pradesh” Hindi dainik samachar, Kanpur, Dated 06 feb. 2023. Available on https://hindi.news18.com/news/uttar-pradesh/kanpur-kanpur-news-lal-imli-workers-now-get-their-salary-after-40-month-protest-budget-2023-24-5341727.html

4. “Amar Ujala” Hindi dainik samachar, Kanpur, Dated 23 July 2024. Available on https://www.amarujala.com/uttar-pradesh/kanpur/change-in-the-work-area-of-officers-in-lal-imli-one-resigned-bic-officers-are-coming-next-week-2024-07-13

5. Ananymous, Indian econmy at the time of independence, available at https://egyankosh.ac.in/bitstream/12345678 9/74691/1/Unit-1.pdf,

6. Ibid.

7. Miller, Marion (2014), Cawnpore to Cromar, Librario, ISBN 978-1-909238-09-1.

8. Kapur Shalini, 1998, Labor management relations in public sector undertakings: A case study of Lal IMLI Kanpur BIC Group/ Phd.D. thesis Submitted in Department of Commerce, C.S.J.M.U. Kanpur, Available athttp://hdl.handle.net/10603/260593

9. Ibid,1

10. Availble on, http://texmin.nic.in/note_on_bic_ntc_section.pdf retrieved on 15.07.2024

11. This historical data is collected from the office of the BIC Kanpur.

12. https://rsdebate.nic.in/bitstream/123456789/283484/1/PQ_217_15072009_U1325_p217_p218.pdf retrived on 26.07.2024.

13. An Act no.11 of 1948

14. An Act No. 63 of 1948.

15. (1989) IILLJ 319 ALL.

16. Fri, A.A.B.U. and By:, A.A. (2020) कड़ाके की ठंड में पसीना छुड़ा देता था लाल इमली का वूलन क्लॉथ, इंग्लैंड-अमेरिका-रूस और जर्मनी तक थी मांग - Lalimli mill history kanpur woolen cloth of Lal Imli Mill was demand in USA UK Russia and Germany Jagran Special, Jagran. Available at: https://www.jagran.com/uttar-pradesh/kanpur-city-lalimli-mill-history-kanpur-woolen-cloth-of-lal-imli-mill-was-demand-in-usa-uk-russia-and-germany-jagran-special-20652786.html (Accessed: 24 May 2026).

17. Matter was take from the Question raised in Lok Sabha from the minister of textiles available on https://sansad.in/getFile/loksabhaquestions/annex/172/AU3186.pdf?source=pqals retrieved on 27.07.2024.

18. “News 18, Uttar Pradesh” Hindi dainik samachar, Kanpur, Dated 18 Aug. 2022. Available on https://hindi.news18.com/news/uttar-pradesh/kanpur-kanpur-now-lal-imli-will-become-history-soon-public-industries-department-has-prepared-cabinet-note-4479096.html

19. “News Uttar Pradesh” Hindi dainik samachar, Kanpur, Dated 06 feb. 2023. Available on https://hindi.news18.com/news/uttar-pradesh/kanpur-kanpur-news-lal-imli-workers-now-get-their-salary-after-40-month-protest-budget-2023-24-5341727.html

20. “Amar Ujala” Hindi dainik samachar, Kanpur, Dated 23 July 2024. Available on https://www.amarujala.com/uttar-pradesh/kanpur/change-in-the-work-area-of-officers-in-lal-imli-one-resigned-bic-officers-are-coming-next-week-2024-07-13