MSME Briefing Bureau

Seven years of worker ownership became a lesson in capital’s power gap

When workers took control, they proved ownership was possible. Then they learnt what ownership alone could not solve.

In 1988, India’s Supreme Court-backed rehabilitation scheme placed Kamani Tubes in the hands of its 600 workers. They formed a cooperative, ran the manufacturer for seven years, stabilised production and fought to preserve jobs. But the experiment hit a wall: heavy manufacturing needs capital, creditor confidence and risk-taking. By 1995, BIFR declared the scheme failed. What matters is what workers did next: they recognised the limit, invited outside entrepreneurship and fought to protect their dues.

From family feud to worker ownership

Kamani Tubes was established in 1960 by the Kamani Group, making non-ferrous copper and brass tubes for engineering, electrical and refrigeration industries.

By the mid-1970s, family disputes and mismanagement had badly damaged the business. Losses exceeded ₹4 crore, while unpaid wages reached ₹2 crore by 1985. The owners abandoned the unit.

The Kamani Employees Union (KEU) refused liquidation.

In 1987, the Bombay High Court’s judgment in Kamani Tubes Ltd. vs. Kamani Employees Union established an important principle: financial distress did not erase the employer’s statutory liability to workers. The union then approached the Supreme Court with an extraordinary proposition—workers could help finance an equity takeover through provident-fund contributions and institutional loans.

In September 1988, BIFR approved the rehabilitation scheme. The workers formed KTL Kamgar Audyogik Utpadak Sahakari Society Limited, took management control and received 91.6% equity, valued at ₹96 lakh face value, previously held by the Kamani family. IDBI became the monitoring agency, while the state government sanctioned additional support.

It was an experiment in employee ownership.

Seven years that mattered

From 1988 to 1995, the workers ran the enterprise.

The story is often reduced to a failed cooperative. But the workers proved they could operate the business; they could not overcome its structural capital requirements.

Three problems became decisive.

Capital starvation. Copper-tube manufacturing consumes working capital—raw materials, furnace oil, power and modernisation. A cooperative built around 600 workers could not finance these demands from limited PF and wage contributions. Banks were reluctant to extend fresh credit.

Governance fractures. Once the common adversary—the Kamani family—disappeared, internal differences surfaced. Leadership contests and slower decision-making weakened operational discipline.

Debt overhang. By 1995, liabilities had grown to about ₹116 crore, with roughly 140–170 court cases involving banks, financial institutions and creditors. The cooperative lacked the machinery to restructure the legacy burden.

In May 1995, BIFR declared the scheme failed. By 1997, power to the Kurla plant had been cut and wage arrears had returned.

The cooperative had reached its economic ceiling.

The courageous decision: bring in an outsider

Facing liquidation, the union made its most important decision.

It stopped treating outside capital as the enemy.

Around 2000–2005, KEU sought an experienced entrepreneur. The workers approached Kalpana Saroj, a Mumbai entrepreneur.

Saroj was initially reluctant. Potential bidders had reportedly walked away. The union persisted.

She assembled a team and prepared a revival plan for BIFR and creditor banks. Between 2000 and 2006, she negotiated with banks, courts and government agencies, taking operational charge before formal approval.

This was worker pragmatism, not abandonment.

Four moves changed the game

Saroj’s turnaround rested on four moves.

1. Legal de-risking. She worked through the maze of 140–170 pending cases, reducing litigation and clearing the path for revival.

2. Debt restructuring. Through negotiations with creditor banks and government agencies, penalties and interest were written off and principal was reduced by 24%, substantially lowering the effective burden.

3. Relocation. Core manufacturing was shifted from the encumbered Kurla property to a greenfield facility at Wada, owned by Saroj. The move separated the operating business from the legacy asset problems.

4. Working capital and professional management. Saroj put in personal capital—including money raised by selling a property in Kalyan—restored raw-material credit, settled statutory dues and imposed professional management.

BIFR approved the revival scheme in 2006. Commercial production restarted in 2009–10. The company exited SICA in 2011 and returned to profitability.

What workers gave up—and what they protected

The revival required change.

The original cooperative ownership structure could not remain intact while attracting the capital and credibility needed to satisfy lenders and rebuild the business. Collective worker ownership gave way to private ownership under Saroj’s leadership.

Worker interests were not simply discarded.

Legacy unpaid salaries and provident-fund dues were prioritised and settled. Workers reportedly received ₹2.5–5 lakh each in arrears settlement, along with an additional goodwill amount.

The workers did not preserve voting control at any cost. They preserved economic claims, dignity and jobs.

The real lesson is not “workers failed”

Kamani Tubes offers a more useful lesson than a hero-versus-failure narrative.

The workers used the law to obtain control, ran the enterprise for seven years, discovered their capital limits and invited professional entrepreneurship.

It is institutional learning, not ideological surrender.

For founders: ownership without capital, governance and financial discipline is fragile.

For employees: ownership brings responsibility for capital, risk, markets and governance.

For unions: protecting workers does not always mean protecting worker control.

Sometimes, the smarter victory is to give up control so the enterprise and workers’ interests can survive.

Kamani Tubes leaves a powerful question for every business owner and workforce:

When survival demands a change in ownership, can you put the future of the enterprise above the pride of control?

Perhaps that is ownership at its hardest.

That makes the case relevant today. Ownership is a tool, not an identity. The question is whether the ownership structure gives the enterprise capital, capability and accountability to survive, compete and sustain jobs over time.

Read the full case at MSMEBriefing.com.

Sources & credits

Supreme Court / Bombay High Court, Kamani Tubes Ltd. vs. Kamani Employees Union (1987); ILO, What Works for Workers’ Cooperatives?; Kamani Tubes / IndiaMART; The Weekend Leader, “Anything Is Possible”; Open Magazine, “She Who Broke Two Glass Ceilings” (2014); Business Standard, “A Revolution That Went Wrong” (2013); Kamani Tubes official website.