(p-Chloroanilinium)₂CuCl₄(C₂H₁₄Cl₆CuN₂) is from an important family of organic–inorganic layered hybrid compounds which can be a possible candidate for multiferroicity. In situ high pressure FTIR, Raman and resistivity measurements on this compound indicate the weakening of Jahn–Teller distortion and the consequent removal of puckering of the CuCl₆^4- octahedra within the layer. These effects trigger insulator to semiconductor phase transition along with a change in the sample colour from yellow to dark red. This article explains the crucial role of the anisotropic volume reduction of the CuCl₆^4- octahedron (caused due to the quenching of Jahn–Teller distortion) in the observed insulator to semiconductor phase transition.