(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.