CHAPTER-III

INDUSTRIAL DISPUTES: METHODS AND

MACHINERY FOR THEIR SETTLEMENT
 CHAPTER-III
INDUSTRIAL DISPUTES: METHODS AND MACHINERY
FOR THEIR SETTLEMENT

3.1 Introduction

This Chapter deals with the concept of ‘Industrial dispute’. The definition of

the concept as given in the I.D. Act is discussed in detail. This discussion provides an

understanding as to the inherent nature of industrial disputes in employment

relationship and the need to settle them in a manner agreeable to the parties to the

dispute and the society in general. The discussion of the concept of industrial dispute

is so designed as to get an appreciation regarding the applicability of a particular

method of settlement to a particular type of dispute. For example, the method of

compulsory adjudication is generally considered as more appropriate and effective in

resolving “rights disputes” rather than “interests dispute”.

The various methods of settlement of industrial disputes, as are available and

used in varying degree, are discussed to the extent felt necessary. With a view to

utilizing these techniques of settlement, the I.D.Act provides different types of

settlement machinery aimed at preventing, wherever possible, investigating and

settling of the disputes. Therefore, further discussion in this Chapter concentrates on

these provisions. The discussion also deals with the effectiveness of the machinery in

helping peaceful resolution of disputes in the light of their working in the country

during the last five and half decades. Since the main theme of the thesis is critical

study of adjudication of industrial disputes, the functional nexus among the various
 83

methods of settlement and the correlation of adjudication with other methods is

emphasized.

3.2 Concept of industrial disputes

Disputes are characteristic of society and more so in an industrial society. The

conflict between the capital and labour is inherent in an industrial organization. The

disputes that arise from this basic conflict of interests, it is commonly agreed, can

only be adjusted temporarily but cannot altogether be eliminated. The inherent

inequality of employment relationship which places more power in the hands of

employers, the question of distribution of the social product, which is the outcome of

the common effort of employers and workmen, the issue of job security which is vital

to an employee, the constant urge of the workmen who are generally on the lower

ladders of society to improve their standards of living, the employers natural

inclination to retain a larger portion of the surplus and the growth of the trade union

movement which articulate the demands of the workmen are some of the important

factors that give rise to disputes in any industrial organization.

The industrial disputes are, therefore, the disputes that arise between an

employer or an employers organization on one side and the workmen or trade unions

of workmen on the other, on matters relating to employer-employee relationship, i.e.,

on the formulation and enforcement of standards of wages and other conditions of

employment.
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The divergence of interests between labour and capital is at the root of the

industrial or labour disputes. Kahn Freund emphasized the reality of this divergency

when he observed:

“Any approach to the relation between the management and labour is fruit less

unless the divergency of their interests is plainly recognized and articulated. This is

true of any type of society one can think of and certainly of a communist as much as

of a capitalist society. There must always be some one who seek to increase the rate

of investment.”1

Mr. Justice Higgins, the principal founding father of the Australian system of

arbitration and conciliation, said that “ the war between the profit maker and the wage

earner is always with us; i.e., the war between those who argue for more investment

and those who argue for a maintained or improved standard of living now.”2

The capital and labour are the two sides of industry, both having their own

interests. The one interest they have in common is that the inevitable, and sometimes

necessary, conflicts should be regulated from time to time by available procedures

recognized by both the parties. “ It is however a sheer utopia to postulate a common

interest in the substance of labour relations.”3

The fundamental character of industrial disputes as a distinct phenomenon of

modem industrial society is that such disputes are not simply a claim to share the

1 Kahn Freund, Labour Relations and the Law (1983) (3rd ed.) (London, Stevens), pp. 26-27.
2 Ibid., p.27.
3 Ibid., p.28.
 85

material wealth jointly produced and capable of registration in statistics. At heart, they

are a struggle, constantly becoming more intense on the part of the employed group,

engaged in co-operation in rendering services to the community, for a higher general

human welfare, to share in that welfare in a greater degree.4

Analysing how the conflicts between employers and workmen led to

organization on both sides, Kahn Freund observed:

“Thus on the employers as well as on workers’ side the formation of

organized groups may be the outcome of the conflict itself. In labour management

relations conflict is very much father of all things.”5

3.2.1 Types of Disputes

Before proceeding to discuss how the concept of “ industrial dispute” is

defined under the I.D.Act, it is particularly relevant, from the point of view of

examining the suitability of settlement procedures, to distinguish between different

types of industrial disputes. Highlighting the distinctions in different countries, the

ILO Publication reported:

“In a number of countries national law or practice distinguishes between

different types of labour dispute for the purpose of applying different procedures of

settlement. Two main distinctions have been developed: the first is based on the

number of persons involved in the dispute, which determines individual or collective

4 Justice Issac, Quoted by Justice Krishna Iyer in Bangalore Water Supply and Sewarage Board v.
A. Rajappa, (1978) Lab. I. C. 467 (S.C.).
5 Kahn Freund, Selected Writings, (1978), Modem Law Review, p.43.
 86

character; the second on differences in the nature of issues involved; essentially the

difference between issues regarding the application or interpretation of existing rights

and those regarding the establishment of new rights (in which case the distinction

between rights and interests disputes.) In some countries disputes regarding trade

union rights constitute a separate category, dealt with by distinct procedures.”6

3.2.2 Individual and collective Disputes

In general, a dispute is individual, if involve a single worker, or a number of

workers in their individual capacities or in relation to their individual contracts of

employment. For example, disputes relating to discharge, dismissal, retrenchment or

termination of an individual workman and also disputes relating to other service

conditions of individual workman such as promotion, seniority, entitlement to wages

and other allowance, increments, transfer, suspension, retirement benefits, etc., are

considered as individual disputes. It may be noted that all such individual disputes

under this distinction are “rights” or “legal” disputes. They involve legal questions

like the application and enforcement of existing rights under the contract of

employment or law, as stated in the legislative enactments or binding court decisions.

On the other hand, a collective dispute is a dispute involving a number of

workmen, whether or not the said workmen are organized in trade unions. Collective

disputes are disputes that affect the workmen as a class, involving their rights or

interests. The community of interest of the class of workers as a whole distinguishes

6ILO Office, “Conciliation and Arbitration Procedures in Labour Disputes, A Comparative Study",
(Geneva, 1980), p.137.
 87

the collective dispute from an individual dispute. The word “collective “ in the phrase

“ collective bargaining” originally reflected the plurality of workmen involved. By far

the most important industrial disputes, which if not resolved peacefully might result in

work stoppages, are the collective disputes. The disputes relating to wages, bonus,

other allowances, working hours, disciplinary procedure and other general conditions

of employment are by nature collective disputes. Collective disputes may be “rights

disputes”, as for example when they involve the interpretation or enforcement of the

terms of collective agreement or of award or law, or “ interests disputes”, which arise

from the demands of workmen for modification of existing rights.

It may be noted that the steps leading to the distinction between individual and

collective disputes were taken in France, when the Act of 1806, at a time when trade

unionism was still at an early stage of development, established “ probiviral” courts to

settle differences in relation to a contract of employment, i.e., individual disputes,

although new dispute settlement procedures were later on designed for disputes which

were generally initiated by trade unions and necessarily collective in nature. The

French Labour Code (Overseas Territories) 1952 introduced in many former French

territories the distinction between individual and collective disputes and provided for
n
the establishment of Labour courts to hear individual disputes.

Although the I.D.Act in India has not made distinction, the Courts, while

interpreting the definition of “industrial dispute”, did bring out such a distinction; of

course for a different purpose. They held that individual disputes would not per se be

1 Ibid., p. 137.
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industrial disputes, unless, a trade union or a considerable number of co-workmen

espouse the cause of the individual workman.8 Thus, the courts recognized only

collective disputes as industrial disputes for the purpose of the I.D.Act. This

interpretation led to an amendment of the Act, which recognized individual disputes

relating to discharge, dismissal, retrenchment or termination of an individual

workman as industrial disputes, without such espousal.

3.2.3 Rights and Interest Disputes

Depending upon the nature of issues involved, the industrial disputes are

categorized as “rights disputes “ or “interests disputes”. The right disputes which are

also known as “legal disputes”, involve issues relating to existing rights of workmen

under the existing contract of employment or any other norms having the force of law,

such as settlements, awards, court decisions or legislation. “These disputes originate

in complaints about an alleged violation of agreed standards by member of the

opposite group, in the differences regarding the meaning or interpretation of these

standards, in the application of those standards to concrete cases, e.g ., in American it

is called a ‘grievance dispute’ in connection with seniority of employment or with

dismissals or other disciplinary measures.”9 In America the rights disputes are also

called as “contractual disputes”, meaning thereby that they relate to the existing

contract.

8 Central Provinces Transport Services Ltd, v. Raghunath Gopal Patwardhan, (1957) I. L.L.J. 27
(S.C.).
9 Kahn Freund, supra note-5, p.55.
 89

On the other hand, disputes concerned with the variation of existing standards

so as to lay down new and better standards are called “interests disputes”. These

disputes arise when the workmen of trade unions put forward their demands for a

wage increase or increase in other allowances, extra bonus, a pension fund, etc. and

the employer has denied to concede these demands. These disputes are so called

because the workers have no right to such demands under the existing contract of

employment or other legal norms, but they only have an interest in them. In the

U.S.A. these disputes are also known as “economic disputes” or “terminal disputes”

(arising upon the termination of the contract of employment).

It may be recalled that all individual disputes are by nature “rights disputes”

and collective disputes may be either rights disputes or interests disputes. And all

interests disputes are essentially collective disputes.

It was observed earlier that in a number of countries, national law or practice

distinguishes between these types of dispute for the purpose of applying different

methods of settlement. In many countries where this distinction is maintained, the

rights disputes are invariably decided by institutions like Labour Courts or by private

arbitration, after failure of mutual negotiations.

It is of interest to note that in Britain and some countries following the British

tradition, no distinction has been made between different types of labour dispute, such

as rights and interests disputes. The reasons are peculiar to the collective bargaining

tradition and the nature of collective bargaining agreements in Britain. Collective bar

gaining agreements have never been considered in Britain as laying down legally
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enforceable standards. The traditional approach of British workers and unions towards

law and courts, in whom they had the least thrust, was responsible for this peculiar

situation. Even the change introduced by the Industrial Relations Act, 1971, which

was repealed in 1974, treating collective bargaining agreements as legally enforceable

was resisted by union by inserting a clause in the collective bargaining agreements

that they do not intend to create legal relations by the agreements. Commenting on the

absence of such distinction in Britain, Kahn Freund observed:

“In Great Britain the distinction between conflict of right and conflict of

interests is to some extent academic. The difference between the enforcement of

existing standards and the creation of new ones is often ignored in practice... yet, the

neglect of this distinction, so sharply drawn on the continent of Europe, is not only

due to imprecise thinking. Conflicts of rights and conflicts of interests do not have to

be kept in watertight compartments where the “rights” are enforced mainly by social

and not legal sanction.”10

3.3 Nature of dispute and settlement methods

The distinctions as drawn above are discussed in detail because the

adjudication system prevalent in India is well suited to resolve the rights disputes. As

far as the interests disputes are concerned, collective bargaining is considered as the

best method to resolve them and failing that conciliation and voluntary arbitration

would be the most suitable methods to supplement the collective bargaining.

Compulsory adjudication with its present structures in India, i.e., one-person tribunal

10 Ibid., pp. 56-57.

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of a judicial officer as presiding officer, is not a suitable alternative for resolving

interests disputes. Even those concede that compulsory adjudication should be the last

resort even in interest’s disputes, particularly in cases of disputes relating to public

utility services and other vital disputes, desire structural changes in the composition of

these bodies.

It is useful here to note that NCL and the Ramanujam committee have

recommended such changes, while retaining the Labour Courts as they are for

adjudication of rights disputes. Both of them favoured multi member Industrial

Relations Commissions, independent from the government, for adjudicating interests

disputes. It is true that they have not made the necessary distinction between these

different types of disputes; but they had these distinctions in mind when they

recommended different quasi-judicial bodies for adjudication of different types of

disputes.

It is pertinent to refer here that although the I.D.Act does not make a clear cut

distinction between rights disputes and interests disputes, the matters specified in

Second Schedule, which are within the jurisdiction of Labour Courts, are essentially

rights disputes. On the other hand, the matters, which are specified in Third Schedule,

are within the jurisdiction of Industrial Tribunals and are all interests disputes. But

there are no structural differences between Labour Courts and Industrial Tribunals

under the Act.

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3.3.1 The Definition of “Industrial Dispute” under the I.D. Act.

The I.D.Act in Section 2 (k) defined “industrial dispute” in the following

words:

“Industrial dispute” means any dispute or difference between employers and

employers or between employers and workmen, or between workmen and workmen,

which is connected with employment or non-employment or the terms of employment

or with the conditions of labour of any person”

This definition is a slight modification (the disputes between employers and

employers are also included in the present definition) of the definition of ‘trade

dispute’ in the repealed Trade Disputes Act. 1929, which in its turn was a

reproduction of the definition of the same term in the Industrial Courts Act, 1919 of

the United Kingdom. This Act introduced for the first time adjudication of disputes as

a wartime measure.

The definition postulates that, first, the dispute should relate to an “industry” as

defined in Section 2 (j); secondly, there should be a dispute or difference as a matter

of fact; thirdly, the dispute should be between the parties specified and lastly, the

dispute should be connected with matters, which bear upon the relationship of

employers and workmen.

(i) Industry

According to Sec.2 (j) “industry” means any business, trade, undertaking,

manufacture or calling of employers and includes any calling, service, employment,

handicraft, or industrial occupation or avocation of workmen.”

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Until a seven judge Bench of the Supreme Court in 1978 authoritatively laid

down certain definite principles in Bangalore Water Supply and Sewerage Boards v.

A. Rajappa11 there was lot of uncertainty on the scope of the definition. The Supreme

Court by a majority verdict in this case held, ‘where (i) a systematic activity (ii) is

organized by co-operation between employer and employees (iii) for the production

and /or distribution of goods and services calculated to satisfy human wants or wishes,

prima facie, there is ‘industry’ in that enterprise.

“Absence of profit motive or gainful objective is irrelevant, be the venture in

the public, joint or private or other sector. The true focus is functional and the

decisive test is the nature of the activity with special emphasis on employer-employee

relations.”

The consequences are: (i) professions (ii) clubs (iii) educational institutions

(iv) Co-operatives (v) research institutes (vi) charitable projects and (vii) other

kindred adventures, if they fulfill the above mentioned triple tests, they cannot be

exempted from the scope of S.2 (j).” 12

The only exemption recognized by the Court is the sovereign functions and not

any welfare or other economic activities undertaken by government or statutory

bodies.

The Parliament has amended the definition in 1982 by adopting the above

triple tests by excluding hospitals, educational and research institutions etc., from the

"(1978) Lab. I. C. 467(S.C.).

12 Ibid.,
 94

ambit of the definition, but this amended definition has not yet been brought into

force.13

However, in Coir Board Ernaculam v Indira Devi P.S. 14 the Supreme Court

was called upon to examine whether the appellant Coir Board is an industry under the

I.D.Act, 1947. The Kerala High Court held that Coir Board is an “industry” under the

I.D. Act., On appeal two judges bench of the Supreme Court observed:” Looking to the

uncertainty prevailing in this area and in the light of the experience of the last two

decades in applying the test laid down in the case of Bangalore Water supply and

Sewrage Board, be re-examined. The experience of the last two decades does not

appear to be entirely happy. Instead of leading to industrial peace and welfare of the

community (which was the avowed purpose of artificially extending the definition of

industry) the application of the I.D. Act to organization which were quite possible not

intended to be so covered by the machinery setup under the I.D.Act, might have done

more damage than good, not merely to the organizations but also to employees by the

curtailment of employment opportunities”. Further it is opined by the bench that lager

bench should be constituted to re-examine the wider connotation of the definition of

the term “industry” by the seven Judge bench of Supreme Court in Rajappa’s case.

Accordingly three judge bench was constituted and the bench has upheld the decision

of the seven Judge Bench in Rajappa’s case and held that the request for constituting

a larger Bench was refused both on the ground that the Industrial Disputes Act had

13 Act 46 of 1982
14 1998 (78) FLR 847 S.C.
 95

undergone an amendment and that the matter did not deserve to be referred to a larger

Bench as the decision of seven Judges in Bangalore Water Supply case was binding

on Benches less than seven Judges.15

However, the five Judge Bench of Supreme Court in State of U.P v. Jai Bir

Singh16 held that the interpretation of the term “Industry” was over expansive and one

sided i.e., only workers oriented interpretation, by the majority judges in Bangalore

Water Supply and Sewerage Board v A. Rajappa and hence requires reconsideration

by a larger Bench. Further, it is held that, the main aim of Industrial Disputes Act,

1947 is to regulate and harmonise relationship between employers and employees for

maintaining Industrial peace and social harmony and hence, while interpreting the

same interests of employers, employees and in a democratic society, people, who are

the ultimate beneficiaries of the industrial activities have to be kept in view,

ii) Factum of Dispute

A dispute arises when one party on the other makes demand and the other party

has rejected to concede the same. Until such time, the dispute cannot be said to have

come in to existence. Raising the dispute for the first time before the conciliation

officer or before the appropriate Government is not sufficient to constitute an

industrial dispute.17 However, this view of the Supreme Court was not in conformity

with the earlier decision of the Supreme Court in Bombay Union ofJournalists v. The

15 (2000) 1 SCC, 224.

16 (2005) 5 SCC, 1.
17 See Sindhu Resettlement Corporation on India v. Industrial Tribunal, (1968) I. L. L. J. 484 (S.C.).
 96

1 ft
Hindu wherein it was ruled that the industrial dispute must be in existence or

apprehended on the date of reference. The net effect of the principle is that even if the

demand is not made earlier before management and rejected by them and is raised at

the time of reference or during conciliation proceedings, the dispute may be an

“industrial dispute”. The Supreme Court in Shambbunath Goel v Bank of Baroda has

followed this view.19 The court observed that, “to read in to the definition, the

requirement of written demand for bringing into existence an industrial dispute would

tantamount to re writing the section.” And held that, it is for the Government to be

satisfied about the existence of the dispute.

iii) Parties to the Dispute

(a) Employers and Employers

The disputes, which are connected with matters specified in the definition

between employers and employers, have also been included in the definition as a

matter of abundant caution and with a view to widening the scope of the concept of

industrial dispute. There is so for no such dispute taken up by the machinery provided

under the Act nor is there any decided case on the construction of these words.

(b) Employers and workmen

By far, the most important disputes which the Act intends to cover are the

inter group conflicts, i.e., conflicts between employers organization and trade unions,

or conflicts between a single employer and the workmen, as a group, represented by a

18 AIR 1963 SC 318.

19 (1978) 2 S. C.C. 353.
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number of workmen collectively or by trade union or unions. Until 1957, when the

Supreme Court decided in Central Provinces Transport Services Ltd., v. R.G.

Patwardhan,20 that an individual dispute between an employer and single workman

could not per se be an industrial dispute, but could become one if it was taken up by a

trade union or a substantial number of co- workmen, there was a considerable conflict

of judicial opinion on this question. The Supreme Court in the instant case made the

support of a trade union or a considerable number of co-workmen essential for

converting an individual dispute in to an industrial dispute, within the meaning of S.2

(k) of the Act. In other words, the Court held that on the side of the workmen the

dispute must be shown to affect them collectively. The Court referred to the concept

of collective bargaining and the scheme of the Act in coming to the conclusion, which

gave sufficient muscle to the trade unions, without whose espousal an individual

dispute cannot be converted in to an industrial dispute, so it can be dealt with by the

machinery provided under the I.D.Act. The trade unions received this decision

favourably as the workmen are in a way constrained to join trade unions, lest the

unions might not take up their cause in case of any future eventuality. But this

position did not remain for long and in 1965 Parliament amended the I.D.Act and

inserted a provision to consider the individual dispute connected with “discharge,

dismissal, retrenchment or termination” as deemed industrial dispute,

20 (1957) I. L. L. J. 27 (S.C.).
 98

“notwithstanding that no workman nor any union of workmen is a party to the

dispute.”21

The Government on the ground that the most serious disputes relating to

individual workmen would go unresolved, if the unions for any reason do not take

them up, justified the amendment. But, this had removed the only legal influence or

persuasion for the workmen to join trade unions.

However, as law stands now, the individual disputes which are not connected

with termination of service still require espousal by trade unions; otherwise they are

not considered as industrial disputes which may be referred for adjudication,

c) Workmen and Workmen

The third alternative regarding the parties to the dispute is that it should be a

dispute, which is connected with the matters specified in the definition between the

workmen as such, for whom the trade unions may act in a representative capacity.

Whether a dispute between trade unions as such, i.e, a pure inter-union disputes, such

as a dispute relating to recognition of trade unions, is comprehended by the definition

or not is a matter which is still undecided, as no such dispute was ever referred for

adjudication under this Act.

iv) Subject matter of Dispute

The definition does not contemplate all types of dispute between employers

and workmen, but only those disputes which are connected with “employment or non

21 Section 2-A, Inserted by the I.D. (Amendment) Act, 1965 (Act 35 of 1965)(w. e. f. 1-12-1965).
 99

employment 22 or terms of employment or with the conditions of labour of any

person” are covered by the definition,

v) Any Person

Interpreting the words ‘of any person’, the Supreme Court in Workmen of
'yy
Dimakuchi Tea Estate v. Dimakuchi Tea Estate held that ‘any person’ in the

definition clause means a person in whose employment or non employment or terms

of employ or conditions of labour, the workmen who are raising the dispute have a

direct and substantial interest i.e, with whom they have under the scheme of the Act,

community of interest. The words ‘any person’ do not mean any body or every body

in this wide world, but they are also not limited to ‘any workmen,’ potential or

otherwise.24

3.4 Disputes settlement methods and machineries

It is already noted that that disputes between employers and workmen are a

common phenomenon in an industrial society and these disputes arise due to inherent

conflict of interests and expectations in employer-employee relationship. There can be

no rules for their avoidance and so what has to be done is to devise ways and means to

prevent them from becoming serious, wherever possible, and to settle them when they

22 For the meaning of these words, see, Western Automobile Association v. Industrial Tribunal, (1949)
I. L. L. J. 245 (F. C.).
23 (1958) I.L.L.J 500 (S.C.).
24 For further discussion on the interpretation of these words, see, the minority opinion of Justice
Sarkar in Dimakuchi Tea Estate Case; Workmen of Dahingearpar Tea Estate v. Dahingeapar Tea
Estate, (1958) II L. L. J 498 (S.C.); Standard Vaccum Refining Company of India Ltd. v. Their
Workmen, (1960) II. L.L J. 233 (S.C.); All India Reserve Bank Employees Association v. R.B.I.,
(1965) IIL. L. J. 175 (S.C.).
 100

actually arise through appropriate procedures. Highlighting the need for effective

procedures for settlement of labour disputes, the ILO Publication observed:

“Both in industrialized and developing countries have always attaches

particular significance to the establishment of effective procedures for dealing labour

disputes. This significance has, however, been felt more deeply in recent years as a

result of growing concern with the effects of labour disputes on industrial growth,

economic development and over all socio political stability.”25

3.4.1 Collective Bargaining

Of the various methods that are used for adjustment of industrial conflicts,

collective bargaining stands on the highest footing. Theoretically, no one denies, as it

involved no third party intervention. The content and scope of collective bargaining

vary from country to country. Collective bargaining method is also known as common

sense method of settling disputes. A collective bargaining agreement was defined by

Ludwig, Teller as an “agreement between single employer or an association of

employers on the one hand and a labour union on the other, which regulates the terms

and conditions of employment. The term “ collective as applied to collective

bargaining agreement will be seen to reflect the plurality not of the employers who

may be parties thereto, but of the employees therein involved. Again the term

collective bargaining is reserved to mean bargaining between an employer or group of

employers and a bonafide labour union. The collective bargaining agreement bears in

its many provisions the imprints of decades of activity contending for labour equality

25 ILO Office, supra note: 6, p. 181.

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through recognition of the notions underlying collective negotiation. Indeed, in the

collective bargaining agreement is to be found a culminating purpose of labour

activity.” But, the common characteristics is that it is a process of bargaining

involving bipartite negotiations, between employers, either represented through an

organization or single employer, and the workmen, represented through trade unions,

by which they seek to settle their disputes on matters bearing upon employer-

employee relationship, on the basis of the strength of sanctions available to each side.

The negotiations may result in an agreement, in which case, the dispute is peacefully

settled. But, occasionally depending upon the attitude of both parties to accept a

compromise for the adjustment of the conflict, negotiations may not yield an

agreement. Then both parties may threaten to use or start using the sanctions

available to them to put pressure on the other, i.e., the workers may resort to strike,

by withdrawing their labour, and the employer may retaliate by declaring a lock out.

The threat or the ultimate use of these weapons available to both parties in the process

of colie,ctive bargaining may ultimately bring about a situation where agreement

become possible. For a just settlement through collective bargaining, it is necessary

that both parties must have nearly equal bargaining power. In the absence of an equal

bargaining capacity, the winner will generally be the stronger party, unless the

stronger party relents to reasonable demands keeping in mind the long-term peaceful

relations between the parties.

26 Ludwig Teller, Labour Disputes and Collective Bargaining, Vol. I., p. 476, S. 154, quoted in
Malhotra, O. P., p.l 57.
 102

The NCL agreed that collective bargaining is a superior arrangement for

resolving disputes. It observed:

“The best justification for collective bargaining is that it is system based on bi­

partite agreements, and as such, superior to any arrangement involving third party

intervention in matters which essentially concern employers and workers.27

“The problem with collective bargaining is the work stoppages that might

result from the failure of negotiations. Collective bargaining is a process of reaching

agreement and strikes are an integral and frequently necessary part of that process”.

The work stoppages, although some times necessary to make the parties understand

the necessity of each other, are not only harmful to both employers and workmen, but

also to the nation. Public opinion is always against such stoppages they cause direct

inconvenience to one section of the public or the other. Such inconvenience will be

felt more when work stoppages occur in public utility services, which are essential to

the public.

But to develop collective bargaining as the most desirable method of settlement

of disputes, certain amount of work stoppages will have to be tolerated in the initial

stages, i.e., until the system becomes self regulatory. In countries like U.S.A., Britain

and other industrial western countries where collective bargaining is highly developed

due to the existence of veiy strong trade unions, the work stoppages are not

27 First National Commission on Labour Report, (1969) p. 325.

28 Mathew R.E., Labour Relations and the Laws, p.563.
 103

comparatively higher than those in countries like India and other developing

countries, where the system of collective bargaining is not highly developed.

Development of collective bargaining on sound lines would ultimately reduce

work stoppages and it would be conducive to industrial harmony in an atmosphere of

industrial democracy. Giving importance to collective bargaining does not necessarily

mean complete abstention of state in industrial relations. On the contrary, there may

be instances, where the state has to intervene to prevent work stoppages and for

ensuring an amicable settlement but without undermining the collective bargaining

process.

Collective bargaining in India, although spread to many industries now, cannot

be said to be at a developed stage. There is a vast unorganised sector where trade

unions make their presence only nominally or virtually there are no unions at all. It is

common knowledge that in this unorganised sector there is more exploitation of

labour, to the extent that the employers do not even care to implement the minimum

wages fixed by the state under the minimum wage legislation. Again there is no

worthwhile collective bargaining in agriculture sector and wages there depend upon

the forces of labour market. Child labour in violation of the child labour prohibition

laws is a common thing in the unorganised sector.

Collective bargaining can be said to be in a reasonably advanced stage in

public sector undertaking and major industries in private sector. In view of

concentration on industries in major cities in India, the trade union movement is also

mainly centralized in these areas.

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Factors restraining the growth of collective bargaining

There are many factors, which are restraining the growth of collective

bargaining in India. But, it is proposed to mention only the most important of them.

The responsibility lies on trade unions and the employers as well as the Government

far not creating an encouraging atmosphere conducive for healthier bargaining.

(i) Multiplicity of trade unions and their political connections is a major

factor, due to which collective bargaining could not develop on sound lines in the

country. In most industrial units, there are as many trade unions as there are political

parties, often not less that five or six. The employers find it difficult to deal with all

these unions, pulling in different directions. Gaining more support from workers with

radical slogans and sometimes-unreasonable demands is the obsession of the unions

rather than getting tangible benefits to the workmen. Inter union (and sometimes even

intra union) rivalries is a common feature of India trade union movement. The

proposed amendment to the Trade Unions Act to enhance the minimum number of

workers requires for registration of a union from the present seven to one hundred or

one tenth of total workers have not yet been made into law. Even this amendment may

only cure the disease in a minor way because trade union registration is not

compulsory under the Act.

(ii) The reluctance of employers to share power with the workmen is another

factor that restricts the development of collective bargaining. Except for a few

enlightened ones, the employers, in general, are reluctant to prefer a bargained

relationship ones, the employers, in general, are reluctant to prefer a bargained

 105

relationship to take the place of government intervention. Some employers do go

further and meddle with the trade union organizational matters, in some cases even to

the extent of encouraging “company unions”.

(iii) The government policy throughout has not been helpful to the

development of collective bargaining in the country. The government has so far failed

in making a law providing for recognition of trade unions. In the absence of such law

imposing an obligation on the employers and trade unions to bargaining in good faith,

collective bargaining has become purely a voluntary affair between the parties. Unless

the trade unions are strong enough, the employer would feel that it is advantageous

not to negotiate with the unions. Until such a law is made, the collective bargaining

will continue to be at an undeveloped stage. Strong trade unions and mutual

obligation on the parties to bargain in good faith are sine qua non for development of

collective bargaining on sound lines.

(iv) Further, there is a genuine complaint that the availability of compulsory

adjudication even for interests dispute has hampered the growth of collective

bargaining. Although the adjudication cannot be avoided in case of rights disputes,

greater scope for collective bargaining should be provided for the settlement of

interests disputes, by restricting the scope of compulsory adjudication in this area.

Government’s intervention in interests disputes, except perhaps in public utility

services, should be rare. With regard to rights disputes also, there can be collective

bargaining initially, but the degree of success is likely to be veiy limited here as the

parties are likely to take legal stands and talk in terms of justice in such cases.
 106

Therefore, where the parties fail to submit such disputes for arbitration, which

normally happens in India due to the absence of sound collective bargaining

traditions, the adjudication is the only effective remedy in rights disputes.

The recommendations of NCL on the recognition of trade unions and for an

increased scope for collective bargaining have not yet been implemented.

Collective Agreements

Collective agreements have not made much success in the country due to the

factors discussed above. However, since Independence trade unions have been

growing in strength as well as in numbers and agreements with employers have

become more common. Most of the agreements are at the plant level, though in

important industries industrial and national level agreements have become common

on major employment issues. Often the collective agreements reached voluntarily are

registered as conciliation agreements to ensure that these agreements shall be binding

on all workmen under Section 18(3) of the ID, Act.

The collective agreement has become more common in almost all public

sector undertakings and government owned industries. In addition such agreements

are to be found in plantations, mines, ports and docks, state transport services,

industries like chemical, petroleum, oil refining and distribution. All India agreements

are also common in industries like textiles. Jute, sugar, railways, banking, insurance,

air transport, etc.

 107

First NCL noted: “on the whole the record of reaching collective agreements

has not been unsatisfactory, though its extension to a wider area is certainly

desirable.”29

Although there is no statistical evidence on the extent of development in the

collective agreement, it may be taken for granted that there are more collective

agreements now in more industries.

The Industrial Disputes Act and collective Bargaining Agreements

The I.D. Act as originally enacted did not contain any provision relating to

collective bargaining. It was in the year 1956, by an amendment to the Act, a

collective bargaining agreement was included in the definition of “settlement”, which

is declared legally binding on the parties to the settlement.

Prior to this amendment only settlement arrived at in the course of conciliation

proceeding were legally recognized.30

It is significant to note that both S.2 (P) and S.18 (1) refer to agreements

between the employers and workmen and not between the employers and trade

unions. Although there is no much difference in its meaning in practical terms, the

avoidance of the term ‘trade unions’ is noteworthy. Secondly, such a collective

agreement shall be binding only on the parties to the agreements and not on all

workmen of the establishment even when the agreement is between the employer and

a majority trade union or between the employer and a recognized trade union. This

29 Supra note 26, pp. 321-22.

30 See Secs. 2 (p) and 18(1) of the I.D.Act.
 108

may be contrasted with a settlement arrived at in the course of conciliation

proceeding, which shall be binding on all workmen, irrespectively of whether they are

a party to the settlement or not.

However, in M/s. Oswal Agro Furane Ltd and another v. Oswal Agro Furane

Workers Union and others , the supreme court has held that settlement arrived at

between employer and workmen in the course of conciliation proceedings within

meaning of S.2(p) read with S 18 (3) of I. D. Act, would not prevail over statutory

requirements under Sec 25 (N) and S 25 (O) of the Act. Further, it is held that in case

of closure of industry to whom chapter V-B is applicable, obtaining of prior

permission from appropriate government is mandatory. This judgment of the hon’ble

Court will help to avoid fraudulent settlement by the employer by recognizing a

Union which is favourable to him and which is not a real and genuine Union.30

Awards, in terms of agreements

There may be situations where the parties arrive at a private settlement after

the adjudication proceedings have commenced, on the same matters which are

pending in adjudication. This might happen due to a realization on the part of the

parties, after government’s interference through a reference to adjudication, that they

should avoid litigation with its harmful consequence on their future relations or the

possible delay in settlement that is proverbial with the adjudication system. In such a

case, both the parties to the dispute may either abstain from the proceedings leading to

the dismissal of the dispute or the parties may request the adjudietory authority to

31 J. T. 2005 (2) S.C. 260.

 109

permit withdrawal of the dispute; or they may file the settlement before the authority

and request it to adopt the settlement as its award. If the authority finds that the

settlement is fair and reasonable, it has to make its award in terms of the settlement.

Such an award is known as “compromise award” or “consent award”.

In State of Bihar v. D.N.Ganguli, the Supreme Court made an obiter

observation that “it would be very unreasonable to assume that the Industrial Tribunal

would insist upon dealing with the dispute on merits even after it is informed that the

dispute has been amicably settled between the parties. There can, therefore, be no

doubt that if an industrial dispute before the Tribunal is amicably settled, the Tribunal

would immediately agree to make an award in terms of the settlement between the

parties.”

Preference of settlement to an award

The judiciary’s preference of collective agreements over the awards of the

adjudicatory authorities under the I.D.Act has been amply demonstrated by the

Supreme Court in the case of Sirsilk Ltd v. Government ofA.P,33 In this case the Court

went a step further and directed the appropriate Government not to publish an award

which was submitted to it after adjudication on merits by the Tribunal in view of the

amicable settlement of the dispute by the parties. Speaking for the Court, Justice

Wanchoo observed:

32 (1958) IIL. L. J. 634 (641) (S.C.).

33 (1963) II L.L.J. 647 (S.C.).
 110

“Therefore, as soon as an agreement is signed in the prescribed manner and a

copy of it is sent to the appropriate Government and the conciliation officer, it

becomes binding at once on the parties to it and comes into operation on the date it is

signed or on the date which might be mentioned in it for coming in to operation. The

settlement having thus become binding and in many cases having already come into

operation, there is no scope for any inquiry by the Government to the bonafides of the

settlement.34

The Supreme Court in its anxiety to encourage collective agreements went

even further in Amalgamated Coffee Estate Ltd v. Their Workmen?5 In this case, the

parties entered in to an amicable settlement during the pendency of appeal by special

leave in the Supreme Court against the award of the Industrial Tribunal.

Consequently, the employer moved the Court for disposing of the appeal in terms of

the settlement. When some of the workmen who were not parties to the settlement

resisted this motion, the court remitted the case to the Tribunal for a finding on the

fairness of the settlement. Upon the finding by the Tribunal that the settlement was a

fair one, the court disposed of the appeal in terms of the settlement. Thus, it is clear

that the Court preferred a collective agreement to an award, which had in fact been

published and therefore became binding on the parties under Section 18 (3) of the ZD.

Act.

34 Ibid., p. 651-52.
35 (1965) II L.L.J. 110(S.C.).
 Ill

In Herbertson Ltd v. Their Workmen,36 the Supreme Court similarly preferred a

collective agreement reached between the employer and a recognised union to an

award already published and became binding, though in this case the Tribunal

returned a finding that part of the settlement was unfair. The Court held that the

settlement which is in the course of collective bargaining should be given due weight

and consideration and that in view of the fact that several factors might influence the

parties to come to a settlement, the settlement fairness could not be judged by the

same standards applicable to compulsory adjudication. The Court recognised that

there was always delay and uncertainty in litigation and that in collective bargaining

the workmen would get immediate benefits. There was also the prospect of further

advance in the shape of improved emoluments by voluntary settlement, avoiding

friction and unhealthy litigation. This, the court said, is the quintessence of settlement,

which the Courts and Tribunals endeavour to encourage.37 Further in Hillson and

Dinshaw Ltd v. P. G Pednekar and others it was held that the settlement arrived at

not in the course of conciliation proceedings is binding on the person who are parties

to same unless it was shown that settlement was exfacie unfair, unjust or malafide.

In the recent years the Supreme Court has not even been insisting on formal

compliance with the Rules made under the I.D. Act for the validity of collective

bargaining settlements. A settlement made through correspondence between the union

36 (1977) Lab I. C. 162 (S.C.).

37 For detailed discussion of this aspect see Anand Prakash, Trade Unions and Collective Bargaining
in India, 1991(iv) C.I.L.Q. pp. 4-6.
38 (2003) III L.L.J. 77. (Bom.).
 112

and the management, 39and a settlement recorded only by way of minutes of

discussion between the staff association and management40 were held to be binding on

the parties. It may be noted that in both these cases there was no question of inter­

union rivalry and one union represented the workmen.

Though the above judgments stand to the credit of Supreme court for

encouraging industrial democracy through collective bargaining, in an area where the

Parliament and executive could not do much, a significant plea of the working class to

deduce a fundamental right to collective bargaining from Article 19 (1) (c) of the

Constitution was turned down by the Court in All India Bank Employees ’ Association

v. National Industrial Tribunal. 41

Enforcement of Collective agreements

With a view to ensuring proper observance of settlements, Section 29 of the

l.D. Act declares that a breach of any term of any settlement, which is binding, is an

offence punishable with imprisonment which may extend to six months, or with fine

or with both.

Although non-observance of settlements has been declared as a punishable

offence, prosecutions on this count are very few. According to Section 34 of the

I.D.Act, “No court shall take cognizance of any offence punishable under this Act or

of the abetment of any such offence, save on complaint made by or under the

39 AIR 1984 S. C. 516.

40 (1989) IIL. L. J. 457 (S.C.).
41 (1961)//I. L. J. 385 (S.C.).
 113

authority of the appropriate Government.” Experience shows that Governments are

not easily persuaded to launch prosecution when an employer commits the breach of

settlement.

3.4.2 Works Committees

To facilitate bilateral negotiations or joint consultation on all matters of

common concern, Sec.3 of the I.D.Act provides for the constitution of works

committees, consisting of representative of employer and workmen in equal numbers.

As per this provision, the appropriate Government may by general or special order

require an employer of an industrial establishment in which one hundred or more

workmen are employed, or have been employed on any day in the preceding twelve

months, to constitute a Works Committee. The representatives of the workmen shall

be chosen, in consultation with their trade unions, if any, registered under the Trade

Unions Act, 1926.

Section 3 (2) lays down: “It shall be the duty of works committee to promote

measures for securing and preserving amity and good relations between the employer

and workmen and, to that end, to comment upon matters of their common interests or

concern and endeavour to compose any material difference of opinion in respect of

such matters.”

Of the machinery provided under the I.D.Act, the works Committee is the only

machinery which is aimed at ensuring bilateral negotiations between employers’ and

‘workers’ representatives with a view to prevent the disputes through a constant

dialogue.
 114

Scope and Powers of works Committee

It is clear from the Section that the function of the Works Committee was

stated iri vague and general terms. Therefore, the Indian Labour Conference (I.L.C) in

its Seventeenth Session in 1959 discussed the difficulties in the functioning of the

Works Committee and appointed a tripartite committee, which had drawn up a list of

functions.42 The list, which it called only flexible and not exhaustive, included almost

every thing that can be comprehended in employer-employee relationship, such as

wages and other allowances, bonus, holidays, hours of work, retrenchments and lay­

offs, victimization for trade union activities, retirement benefits, welfare and safety

aspects and other amenities to workers.

Although the range of subjects it can discuss is very wide, the scope of its

powers is confined to only two things, i.e., (i) “to comment on matters of common

interest” and (ii) “to endeavour to compose any material differences of opinion.43

Neither “comment” nor “endeavour”, the words used in the statute, could mean, “to

decide “ any disputes on these matters.

The Supreme Court in Northbrook Jute Co. Ltd. v. Their Workmen,44

pronouncing on the powers of the Works Committee, observed:

The languages used by the legislature makes it clear that the Works

Committee was not intended to supplant or supersede the unions for the purpose of

42 See Malhotra, O. P., The Law ofIndustrial Disputes, (1998), Vol. I, p. 625.
43 See Section 3 (2) of the I.D.Act, 1947.
44 (1960)/. L. L. J 580 (583) S.C.
 115

collective bargaining; they are not authorized to consider real or substantive changes

in the conditions of service; their task is only to smooth away friction that might arise

between the workmen and management in day to day work”.

Therefore, the Works committees are only deliberating bodies or at best

recommendatory bodies, but not decision-making bodies. The recommendations made

by the Works Committee may form the basis for the collective bargaining

negotiations between the employer and trade unions. The logic of such Committees at

a time when the trade union movement was in its inception was understandable. After

the trade union movement has come to stay, the Works committees have not merely

become superfluous, but the trade unions have been considering them as their rivals.

Despite policy pronouncements in First and Third Five Year Plans to encourage

Works Committees, they have remained quite ineffective. The NCL attributed their

failure mainly to the lack of appreciation, on the part of both employers and trade

unions, of the utility of such a democratic institution. For effective functioning of

Works Committees the NCL recommended that “the recognized union should be

given the right to nominate all worker members on this body. With union recognition

obligatory, this would eliminate the most important cause of conflict and antipathy

between unions and works committees.45

Kennedy, in his criticism on the ideology of constituting works Committees

over and above the collective bargaining relationship, considered them as “artificial

45 NCL Report, supra note 26, p. 343.

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creation of bodies to perform theoretical function.46 He maintained very

emphatically.

The government’s continued espousal of works committees assumes that there

is a significant function of them to perform that is separable from orthodox union-

employer relations. I believe this is a misreading of the forces at work in labour

relations. The collective bargaining relationship and decision making process places

no limits on its own jurisdiction... The vast majority of works committees are inactive

or lead a pro-forma existence of little significance.47

Similarly, arguing that joint consultative machinery imposed from outside

would hardly serve any purpose, V.V. Giri observed:

“Employers, workers and trade unions have viewed these committees with

great suspicion. Each group felt that the committees would usurp its respective

functions, rights and prerogatives. It is some years now since such committees were

constituted, but there has been no change in the outlook of any of the groups which

would make the work of the committees effective. The feeling of mistrust continues to

pervade industrial relations.48

Works committees are now virtually non-functional and in many industries

they are non-existent.

46 Kennedy Van Dusen, “Unions, Employers and Government”, Manakkalas, Bombay, p. 132.
47 Ibid., pp. 132-133.
48 Giri V.V., Labour Problems in Indian Industry, (3rd Edn, 1972), p. 88.
 117

A veteran trade union leader Sri G. Ramanujam once commented on the Works

committees as follows:

Works committees are rarely constituted; where they are constituted they rarely

meet; when they meet they rarely take decisions; even when they take decisions, they

are rarely implemented”.

3.4.3 Conciliation or Mediation

Conciliation or Mediation are procedures whereby a third party provides

assistance to the parties in the course of negotiations, or when negotiations have

reached an impasse with a view to helping them to reach an agreement.49

Conciliation as a method of settlement of industrial disputes is widely

prevalent in almost all countries. The utility of conciliation as a dispute settlement

technique, not only in labour relations but also in international and other domestic

relations is well recognized. The recent thrust on Lok Adalats in India manifests its

effectiveness as a conflict adjustment technique.

Elucidating the two different objectives of conciliation in labour relations, the

ILO publication on Conciliation and Arbitration observed:

For many years the settlement of disputes without or with a minimum of

strikes and lock outs was the first and the only recognized objective of conciliation

and arbitration, and this still seems to be largely the position in certain countries;

however, especially where voluntary procedures are the only recognized or the

49 ILO Office, supra note 6, p. 145.

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prevailing methods of settlement, it is also the aim of conciliation and arbitration to

foster the growth of collective bargaining.50

Although the etymological origins of conciliation and mediation are different

and the third party is supposed to be more active in mediation in assisting the parties

to find an acceptable solution, going so far as to submit his own proposals for

settlement to the parties, such distinctions, considered as only differences of degree,

have tended to disappear in industrial relations practices. It may be noted in this

regard that Section 4 of the I.D.Act, which provides for the appointment of

conciliation officers, uses the words, “Conciliation Officers... charged with the duty

of mediating in and promoting the settlement of industrial disputes.”

Speaking of the need for outside intervention in industrial disputes and the

emergence of conciliation in labour relations, Kahn Freund observed:

As industrial disputes become more frequent and the need for outside

intervention more urgent, the need arose in many countries for a group of permanent

officials who would keep in touch with the development of industry and whose

services would be available for the prevention and speedy settlement of disputes. In

many countries, e.g. in Britain and in United States Conciliation services were set up,

staffed by civil servants, and much of the work hither to done by honoratires was thus

taken over by this branch of the civil services.51

50 Ibid., p. 147.
51 Otto Kahn Freund, supra note 5, p.70.
 119

Permanent officials take up the conciliation in many countries because it is felt

that they are well suited for the task of mediation. Kahn Freund explains why

generally permanent officials are chosen as conciliators in the following words:

The informal intervention of conciliator, either of his own motion or upon the

request of either party, the lending of a helping hand in negotiations, the discussion of

the situation with the parties in the conference room at the round table, all these are

things well suited for the work of permanent officials who over many years have

gained considerable knowledge of the conditions, the history, the mentality of those

industries which are located in their districts.52

Conciliation Machinery under the Industrial Disputes Act

The I.D. Act contemplates two types of machinery for performing the function

of conciliation. They are, i) Conciliation Officers, who are normally the officers in

the labour department, and ii) Boards of Conciliation,54 a multi-member body

consisting of an independent person as chairman and two or four other members

representing employers and workmen in equal numbers, to be appointed by the

appropriate government on the recommendation of the parties.

Boards of Conciliation

Where a dispute is of a complicated nature and the issues involved are

important and require special handling, boards may be preferable to conciliation

52 Ibid
53 Section 4 of the I.D.Act.
54 Section 5 of the I.D.Act.
 120

officers. The boards of conciliation are the oldest industrial relations machinery along

with courts of inquiry, provided under the repealed Trade Disputes Act, 1929. Both

these institutions have now become obsolete and the Government seldom uses them.

They have almost remained unused.55 Malthotra records that in recent years no Board

has been constituted by the Central Government.56

Conciliation Officers

Sec. 4 of the I.D. Act empowers the appropriate Government i.e. the Central

Government and the State Governments to appoint conciliation officers charged with

the duty of mediating in and promoting settlement of industrial disputes. They may be

appointed for a specified area or specified industries and either permanently or for a

limited period. The officers in the labour Department, i.e., Commissioners, Deputy

Commissioners and Assistant Commissioners of Labour are generally appointed as

conciliation officers. Conciliation authorities are vested with necessary powers under

Sec. 11 of the I.D. Act. Sec. 12 and 13 lay down the duties of the conciliation officers

and boards of conciliation, respectively.

Conciliation proceedings

According to Sec. 12 of the Act conciliation is compulsory in a public utility

service 57 where a notice of strike or lock out has been given under Sec. 22 of the

55 See Giri V.V., supra note 47, p. 89.

56 Malhotra O. P., supra note 41, Vol. I. p.629.
57 Sec. 2 (n) of the Act defines the Term “Public Utility Service” and the First Schedule enumerates
industries, which may be declared as public utility services as and when need arises.
 121

Act.58 According to Sec. 20 the conciliation proceedings in a public utility service

shall be deemed to have commenced on the date on which a notice of strike or lock­

out is received by the conciliation officer and the proceedings will continue until a

memorandum of settlement is signed by the parties or where no settlement is arrived

at until the failure report is actually received by the appropriate government.59 There

is prohibition on strikes and lockouts in pubic utility services during the pendency of

conciliation proceedings and seven days after the conclusion of such proceedings.60

As per Sec. 12(1) conciliation in non-public utility services is discretionary.

Either of his own motion or at the request of the parties the conciliation officer may

hold conciliation proceedings.

The conciliation officer shall, when he commences the proceedings, without

delay investigate the dispute and all matters affecting the merits and right settlement

thereof and may do all such things as he thinks fit for the purpose of inducing the

parties to come to a fair and amicable settlement.61

Where the conciliation proceedings result in a settlement, he shall send a report

to the appropriate Government along with the memorandum of settlement. If no such

settlement is arrived at he shall send to the appropriate government a failure report,

with all the details relating to the dispute, steps taken by him for bringing about a

settlement and reasons on account of which in his opinion, a settlement could not be

58 See also the Second proviso to Sec. 10 (1) of the l.D.Act.

59 See Workers ofIndustry Colliery v. Industry Colliery, (1953) I. L. L. J. 190 (S.C.).
60 Section 22 (l)(d) and (2)(d) of the ID. Act.
61 Section 12 (2) of the l.D.Act.
 122

arrived at.62 Thus failure report forms the basis for the government for taking further

action on the matter. Upon consideration of the failure report, if the appropriate

Government is satisfied that there is a case for reference to a Board of Conciliation or

to any adjudicating authority, it may make such reference and if it does not make such

a reference it shall record and communicate to the parties concerned its reasons

therefore.63

Normally the conciliation officer shall send his report within a period of

fourteen days from the commencement of proceedings, but the time for the

submission of the report may be extended by such period as may be agreed upon by

all the parties to the dispute, subject to the approval of the conciliation officer. 64 A

settlement arrived at in the course of conciliation proceedings has been given a higher

status than a settlement arrived at in the collective bargaining process. The

conciliation settlement is binding on all the workmen in the establishment, present

and future, irrespective of whether a particular union signed the settlement or not.65

The performance of conciliation

Statistical evidence shows that conciliation proceedings are highly effective in

both the Central and State spheres.66 The success rate varies, except in a few States,

from 50 and 90 per cent. There are two limitations to be noted in understanding these

62 Section 12 (4) of the I.D. Act.

63 Section 12 (5) of the I.D. Act.
64 Section 12 (6) of the ID. Act.
65 Section 18 (3) of the I.D. Act.
66 See NCL Report; supra note 26, p. 322.
 123

statistics. First, in view of wider binding operation provided by the Act for

conciliation settlements, the parties even when they settle a dispute through collective

bargaining, go to a conciliator and get it recorded as a conciliation settlement.

Conciliators oblige them, as that would also be an indication of their success on

record. Secondly, it is common knowledge that it is generally minor disputes that get

settled through conciliation. However, by no means one can say that the conciliation

is a failure, although there is a lot of room for improvement.

Conciliation and adjudication

It cannot be said that the presence of alternative method of compulsory

adjudication has a discouraging effect on conciliation. V.V. Giri, pointing out the

availability of adjudication as a major reason for the ineffectiveness of conciliation,

observed:

The major reason for the failure of conciliators in bringing about an amicable

settlement of matters in dispute is the fact that the law provides for another remedy,

namely, adjudication by tribunals. The parties do not, therefore, place all their cards

on the table during conciliation proceedings and are not in a frame of mind to arrive at

a settlement, hoping as they do, that their respective viewpoints will be appreciated

and accepted by the tribunals.67

67 Giri V.V., supra note 47, p. 89.

V*'
 124

Charles A. Myers and S. Kannappan, who had done outstanding work on

industrial relations in India, testified this when they approvingly quoted “one of the

most successful former Chief Conciliators for the Central Government.

“adjudication has made a mockery of conciliation; conciliation must

recommend or reject reference to adjudication, so all effort is pointed in that direction

/ret

and not in bringing agreement.

First NCL also recognized the effect of adjudication on conciliation and on the

attitude of parties towards conciliation, NCL put it thus:

“Conciliation is looked upon very often by the parties as merely a hurdle to be

crossed for reaching the next stage. There is, therefore, casualness about it in the

parties and a habitual display of such casualness conditions make the conciliator also

get into that attitude.69 Further, in order to make conciliation more effective, the

Second NCL has recommended that inspector should not be appointed as Conciliation

Officers as that may undermine their efficiency as such officers. Conciliation officers

should be separately recruited and trained and should be clothed with sufficient

authority to enforce attendance at proceedings of conciliation.70

Working of the system

Taking an overall view of the industrial relations machinery the N C L

recommended a qualitative change in the set-up. The conciliation machinery, the N C

68 Myers A.Charles & Kannappan S., “Industrial Relations in India”, 2nd ed., (Bombay: Asia
Publishing House, 1970), p. 327.
69 NCL Rfeport, supra note 26,p. 323.
70 Second NCL Report (2002) p.45.
 125

L felt, should be part of the industrial Relations Commission (IRC) which was

supposed to be an authority independent of the government. The independent

character of the I R C would, it is hoped by N C L, inspire greater confidence in the

conciliation officers. The commission expected that the parties would be more willing

to extend their co-operation to the conciliation machinery working independently of

the normal labour administration. Apart from this basic change in the set up of

conciliation machinery, the NCL felt that there is need for certain other measures to

enable the conciliation officers to function effectively. They are (i) proper selection of

personnel (ii) adequate pre-job training and (iii) periodic in service training through

refresher courses, seminars and conference.71

3.4.4 Court of inquiry

The Trade Disputes Act, 1929, originally provided the machinery of the court

of inquiry and the same is continued in the present I.D.Act,72 It was only in the initial

stages that this machinery was used and now it is completely out of use. Whatever be

the advantages of the system, the governments have not found favour with it and

therefore, the 1988 Trade unions and industrial disputes (amendment) Bill proposed to
I'X
delete this machinery from the Act.

71 Report of NCL, supra note,26 ,p.323 .

72 See Sec. 6 of the I.D.Act.
73 The Trade Unions & Industrial Disputes (Amendment) Bill-1988 clause-20: to the effect “Section
6 of the Industrial Disputes Act shall be omitted.”
 126

3.4.5 Voluntary arbitration

Arbitration is a procedure whereby a third party, whether an individual

arbitrator or board of arbitrators, not acting as a court of law, is empowered to take a

decision, which disposes of the dispute.74 Arbitration is voluntary when both the

parties to the dispute agree without any compulsion from outside, to leave the dispute

to the arbitrator and to abide by the decision of the arbitrator. To ‘arbitrate’ means to

give judgement or “to make decision”. This method is similar to that of adjudication,

but whereas in adjudication the judge is a state appointed the parties to the dispute

select public official, in arbitration the arbitrator. Of course, the system does not bar

the selection by the parties of any public official as an arbitrator.

The system of voluntary arbitration is generally seen as a method of settling

labour disputes, which operates, effectively as a substitute for the strikes or lockouts.

Voluntary arbitration has therefore been encouraged and promoted as a matter of

public policy in a good number of countries.75

The system of voluntary arbitration is widely resorted to resolve present and

future disputes in countries where collective bargaining is highly developed as the

main form of settlement of disputes. The collective agreements often provide an

arbitration clause and thus parties through arbitration settle the disputes, when the

collective bargaining mechanism fails in an individual case.

74ILO Office, supra note.6, p.147.

75 Ibid., p.158
 127

The persons selected as arbitrators are generally lawyers, judges, economists,

and former civil servants etc., who have gained personal prestige in the locality. As

Kahn Fruend put it, “Judges have played a considerable role in the development of

industrial arbitration in Britain, and in United States too, lawyers, both practicing and

academic, are among the most successful arbitrators. But the role of economists and

the social scientists has been equally prominent.... This is one of the few social

activities, which have not become institutionalised, or at any rate not comparatively

_ 76
so.

Voluntary Arbitration in India

The origins of voluntary arbitration as a method of settlement of industrial

disputes in India go back to 1918, when the Ahmedabad Textile Labour Association

under the leadership of Gandhiji and the Ahmedabad Mill owners’ Association

successfully resolved the plague bonus dispute through voluntary arbitration. Gandhiji

preached this ideology as a guiding force of all labour organizations. Gandhiji said,

“If I had my way, I would regulate all labour organizations of India after the

Ahmadabad model.77

But, later developments show that this model could not be extended to other

parts of the country or to other labour organizations.

76 Kahn Freund., Selected Writings, supra note 5, p. 70.

77 Lakshhman P.P., Congress and Labour Movement in India (Allahabad, 1948) p.10; Quoted in
Sukomal Sin,, p.70
 128

Thereafter, the Bombay Industrial Disputes Act, 1938 and its successor

Bombay Industrial Relations Act, 1946 recognized voluntary arbitration. The first and

second Five Year Plan documents emphasized the need to popularise voluntary
7ft
arbitration as part of government’s labour policy.

In 1956, a significant step was taken in the direction of encouraging voluntary

arbitration by amending the I.D.Act and introducing a specific provision in the Act

relating to voluntary arbitration.79 The Code of Discipline 1958 emphasized that both

the managements and unions would strive to settle their disputes, which could not be

settled through negotiations, by adopting the voluntary arbitration method. The

industrial Truce Resolution adopted in 1962, in the wake of the Chinese conflict,

further stressed the need.80

In 1964, the provision in the I.D. Act relating to arbitration, viz., Section 10-A,

was amended mainly to provide for an extended operation of arbitration award in

cases of majority arbitration.81

Further to promote the idea of voluntary arbitration as a substitute for strikes

and lock outs, the Government of India appointed in July 1967, The National

Arbitration Promotion Board (NAPB), to Constantly monitor and provide necessary

guidelines to promote arbitration. Such Boards were there after set up in many states.

78 See Planning Commission, The First Five Year Plan, Summary (1952) 116-122, Second Five Year
plan-p.572 (1956).
^Industrial Disputes (Amendment and Miscellaneous Provisions) Act, 1956 (Act 36 of 1956)(w. e. f.
10-3-1957) Section 10-A was inserted by this amendment.
80 Giri V.V. supra note 47, p-91.
81 See Section. 10-A (3-A) and Section 18 (3) of the I.D.Act.
 129

Both employers and unions may always approach and seek assistance of these Boards

for the choice of arbitrator and in any other matter connected with arbitration.

With a view to making voluntary arbitration almost compulsory, the 1988

Trade Unions and Industrial Disputes (Amendment) Bill proposed another restriction

on strikes and lockouts. For a legal strike or lockout, it was necessary, as per this

proposal, that the party must have offered for arbitration and the other party had

rejected such an offer.82

The Second NCL has recommended that, in case of non settlement of disputes

in socially essential service providing organizations like Water Supply, Medical

Service, Sanitation, Transport, Electricity etc., by mutual agreement between

employer and workmen and 51% of the workmen have voted in favour of a strike, it

should be taken that the strike taken place and the dispute must forth with referred to

compulsory arbitration by arbitrators from the panel of the Labour Relations

Commission (LRC) or arbitrators agreed by both sides.83 Further a named arbitrator or

panel of arbitrators of all disputes arising out of interpretation and implementation of

the settlement and any other disputes recommends it for having an arbitration clause
OA

in every settlement providing for arbitration.

82 The Trpde Unions & Industrial Disputes (Amendment) Bill -1988 - Clause 45 Amendment to
Section 23 of the I.D. Act.
83 Second NCL Report, supra note 69, p.40
84 Ibid., p. 45
 130

Poor response to the system

Despite all these efforts by the government, the voluntary arbitration has not

become popular with the employers and trade unions. Statistics available show that
nr

number of disputes referred to voluntary arbitration has been declining.

Commenting on the factors responsible for the failure of all government efforts

in this direction First NCL commented:

With little progress made in collective bargaining, which presupposes the

existence of a recognized union representing all the employees and a responsive

employer, who together build up over a period an attitude of mutual trust and an

acceptance of bonafides on the two sides, it is perhaps not a matter for surprise that

voluntary arbitration has so far had little success in India.

Thus, the underdeveloped stage of trade union movement in the country and

the absence of healthy and orderly collective bargaining traditions are mainly

responsible for the extremely poor response to the system from the unions and

employers. The experience of the countries where voluntary arbitration is widely

resorted to show that it can only grow as a supplement to collective bargaining,

because it is for the parties to agree for arbitration.

Other reasons generally cited for the lack of expected progress in this area are:

1) Easy availability of adjudication in case of failure of negotiations, 2) dearth

of suitable arbitrators who command confidence of both parties, 3) cost of arbitration

85 See Srivastava S.C., “Voluntary Labour Arbitration,” 23 JILI, (1981) pp. 398-99.
86 NCL Report, supra note 26, p.324
 131

to the workers, 4) absence of recognized union which can bind all workmen by its

agreements and 5) legal technicalities, which are same as in case of compulsory

adjudication.87 V.V.Giri opined that, “so long as compulsory adjudication is also kept

on the statute book, voluntary methods cannot succeed.88

Voluntary Arbitration under the Industrial Disputes Act

Voluntary arbitration as envisaged in Section 10-A is arbitration in name and

in reality it is more adjudication. Once the parties make a reference to an arbitratory,

OA

it partakes the character of adjudication. The procedures, powers, jurisdiction,

awards and judicial review of awards are all same for both. Thus, “the efficacy of

arbitration is largely buttressed by reliance upon state intervention.90 In India the

emphasis is mainly on compulsory adjudication and the voluntary arbitration has not

taken root inspite of the influential advocacy for it in different policy making

forums.91

Status of an Arbitrator under the Act

The arbitrator appointed by the parties under this Act is considered as a

“statutory arbitrator” and a “tribunal” within the meaning of Articles 136 and 227 of

the constitution of India.92

87 Ibid., See also Srivatsava. S.C., supra note. 87

88 Giri V.V. supra note 47, p.93.
89 Malhotra. O. P., supra note 41, Vol.l, p.14.
90 Indian Law Institute, Labour Law and Labour Relations, (1968 ed.) p.181
91 First NCL Report, p.324
92 See Rohtas Industries Ltd. v. Rohtas Industries Staff Union, (1976) I. L. L. J.21A (SC) and Gujarath
Steel Tubes Ltd. v. G. S. T Mazdoor Sabha, (1980) I. L. L. J. 137 (S.C.) cf, Engineering Mazdoor
Sabha v. Hind Cycles, Ltd. (1962) IIL. L. J. 760 (SC).
 132

Further in Gujarath Steel Tubes Ltd. v. Gujarath Steel Tubes Mazdoor Sabha.93

The Supreme Court by a creative interpretation, which may be considered as judicial

legislation, conferred on an arbitrator the same powers that are vested in the labour

tribunals in cases of disputes relating to discharge or dismissal of workman as

punishment. By this decision, the arbitrator also gets appellate jurisdiction in such

cases and he can even interfere with the quantum of punishment imposed by

employer. Despite the absence of the word ‘arbitrator’ in section 11-A, the Supreme

Court conferred these exceptional powers on arbitrators.

3.4.6. Compulsory Adjudication

Compulsory adjudication, known during the initial stages in this country and

even now in some countries as compulsory arbitration, is the submission of a dispute

to an adjudicator or arbitrator, appointed by the state, without the need for any

agreement or consent of all the parties involved in it, for a legally binding award.

Compulsory adjudication provides a quasi-judicial forum for resolution of industrial

disputes, to which the parties are compelled to resort, whether they like it or not.

When the parties fail to resolve the dispute through voluntary negotiations and

normally, conciliation efforts have also failed and the parties do not agree to resort to

voluntary arbitration, as an ultimate resort, compulsory adjudication machinery may

be pressed into service by the government rather than allowing the parties to resort to

strike or lock out. The main idea is to empower the government, whose responsibility

it is to ensure industrial peace, to compel the parties to abide by the decision of the

93 (1980)1.1. L.J. 137 (S.C.).

 133

adjudicator with a view to avoid confrontation and trial of strength which are

considered harmful not only to the parties but also to the economy of the nation. Once

the government refers the dispute for adjudication, in respect of an industrial

establishment, it can prohibit strikes and lock outs in that establishment.

Compulsory adjudication is used in many countries, even in U.S.A. and

Britain, as an exceptional measure and also mainly for the settlement of disputes of

rights nature.

Nature of compulsory adjudication

The ILO publication on “conciliation and Arbitration” pointed out “The two

questions of compulsory arbitration in interest disputes and of legislative restrictions

on the right to strike in this category are probably the most controversial issues facing

those responsible for public policy as regards the extent of state intervention in the

settlement of industrial disputes. Compulsory arbitration is a subject of controversy

both as a method of settling disputes and as a means of preventing strikes.94 The

above statement clearly indicates the controversial nature of compulsory adjudication

for settlement of interests’ disputes and not of rights disputes. Adjudication as a

method of settlement of rights disputes is widely applied in many countries and there

is no controversy on this aspect, as it does not involve the restricting of the right to

strike. Although compulsory arbitration exists in some form or the other in many

countries, the question that often arises is whether or not the existing system should

94
ILO, supra note 6, pp. 160-61.
 134

be modified, with a view to enlarging or limiting its scope or to simply improving its

operation and rendering it more effective.

Approach to settlement of disputes

In the earlier approach to the settlement of labour disputes, the issue facing

public policy was considered to be that of compulsory arbitration verses strikes.

Commenting on the earlier and present approaches, the ILO publication maintained.

“Even today there seem to be proponents of compulsory arbitration who

conceive of the issue solely and very largely in these terms, (compulsory arbitration

verses strikes) and who would support their view by expressing the issue as one

between compulsory arbitration and the “law of the jungle”. In the main, however, the

question of compulsory arbitration is now considered mainly in relation to collective

bargaining, where the right to strike is held to be an essential element of the right to

bargain collectively. The emergence of collective bargaining as a distinct institution in

the field of labour relations has substantially changed the contours of the problem of

compulsory arbitration.95

It is widely recognized now that through compulsory arbitration, the state

replaces1 the contractual freedom of the parties with the power of third party to

determine the terms of their relationship. It is also commonly assumed that where

compulsory arbitration is applied, particularly in the interests’ disputes, it will tend to

discourage collective bargaining. It is undeniable that, as a matter of principle, it is in

95
Ibid.
 135

the highest public interest that employers and employees should be able to negotiate

collective agreements and that collective bargaining should accordingly be

promoted.96

In developing countries, which have introduced the general system of

compulsory arbitration, one of the reasons often advanced to justify it is the weakness

of the trade unions in these countries. But those who plead for more room for

collective bargaining argue that the very presence of the system of compulsory

arbitration makes the unions more dependent on the government and this system and

therefore it further weakens the unions.

Above all, the question of averting work stoppages, which is considered

essential in a developing economy, still influences the policy makers to continue the

system of compulsory arbitration as an alternative to direct action by the parties.

Compulsory adjudication and ILO conventions on collective bargaining

It is significant to note that the system of compulsory arbitration, entailing

strike prohibitions, which do not fall within the limits deemed to be acceptable, and

which may undermine collective bargaining, might be considered to be incompatible

with the guarantees of ILO convention No. 87. (Freedom of Association and

Protection of the Right to Organize convention, 1948) and the convention No. 98

(Right to Organize and collective Bargaining Convention, 1949)97

96 See Ibid., p. 161

91 See Ibid., p. 163.
 136

It may be interesting to note that these two important Conventions of ILO,

which seek to protect the right to strike of employees, with reasonable limitations, and

to promote collective bargaining have not so far been ratified by the Indian

Government.98

Need for Adjudication

However, there is a safety margin beyond which the state cannot be expected

to permit strikes and lock outs, which are likely to threaten the vital interests of the

community. Therefore, such critical disputes or disputes in public utility services like

water, power, transport, etc., or disputes during the times of war or other emergency

may have to be settled though the system of compulsory adjudication, as a last resort.

Similarly, in disputes involving the rights of the parties i.e., right disputes,

“which involve of the application of legal principles to ascertained or ascertainable

facts, where the parties do not arrive at a voluntary settlement, their existing rights

and duties will have to be determined by a judicial process culminating in the

imposition of legal sanctions such as orders for performance, injunctions and

damages.99 This statement of Kah-Freund known for his penchant for collective

bargaining is recognition of the proposition that adjudicatory settlement of rights

disputes is not only necessary, but also desirable.

Therefore, the adjudication method should continue in some form, and there is

no room for any controversy on this matter. Then the question left is how to improve

98 See Mitra, N. L., “Toil in Distrust”, 31, J/I/(1989) p.186.

99 Kahn Freund, supra note 5, p.56.
 137

the operational efficiency of adjudication so as to render justice to the parties

expeditiously, at a less cost and with least technicalities. The thesis aims at probing

into these areas.

As against the above arguments against compulsory adjudication as a method

of settlement of interests’ disputes, its proponents cite the following reasons for the

continued operation of this system.

1. India, being a developing country, cannot afford work stoppages, which would

interfere with achievement of her production goals.

2. If strikes are freely permitted, there is a “danger” that trade union movement

might play into the hands of communists, who are already strong in the trade

union movement in the country.

3. Trade unions in India are generally weak and workers lack sufficient resources

to survive long strikes, which may be necessary in the process of collective

bargaining. So, if compulsory adjudication is not available, workers and their

unions would be at the mercy of employers.

4. The government would lose its control on labour relations, if it has no power to

refer disputes for adjudication.

5. Strikes and lockouts are harmful to the interests of the community and

therefore the government has an obligation to the people to intervene in

 138

industrial disputes wherever it is necessary so as to ensure free flow of goods

and services to the community.100

However, there is now a growing awareness that both collective bargaining and

voluntary arbitration built into the collective agreements, should be encouraged to

replace the system of compulsory adjudication in the country, particularly in matters

concerning interest disputes. The present adjudication machinery, however, has to

continue for the settlement of rights disputes and emergency cases.

Compulsory adjudication under the Industrial disputes Act

The central theme of the I.D. Act is compulsory adjudication. As enacted in

1947, excepting the provisions relating to other machinery, every provision in the act

dealt with only compulsory adjudication and prohibition on strikes and lock outs.

Since the succeeding Chapters are designed to deal with these aspects in detail, in this

chapter only the policy aspects have been discussed.

3.4 Conclusion

Despite several objections based on the fundamental issues as well as

functional aspects, it cannot be denied that compulsory adjudication in our country,

with the intervention of High Court and Supreme Court, has made very large

contribution towards the betterment of service conditions of workers. The NCL

recorded this in the following words:

100
See Myers Charles & Kannappan.S., supra note. 67, p.321.
 139

“It cannot be denied that during the last twenty years the adjudication

machinery has exercised considerable influence on several aspects of conditions of

work and labour management relations. Adjudication has been one of the instruments

for improvement of wages and working conditions and for securing allowances for

maintaining real wages, bonus and introducing uniformity in benefits and amenities. It

has also helped to avert many work stoppages by providing an acceptable alternative

to direct action and to protect and promote the interests of weaker sections of the

working class who were not well organised or were unable to bargain on an equal

footing with the employer.101

101
First NCL Report, supra note.26, p.325.