Labour Law for Beginners: The Industrial Disputes Act, 1947

This article is part of a series of blog posts by Simpliance that aim to guide both employers and employees with respect to the best practices of labour law compliance. They also act as a guide for individuals unfamiliar with the regulations governing employment in India. This blog on Industrial Disputes is the second post in the series, with the first one being on minimum wages.

Introduction

Regardless of the level of economic development, policies governing dispute resolution form an essential part of the labour law framework in any nation. This is due to the fact that complaints and conflicts are inevitable in any working relationship, and the object of policy is aimed at providing mechanisms that address these disputes effectively and expeditiously. In recent times the use of voluntary mechanisms such as arbitration, conciliation, and mediation has become central to dispute resolution policy. This is because they lack the adversarial element that ordinary litigation proceedings are characterized by and thus, have been effective in maintaining relationships during the process of dispute resolution.

The Industrial Disputes Act, 1947 is the primary legislation governing dispute resolution in India.  It was enacted to provide for the investigation and settlement of industrial disputes, to prevent illegal strikes and lockouts, to provide relief to workmen during lay-off or after retrenchment or wrongful dismissal. It also provides for the mechanisms of conciliation, arbitration, and adjudication to promote measures for mutually beneficial relations between employers and employees.

Applicability & Scope of the Act

To understand the scope of the Industrial Disputes Act, 1947 it is important to understand the meaning and import of the terms ‘industrial dispute’ and ‘industry’ as defined in the statute. Section 2(k) of the Act states that the former describes any dispute or difference between employers and employees, or between employers and workmen, or amongst workmen, which is connected with the employment or non-employment or the terms of employment or with the conditions of employment of any person. Section 2(j) of the Act defines the latter as any business, trade, undertaking, manufacture, or calling of employers and includes any calling, service, employment, handicraft, or industrial occupation or avocation of workmen.

Therefore, to attract the application of the Act, a dispute would have to occur in an establishment falling under the definition of industry and would have to involve one or more of the stakeholders mentioned in the definition of industrial disputes. In other cases, there is no scope for governmental interference and thus the only recourse is to approach courts or engage in alternate dispute resolution mechanisms.

It is pertinent to note that the definition of ‘industry’ has been discussed extensively in case laws. In the landmark case of Bangalore Water Supply and Sewerage Board v. R. Rajappa, the Supreme Court laid down a three-pronged test to ascertain whether a particular activity was industrial in nature. If the said activity involved systematic and organized activity, cooperation between employer and employee, and was carried out for the production of goods and services, it would be considered industrial in nature. The elements of capital investment and profit motive were held to be immaterial in the determination of the above question. In the case of an undertaking engaging in multiple activities, which might or might not be one of the core activities, the Dominant Nature Test is applicable. It determines whether a specific activity of any enterprise can be classified as industrial in nature by examining the predominant nature of the activities conducted by the enterprise and the integrated nature of the departments.

Dispute Redressal Bodies

Industrial disputes may be broadly classified into interest disputes and rights disputes. Interest disputes are mostly related to the determination of a revised wage level and other conditions of employment. Whereas, rights disputes relate to the interpretation and application of existing standards of employment and usually involve an individual worker or group of workers. The Industrial Disputes Act, 1947 has provided for the establishment of both internal and external mechanisms to settle industrial disputes. Internal mechanisms include bodies such as the works committee and the grievance redressal committee.

Works Committee

Section-3 of the Act is statutorily mandated in all industrial establishments having a hundred or more workmen. It consists of representatives of employees and workmen of an establishment. The workmen’s representatives and employer representatives should be equal in number. The object of the works committee is to provide for an internal forum for dispute resolution as a precursor to litigation or external mechanisms for dispute resolution.

Grievance Redressal Committee 

Section-9(c) of the Act requires the employer in every industrial establishment in which fifty or more workmen are employed to provide for a grievance settlement authority. Every industrial establishment consisting of twenty or more workmen shall have one or more grievance redressal committees that shall be composed in equal proportion by members of management and the workmen. The total number of members in the committee shall not exceed six and shall include one female member if feasible. The Grievance Redressal Committee shall complete its proceedings within forty-five days after the receipt of a written complaint by an aggrieved party. Any workman dissatisfied by the decision of the committee may prefer to appeal against it. The employer is then obliged to consider the appeal and dispose of the matter within one month from the date of its institution and provide a copy of the decision to the aggrieved employee.

The Industrial Disputes Act, 1947 provides for the following external mechanisms to resolve industrial disputes: – 

Board of Conciliation & Conciliation Officers

Section 4 and Section 5 of the Act refer to conciliation as a mechanism for redressal of industrial disputes. The Government appoints Conciliation Officers by way of notification in the Official Gazette. They can be appointed to a specific area or industry, for a fixed period of time, and are considered to be acting in an administrative capacity.Their role is to facilitate dialogue between the parties so as to help them reach a common understanding. The Officer must submit a report within 14 days of the commencement of the conciliation of an issue/dispute. On the basis of the same, the Government is empowered to either take the issue further in the form of litigation or write to the parties.

The Conciliation Board is set up through a Gazette Notification issued by the Government to resolve industrial disputes amicably by aiding the parties in reaching a settlement. It comprises a Chairman and two or four members, all of whom must be impartial and must have no personal involvement in the cases. A number of members are appointed equally for each side of a dispute and are appointed on the recommendation of the parties. In case the parties fail to reach a conclusion, then the government appoints the members and proceedings resume. The Conciliation Board does not have powers to take suo moto cognizance of matters, it may only engage in a matter when the government refers a case to it. The board must submit a report within 2 months of the occurrence of a dispute which must be published by the government within thirty days of receipt of the report. In circumstances wherein the dispute is still not resolved, industrial tribunal or labour tribunal can be approached.

Court of Enquiry 

This court of civil nature under Section-6 of the Act is constituted by the government by way of notification to inquire into matters connected with or relevant to industrial disputes.

Labour Court

They have been constituted under Section 7 of the Act, consisting of only one person who is appointed by the government to oversee the proceedings of the court. Qualification of such a person is that they must have been/are a High Court Judge, or district judge or additional district judge for at least 3 years or held any judicial office in India for not less than 7 years. Their jurisdiction extends to matters specified under the Second Schedule of the Act.

Industrial Tribunal 

They have been constituted by government notification under Section 7-A of the Act, and one or more of its kind can be constituted. They are a quasi-judicial body; therefore, they must serve notice upon the parties to the reference by name before making any award. Their jurisdiction extends to matters specified in the Second or Third Schedule.

National Tribunal

This quasi-judicial body is constituted under Section 7-B to solve industrial disputes at the national level, of national importance. Disputes of such nature are taken up at the national level, in which one or more industries in one or more states are affected. The judge presiding this tribunal must not be lesser in position than a High Court Judge, must be less than 65 years, and has the same powers as other preceding tribunals, with respect to the declaration of an award.

Conclusion

While the Act provides for both internal and external bodies for dispute resolution and prevention of illegal strikes, lockouts and mitigates the use of unfair labour practices, from a compliance perspective it is important to have robust internal mechanisms that address disputes. External mechanisms generally require a great deal of effort, expense and time spent which generally leads to a soured relationship between employer and employee. Thus, having internal mechanisms is preferable because the likelihood of having to rely on adjudication or alternate dispute resolution reduces thereby providing for an amicable working relationship which ultimately leads to greater productivity.

Disclaimer: This blog is meant for informational purposes and discussion only. It contains only general information about legal matters. The information provided is not legal advice and should not be acted upon without seeking proper legal advice from a practicing attorney. Simpliance makes no representations or warranties in relation to the information on this article.