Industrial Dispute Act


Industrial Dispute Act was enacted to provide machinery and forum for the settlement of conflicting and seemingly irreconcilable interests and differences without disturbing the peace and harmony in industry in assuring industrial growth which is prerequisite for a welfare state. Industrial Dispute Act is a piece of legislation calculated to ensure social justice to both employers and employees and advance progress of industry by bringing out harmony between the parties.

Industrial Disputes

"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 the employment or non-employment or the terms of employment or with the conditions of labour, of any person;

Parties to the Dispute

The dispute or difference should be between employers and employers or between employers and workmen, or between workmen and workmen.

In ‘Workmen of Dimakuchi Tea Estate v. Management of Dimakuchi Tea Estate’ the Supreme Court interpreted the term ‘any person’. It observed that having regard to the scheme and object of the Act and its other provisions, the expression ‘any person’ in S. 2(k) of the Act must be read subject to such limitations and qualifications as arise from the context; the two critical limitations are –

1. The dispute must be a real dispute between the parties to the dispute so as to be capable of settlement or adjudication by one party to the dispute giving necessary relief to the other

2. The person regarding whom the dispute is raised must be one regarding whose employment, non-employment, the terms of employment or conditions of labour the parties to the dispute have a direct or substantial interest. In the absence of such interest, the dispute cannot be said to be a real dispute between the parties.

Where the workmen raise a dispute as against their employer, the person regarding whose employment, non-employment, the terms of employment or conditions of labour the dispute is raised need not be a workman within the meaning of the Act, but must be one in whose employment, non-employment, the terms of employment or conditions of labour, the workmen as a class have a direct or substantial interest.

Subject Matter of Dispute

The subject matter of the dispute must be:

• connected with employment or non-employment

• connected with terms of employment

• connected with conditions of labour


Prior to the 2010 amendments, normally only collective disputes or disputes raised by a group of workmen could be taken up as industrial disputes. An individual workman could raise a dispute if it fell under the exceptional cases listed in section 2 a: cases of dismissal / discharge / retrenchment / termination only. For non-termination issues (like promotion / transfer / punishments not amounting to termination) individual workman couldn’t raise a dispute if there are no other workmen supporting his case.

But after the 2010 amendment, any person who is a workman employed in an industry can raise an industrial dispute. The amendment says, “(2) Notwithstanding anything contained in section 10, any such workman as is specified in sub-section (1) may, make an application direct to the Labour Court or Tribunal for adjudication of the dispute referred to therein after the expiry of forty-five days from the date he has made the application to the Conciliation Officer of the appropriate Government for conciliation of the dispute, and in receipt of such application the Labour Court or Tribunal shall have powers and jurisdiction to adjudicate upon the dispute, as if it were a dispute referred to it by the appropriate Government in accordance with the provisions of this Act and all the provisions of this Act shall apply in relation to such adjudication as they apply in relation to an industrial dispute referred to it by the appropriate Government."

Referring the dispute for settlement to the third part had been a cultural and intellectual trait of India a long time ago. At the grass root level the Indian epics are full of examples of consensual procedures followed for the settlement of disputes. The British system of settling disputes has embedded in the roots of India a judicial system of settling disputes which has proved successful to a huge extent. The state has had a monopoly over settling the disputes of the parties concerned and this has made the unofficial and informal settlement procedures extinct. This shift has provided the judiciary with an opportunity to use the ADR methods and procedures to minimize the stress of docket explosion as well as a challenge to improve upon the old delayed procedures and maintain people’s trust in itself. The ADR procedures were not considered to be at the highest level by Indian judiciary and they were not perceived to cause any conflict between the ADR and the courts. Subsequently the Chief Justice and the judges believe the new development to be necessary and desirable. As seen in the Mediterranean and Eastern Export Co. Ltd. V. Fortress Fabrics Ltd. (1948) 2 All E R 186, “the day has long gone by when the Courts looked with jealousy on the jurisdiction of arbitrators." [i] 

Moreover the new amendments to the Indian Civil Procedural Code quite openly states a willingness to incorporate the ADR procedures and mechanism into the court systems of handling disputes by empowering them to referring the disputes for conciliation and arbitration wherever required. This integration of conciliation and arbitration process is definitely a historic and significant development.

The main driver of the establishment of the UNCITRAL Model Law on rules of conciliation and arbitration process was to settle disputes arising in the context of international trade and commercial relations as a result of liberalization, globalization and privatization. The adoption of such rules by the General Assembly of UN was done with a motive to establish harmonious international economic relations between the countries which have different social, legal and economic systems in place. However while adopting these rules, the Indian Arbitration and Conciliation Act covered certain laws relating to the domestic arbitration, enforcement of foreign arbitral awards, international commercial arbitration and to define laws relating to conciliation. This was the first attempt in the Indian history that an extensive legislation was laid down in the context of conciliation. The Statement of Objects and Reasons of Arbitration and conciliation Bill, 1995 stated:

“Like arbitration, conciliation is also getting increasing worldwide recognition as an instrument for settlement of disputes. There is, however, no general law on the subject in India. Though the said UNCITRAL Model Law and Rules are intended to deal with international commercial arbitration and conciliation, they could, with appropriate modifications, serve as a mode for legislation on domestic arbitration and conciliation".

What is Conciliation?

CONCILIATION and MEDIATION are terms that are often used interchangeably. Basically, it is a dispute resolution process which is confidential, voluntary and private. In conciliation, a person who is neutral aids the parties involved in reaching a negotiated settlement. This method provides the involved parties with a chance to converse, negotiate an explore options with the help of a neutral third party that is the conciliator in order to exhaustively determine if at all a settlement is possible. The conciliator cannot impose a settlement as he does not have the power to do so. His main function is to encourage the parties involved to reach an amicable settlement by breaking any possible deadlocks. He does so by acting as a channel for communication between the two parties involved and he allows the parties to focus on the core objectives and filters out any kind of disturbing elements.

Conciliation Procedure

The first and foremost step is to select a conciliator who is both neutral and is a third party. This can be done either with the help of an institution or by the parties themselves. The parties enter into an initial discussion regarding what the conciliation cost would come out to be and who all will attend the conciliation. The parties at times are even encouraged to bring lawyers with them. The cost of the sessions is usually shared by both the parties. The process of conciliation is explained to the parties involved and also the conciliator is introduced to both the parties. The basic ground rules of propriety and courtesy are laid down and are scrupulously followed.

In the very next stage, the parties are asked to present their case and to vent out their feelings by explaining their case. The conciliator only listens and identifies issues but makes no judgment whatsoever. It is followed by a session of brainstorming where the creative solutions are explored. The main aim at this stage is moving away from the positions and focusing on interests. The conciliator may even request the parties to join him in a private session if the parties are uncomfortable in sharing certain pieces of information in the joint sessions. If the parties wish so, such information can be kept confidential. As a final step, the parties reach a consensus and written agreements are made. Reviewing the case and monitoring are very important.

What is the success rate of conciliation?

All the countries that have resorted to mediation/conciliation enjoy a very high success rate. With the enforcement of the Arbitration and Conciliation Act 1996 in India, the Parliament has recognized alternative forms of resolution of disputes. Any settlement that is reached through mediation or "conciliation" (as termed in the Act) enjoys the same effect and status as an arbitration award, and hence is enforceable as if it were a decree of court. The Act also protects the confidentiality of the proceedings.


The Arbitration and Conciliation Act 1996

Initially promulgated as an Ordinance, this Act (the 1996 Act) both consolidates and streamlines the law that relate to Arbitration in India mainly by bringing the various provisions relating to arbitration under one statute which in the past were spread over three separate Acts. The Act is drafted on the lines similar to the UNCITRAL Conciliation Rules and UNCITRAL Model Arbitration Law and for the very first time statutorily it recognizes conciliation by providing the rules of engagement.

The Code of Civil Procedure (CPC)\

For many years, our country India has suffered from quite an overwhelming backlog of cases. On an average, a typical civil case takes almost one entire decade in getting adjudicated. The Indian Legislature did recognize this and hence in 1996, in order to take away the burden from courts and to build up more efficient machinery for managing cases, conciliation was integrated as an option for dispute resolution in appropriate commercial and civil matters. As a result, in 2002, the CPC could make ADR an integral part of our judicial process. According to the new inserted section 89 of CPC, if court feels that there could be some elements that could be acceptable to the parties, the court may be able to formulate some terms to reach an agreement and refer the same for conciliation, arbitration, mediation and judicial settlement.

Conciliation vs Arbitration under the 1996 Act

Settlement through Arbitration is more privatized than judicial settlement, whereas settlement through conciliation is further more privatized than arbitration. In case of judicial settlement the parties concerned do not have any control over the decision given and they have to abide by it or may appeal to a higher court. But in case of arbitration the parties concerned with the dispute are given substantial freedom to regulate the various contents except for some provisions during the various phases of the arbitration proceedings. The parties in such a case have no control over the decision process, but the award is made by their consent. Moreover while the Act requires that the arbitration settlement has to be done in writing, but there is no such provision in case of conciliation. But this does not render much practical difference between the two because a written offer and the parties written acceptance is required to start the process of conciliation. On the other hand in case of arbitration even if a prior written consent hasn’t been taken and the parties have appointed the arbitrator to proceed with submitting the written claim and defense and thereby continue with the arbitration proceedings till the end of the award, the provisions of section 7(2) under 4(c) are deemed to be fulfilled. Also before the 1996 Act was enacted it was possible to enter into an arbitration agreement even if the dispute has not arisen, but such a provision was not possible for the conciliation process. This provision clearly stated that the conciliation agreement should be ad hoc settlement only after a dispute has been raised. But now the act states that there cannot be any objection for not allowing the parties to enter into a conciliation agreement even before a dispute has been raised and the conciliation can be done for disputes which may arise in future. While an arbitration proceeding is on, the parties concerned with the dispute can engage into a conciliation agreement on their own or may authorize the arbitrator to settle the dispute through mediation or conciliation. This settlement would be recorded as an arbitral award. But when a conciliation proceeding is going on the parties cannot initiate any arbitration or judicial proceeding except when this is done to preserve their rights.

The amendments in the Civil Procedure Court in 1999 introduce the provision of allowing the courts to refer the unresolved cases for conciliation, arbitration and mediation to facilitate the resolving of the disputes. No such provision existed in the Arbitration and Conciliation Act of 1996 where the courts could refer the cases for arbitration and conciliation unless there was an agreement between the concerned parties in that respect. But under the new section 89 added in the CPC, the courts can refer the cases where they think that there exists a chance of a settlement acceptable to the concerned parties. The court has the power to formulate terms of the settlement and offer them to the parties for observation and after receiving the feedback may reformulate those terms and make a reference for mediation, arbitration or conciliation. The aim of the court here is not to assure an agreement but only to view the observation of the parties so that in case there exists a possibility of an agreement during the formulation stage, the court can base its judgement on those terms eliminating the need of further negotiations through arbitration and conciliation. But in case such a reference has been made, then it is considered a legal reference under the section 76 of the 1996 Act and will overrule the provisions of the Civil Procedure Code 1999 under which the initial reference was made.

The Supreme Court in its judgement in Salem Bar Association v. Union of India directed a committee to frame draft rules under section 89(2)(d) of the Civil Procedure Code for mediation. Therefore the Committee headed by Mr. Justice M. Jagannadha Rao, Chairman of the Indian Law Commission prepared an exhaustive code for the regulation of the ADR process under section 89 of the CPC. It consisted of two parts where the first part deals with the ADR rules which consists of the procedure which has to be followed by the concerned parties and the Court while choosing a particular ADR method. The second part deals with Mediation Rules of 2003 which consist of the draft rules of mediation under S. 89(2) (d) of the CPC. Under section 89(1)(a) to (d) the Court shall not refer any dispute for arbitration or conciliation without taking a prior written consent of the parties involved. But under the rule 5 (f) and (g), the court has been given the power of reference to ADR methods under certain circumstances even without the consent of all the parties. Rule 4 requires the Court to undertake counseling to facilitate the parties in choosing the right method of ADR depending on the relation of the parties which needs to be preserved as well as the nature of the case. Under the Rule 6 (2), in case the ADR methods fail, the Court shall proceed in accordance with the law while judging the case when such case is referred back to it.

Part 2 of the Rules lay certain provisions regarding the actual manner in which the mediation must be conducted which make necessary changes to some provisions of 1196 Act concerning conciliation. A noteworthy feature of these provisions is reflected by Rule 19 which imposes an obligation on the parties to make a substantial effort to arrive at a settlement and this is aimed to prevent the whole procedure from being reduced to a waste. The rules also deal with certain cases wherein the parties succeed in arriving at a settlement through the ADR process by only regarding some of the issues considered necessary. Thus Court may include the partial settlement of only those issues and deal with the remaining issues according to the law. The Rules also lay down certain codes of ethics which have to be followed by the mediator in a correct and effective manner so as to arrive at an unbiased and fair settlement which would instill confidence in the concerned parties in the mediator and also in the credibility of the process.

Advantages of Conciliation

For resolving industrial disputes of almost any kind pertaining to contracts, conciliation has proved to be an alternative which is more flexible than both arbitration and litigation for the simple reason that it is completely voluntary.

At any stage in a conciliation proceeding, parties can withdraw without any kind of prejudice to their own legal position.

Conciliation facilitates in settling the matters at the very threshold of the dispute. Hence it helps in avoidance of protracted litigation efforts at any of the courts. Also, because of the fact that we can schedule conciliation very early in the dispute, a settlement is reached much more early than litigation.

The parties concerned get engaged directly while negotiating the settlement.

Since the conciliation officer is a neutral third party, he can look at the dispute objectively and hence can assist the parties involved in exploring those alternatives which they themselves might not have considered.

The parties involved cut costs and save a lot of money which is otherwise spent on unproductive things such as traveling to the courts and the legal costs involved in retaining of counsels and litigation and also the staff time.

The parties are free to choose conciliators and they can carefully select them looking at their knowledge and experience.

The process of conciliation significantly improves the probability of the parties involved in continuing in an amicable business relationship both during the proceedings and even after it.

The special needs of the parties can be catered to by making the creative solutions a part of the settlement.

Throughout the course of the conciliation process, confidentiality is strictly maintained with respect to the information exchanged and the offers and counter offers that are there as solutions. Also whatever information is exchanged in this process may not be leaked out and used as evidence in any judicial, arbitral or other proceedings.

Qualities of a Conciliator

The most important qualities of a good conciliator include:

Every conciliator should possess the two attributes of independence and impartiality. It is imperative that the conciliator not only possesses these qualities but also it is visible to others. The parties involved should have full confidence in his neutrality and integrity and he must be above all suspicion. The conciliator should possess enough independence so as to not to be influenced or swayed by anyone else. He should be strong and should be able to resist any kind of persuasion or undue pressures from powerful unions or employers.

A conciliator should not really let any conciliation proceedings that he is overseeing to become only a formality or only a road that leads to arbitration. He should be capable of offering the party options that will convince them to reach a settlement with his aid and to seriously make an effort to reach such an agreement.

A conciliator needs to deal with a variety of people and also has to preside over the joint meetings that happen as a part of the conciliation proceedings. Hence he should not just be able to tactfully control and guide these joint discussions but also exhibit clear headedness, impression of expression, responsibility and mature judgment. He must be able to demonstrate to others that he has sufficient amount of practical mindedness and commonsense.

He should possess a sense of humor to release the tensions that happen in joint discussions and should also have a friendly personality. He should also have special alacrity of mind so that he can quickly grasp and analyze the key elements surrounding the controversy.

A conciliator should be well versed with all labor laws and the regulations that concern industrial relations and the settlements of any industrial disputes. He should have a fair idea of the industrial system, for example the structure and development of trade unions and employers’ associations; the existing methods in collective bargaining, the practices and procedures for negotiation, how the negotiating bodies that are set up by parties operate, the key patterns and causes of industrial disputes, knowledge about personnel management, how a trade union functions within an undertaking, disciplinary and grievance procedures and the machinery for joint consultancy.

Report of Settlement of ID U/S 12(3)

If the conciliation officer succeeds in bringing about an understanding, he should get the parties to sign a settlement in form-H (Form of Memorandum of Settlement) as per sn.12(3), 18(3) and rule-58. As per rule 75, he has to maintain a register in form-o, giving the details of the settlements signed by him.

Report of Failure of conciliation U/S 12(4)

If the conciliation officer fails to bring about a settlement, as per sn.12(4) i.e. if no such settlement is arrived at, the conciliation officer shall, as soon as practicable after the close of the investigation, send to the appropriate Government a full report setting forth the steps taken by him for ascertaining the facts and circumstances relating to the dispute and for bringing about a settlement thereof, together with a full statement of such facts and circumstances, and the reasons on account of which, in his opinion, a settlement could not be arrived at. This is called a failure report. Before sending the failure report he should ask the disputing parties whether they would like the dispute to be sent for arbitration. As per sn.12(6) he is expected to close the conciliation proceedings within 14 days but with the consent of the parties he can keep the conciliation process going for a longer duration.

Note: unlike in arbitration/adjudication proceedings, a conciliation officer has no power to enforce his decision on the parties. He can only try to persuade the parties to accept his suggestion.