VOLUNTARY ARBITRATION UNDER THE INDUSTRIAL DISPUTES ACT: A CRITICAL ASSESSMENT

VOLUNTARY ARBITRATION UNDER THE INDUSTRIAL DISPUTES ACT: A CRITICAL ASSESSMENT

AuthorElana Rose Siby,
B.A.LLB(Hons.),
 School of Law Christ (Deemed to be University).

One of the fundamental objectives of labour and industrial legislation is to promote industrial peace and justice so that all parties equally benefit from their combined efforts and thereby develop industrial peace and progression in the country. In order to attain this objective it is necessary for efficient disputes settlement machinery. Measures for the conciliation and arbitration of industrial disputes are a necessary for the modern organisation of production and are required for the industrial and economic growth of a country. Labour unrest arises out of fluctuations in the industry and can be of psychological or economical causes. Adequate machinery for the conciliation and a resolution of collective labour disputes is an essential part of the social and administrative equipment of the modem industrial state. The need for such machinery arises directly from the industrial organisation of production. Technical organisation, the introduction of the factory system in the early days of the industrial revolution, has revolutionised the personal bond that previously existed between the employer and employee. Financial organisation and the development of the “soulless” limited company deepened and widened the gulf thus made. Vocational organisation, the setting up of trade associations for the protection of the interests of workers and of employers, established the whole employer employee relationship on a new basis. The necessity of organising this relationship and, in particular, of making provision for the conciliation and resolution of such disputes as might arise, followed as a matter of course. The progressive increase of organisation – technical, financial, and vocational – throughout the whole industries has made the situation more imperative.[1] 

The main methods for preventing and settling industrial disputes in India are Collective bargaining and Arbitration. Collective bargaining is a process of discussion and negotiation between an employer and a trade union resulting in a written agreement and the resolution of problems arising under the agreement. It has defined the process of collective bargaining as a technique by which, dispute as to conditions of employment is resolved amicably by agreement rather than coercion. Workers, who are generally represented by a trade union, use this medium to express their grievance about various issues such as wages and working conditions. Collective bargaining has been regarded as the best method of resolution for industrial disputes. In a way voluntary arbitration supplements collective bargaining.[2] When negotiation fails, arbitration offers an opportunity to appoint an arbitrator to resolve the issue on mutual grounds. In 1956, a new provision, Section 10A, was added to the Industrial Disputes Act of 1947 providing an option to the parties to refer their industrial dispute to an arbitrator of their choice. Arbitration provision was inserted in the Act with a view to create an atmosphere of harmony and confidence among the employer and employees and to avoid the bitterness which is generated in adjudication before other authorities. It was hoped that the voluntary arbitration, would infuse sense of confidence and co-operation and its award would be respected and observed unconditionally.

 The employer and employee relationship in India has not reached a satisfactory stage for an amicable settle of disputes. Collective bargaining has not developed in the country. Industrial Disputes Act, in general, has not come to the expectation to provide the atmosphere for quick and amicable settlement of industrial disputes. The success of “Code of Discipline” and “grie
vance Procedure” which were adopted by tripartite Indian Labour Conference in 1958 , is not beyond doubt[3]. The system of voluntary arbitration within the framework of the Act might have opened new avenue for amicable settlement, if it would have been given free hand to develop it. But there would hardly be any arbitration under Section 10A, because the parties would not like to leave their fate in the hands of an arbitrator whose award may not be reviewed by the courts of law. In these circumstances the likelihood is that parties would wait for the reference by the Government to the tribunal.[4]

The Evolution of Arbitration :

The Industrial Disputes Act, as enacted in 1947, had not incorporated provisions relating to Voluntary Arbitration. Consequent upon the establishment of the Planning Commission and the launching of the First Five Year Plan, there was a rethink over the mechanisms to be preferred for the resolution of industrial disputes. During the First Five Year Plan, the Government approached the labour policy from two angles, namely, the welfare of the working class and the country’s economic stability and progress. But, despite the professed governmental policy and anxiety to encourage collective bargaining and Voluntary Arbitration, no legal sanctity was given to Voluntary Arbitration until 1956. Severe criticisms against the machineries of conciliation and adjudication led to the introduction of section 10A relating to Voluntary Arbitration through the Industrial Disputes Miscellaneous Provisions (Amendment) Act, 1956. This Amendment sought to accord legal sanctity to the system of Voluntary Arbitration. However, the ‘Award’ of the Arbitrator still stood on a lower pedestal than the ‘settlement’ of an Industrial Tribunal, in so far as their binding nature was concerned. Whatever the Government had stated in its First Five Year Plan Manifesto in regard to its labour policy was reiterated when it embarked upon the Second Five Year Plan. Since the Constitutional Objective has been the establishment of a socialistic pattern of society, suitable modifications in our labour policy had to be necessarily effected. Consequently, there was a shift in emphasis in the Plan from statutory to non-statutory code of discipline and greater emphasis was placed on ‘Voluntary Arbitration’ for the resolution of industrial disputes in the event of a deadlock in the collective bargaining process. The Code of Discipline, 1958, therefore, reflected the faith of the employers and workmen in the system of Voluntary Arbitration and enjoined them to resort to it in case the collective bargaining and conciliation processes failed.

 The 1964 Amendment sought to place the arbitrator’s award at par with the award of an adjudicator and also the settlement arrived at in the course of conciliation proceedings. The Code enjoins on parties to refrain from taking unilateral action in connection with any industrial matter, to utilize the existing machinery for settlement of disputes with the utmost expedition, and to prevent strikes and lock-outs without notice and without exploring all avenues of settlement. It also discourages recourse to litigation and recommends that disputes not mutually settled should be resolved through voluntary arbitration, the Voluntary Arbitration as a mode of settlement of industrial disputes was taken to greater heights. The Third Plan reveals that the Plan laid greater emphasis on Voluntary Arbitration as a model for settling industrial disputes. The reiteration of the Government’s labour policy enunciated in the Third Plan is easily discernible in the Fourth Five Year Plan. Emphasising the significance of Voluntary Arbitration in the settlement of industrial disputes, the provisions of the Act relating to adjudication are available as a last resort, it is recognized that greater emphasis should be placed on collective bargaining and on strengthening the trade union movement for securing better labour management relations, supported by recourse in the large measure to voluntary arbitration.

The Indian Labour Conference, in 1962, reiterated the need for a wider acceptance of this method. The Act provides for Voluntary Arbitration and the disputants may choose the presiding officer of an adjudicatory body set up under the Act as an Arbitrator. These adjudicatory bodies are independent quasi judicial bodies which would acquire jurisdiction to adjudicate, normally, on a written reference of an industrial dispute by the Appropriate Government. The referral power the Appropriate Government enjoys does not confer upon it any jurisdiction to play the role of an arbitrator.

The Scope for Judicial Review

Section 10 A of the Industrial Disputes Act, 1947 authorises the parties to make a reference to the voluntary arbitrator. But before the reference may be made to the arbitrator four conditions must be satisfied
      1)     The industrial dispute must exist or be apprehended
      2)     The agreement must be writing 
      3)     The reference must be made for before a dispute has been referred to under section 10 to a labour court
      4)     The name of the arbitrator must be specified
The question arises whether a decision of an arbitrator is subject to judicial review. The High Courts appear to be unanimous on the point that a writ under Art. 226 of the Constitution lie only against a statutory arbitration. However, there is a conflict of judicial opinion among the High Courts whether arbitration under section 10A of the Act is statutory or not. The Kerala High Court in A. T. K. M. Employee’s Assn. v. Mus aliar Industries Ltd.[5] held that arbitration under Section 10A of the Industrial Disputes Act was not a statutory arbitration, and hence an application for appropriate writ was not maintainable. The Court stated that “the arbitration is directed by agreement, is not to a public body, the authority of the arbitrator does not depend on any statutory jurisdiction, and he is a private tribunal setup as arbitrator by agreement. Section 10A(l) is but a provision, which enables parties to refer their disputes if they want, to an arbitrator of their choice.

The Patna High Court in Rohtas Industries Staff Union v. State of Bihar [6], and Bombay High Court in Air Corpn. Employees’ Union v. D. V . [7] have held arbitration under Section 10A of the Industrial Disputes Act as a statutory arbitration, on the ground that the jurisdiction of the arbitrators is statutory because it is based upon S. 10A of the Act and the award of these arbitrators become enforceable under S. 17Aof the  Industrial Disputes Act. The Bombay High Court in the Air Corporation Employees’ case was also called upon to decide whether the arbitrator under section 10A was a tribunal or not for the purposes of Article 227 of the Constitution. The decision of the Bombay High Court appears to be sound in the light of various provisions of the Industrial Disputes Act and the rules f
ramed there under. The arbitration proceedings under Section 10A are required to conform to the requirements laid down in the Act and the rules framed there under. A duty is cast on the arbitrator under Section of 10A sub-section (4) to “investigate the dispute” and submit his award to the Government. He is empowered to administer oath, to call witnesses, and even to proceed ex-parte, etc., like the other authorities under the Act. All these show that proceedings before the arbitrator are quasi-judicial in nature, and hence, the arbitrator is supposed to function within the limits of his powers as defined by the Act and rules. Further, the Act has made no distinction between an award of the tribunal and an award of the arbitrator. The Government is required by S. 17 to publish the award within a period of thirty days. The award of the arbitrator has the same force and sanctity as an award given by the other authorities created by the Act and invites a penal action for breach of any term of the award.[8]

 Recently, the Supreme Court has, in Engineering Mazdoor Sabha v. Hind Cycles Ltd[9]

The main hurdle in treating the arbitrator under S. 10A as a tribunal, according to the Court, is that he is appointed by the agreement of the parties and he derives his power to adjudicate from that agreement of the parties whereas industrial tribunals derive it from the statutory provisions themselves. Although it is true to some extent that the arbitrator under section 10A derives his power of adjudication from an agreement of the parties, yet once appointed he functions and adjudicates within the framework of the Industrial Disputes Act and is bound by the provisions of the Act and the rules framed there under. The only difference appears to be that he is not paid by the State. The Supreme Court has relied on the observation of Mahajan, J., in Bharat Bank case[10] that “the condition precedent for bringing a tribunal within the ambit of Art. 136 is that it should be constituted by the State’, and “a tribunal would be outside the ambit of Art. 136 if it is not invested with any part of the judicial function of the State but discharges purely administrative and executive duty”. In fact, in Bharat Bank case, the Court was only pointing out the difference between tribunal exercising judicial functions and tribunal exercising purely administrative and executive functions. It may be pointed out that under Section 10A sub-clause (5), the Arbitration Act, 1940, does not apply to arbitration under Section 10A[11]. That provision was made intentionally by the legislature to treat the award of an arbitrator and that of a tribunal on the same footing and for that purpose Section 2 (a) was amended to include an award of the arbitrator functioning under S. 10A of the Act into the definition of Award. But the Court seems to suggest that the legislature by incorporating S. 10A (5) wanted to treat arbitration proceedings something distinct from tribunal proceedings. The holding of the Supreme Court will definitely forfeit the purpose for which the provision of voluntary arbitration was added in the Industrial Disputes Act. It would create not only practical difficulties but develop a no-man’s land – a wrong for which no remedy might be available.

Despite the many advantages of industrial arbitration, there are also several difficulties which must be met. The selection of an arbitrator who is both impartial and yet familiar enough with the industrial problems involved to render an intelligent award is one difficulty. Ordinarily the parties or their representatives attempt to agree upon such an arbitrator. Yet quite often this attempt results in a deadlock .Arbitration has also been criticised as leading only to compromise. Where the dispute involves the determination of terms for a new trade agreement, rather than the interpretation of an existing agreement, this is largely true.18 In such cases the arbitrator is guided by no settled principles or standards and can only make an arbitrary determination according to what may seem to him to be just and equitable. At best this can be but a compromise, which may or may not be satisfactory to the parties.'”[12] There is no “justifiable question” involved in such cases. Even where the dispute involves the application of a trade agreement, the function of the arbitrator is often not strictly judicial. He is not a dispenser of justice from on high, but rather must find a solution that will be satisfactory enough to both sides to be workable. In so doing he must consider the relative strength of the parties and remember that a decision which cannot be enforced is useless. The difficulty of enforcing agreements to arbitrate and arbitration awards is another serious problem in the event that one of the parties refuses to proceed with the arbitration or to obey the award. In only a few states are legal sanctions provided for such cases. But in spite of these limitations arbitration offers many advantages, it is at least far superior to the costly methods of fighting out labour disputes by strikes and lockouts when negotiation and conciliation fail.

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[1] The Conciliation and Arbitration of Industrial Disputes: I. The Nature of Conciliation and Arbitration, 14 Int’l Lab. Rev. 640 (1926


[2] L.L.M (Banaras); L.L.D (Calcutta) Reader in Law, Kurikshetra University, Kurukshetra

[3] Arjun.P. Aggarwal, Arbitration under Section 10A of the Industrial Disputes Act, 1947 and Articles 136, 226 and 227 of the Constitution of India, Vol 5 , Indian Law Institute, pp138-144 (Jan-March, 1963

[4] Arjun.P. Aggarwal, Arbitration under Section 10A of the Industrial Disputes Act, 1947 and Articles 136, 226 and 227 of the Constitution of India, Vol 5 , Indian Law Institute, pp138-144 (Jan-March, 1963


[5] A.T.K.M . Employees’ Assn. v. Müs aliar Industries Ltd., 1961-I-LL.J. 81 (H.G. Kerala)

[6] Rohtas Industries Staff Union v. State of Bihar , 1962-II-LL.J. 420 (H.G. Patna)

[7]  Air Corporation Employees 9 Union v. D. V. Vyas , 1962-I-LLJ. 31 (H.G. Bom

[8] Arjun.P. Aggarwal, Arbitration under Section 10A of the Industrial Disputes Act, 1947 and Articles 136, 226 and 227 of the Constitution of India, Vol 5 , Indian Law Institute, pp138-144 (Jan-March, 1963)

[9] . 1962- II- LL. J. 760

[10] Bharat Bank v. Employees ‘ of Bharat Bank , A.I.R. 1950

[11] Suresh.c. Srivastava, Volunatary Labour Arbitration: Law and Policy, Vol.23, The Indian Law Institute

[12] The Conciliation and Arbitration of Industrial Disputes: I. The Nature of Conciliation and Arbitration, 14 Int’l Lab. Rev. 640 (1926)

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