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The Industrial Disputes Act, 1947
The Trade Unions Act, 1926
Section 17 in The Industrial Disputes Act, 1947
Section 17 in The Trade Unions Act, 1926
M. Amanullah Khan vs Government Of India & Ors on 25 August, 2004

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Central India Law Quarterly
" Trade Unions And Collective Bargaining In India *
" TRADE UNIONS AND COLLECTIVE BARGAINING IN INDIA * Anand Prakash ** 1. Collective bargaining is democracy in action in the sphere of employer-employee relations. Faced with the superior economic strength of the employer, workmen ever since the 19th century in England have sought to organise themselves into trade unions, so that they can bargain with him on equal terms with regard to their conditions of service and ensure job security. 2. The raison de etre for forming' trade unions was pithily put by Justice Holmes in the following words: "Combination on the one side is patent and powerful. Combination on the other is the necessary desirable counterpart, if the battle is to be carried on in a fair and equal way. If it be true that working men may combine with a view. among other things, to getting as much as they can for their labour. just as capital may combine with a view to getting the greatest possible,return, it must be true that when combined they have the same liberty that the com- bined capital has to support their interest by argument, persuasion. and the bestowal or refusal of these ad- vantages which they otherwise lawfully control." 3. In England and USA where trade unions came into existence in the 19th century, they had to face relentless persecution under the criminal Law as criminal conspiracies. Common Law of tort stipulated that those responsible for provoking and organising them to form combinations with a view to asking them to offer or withdraw their labour in combination. so as to arrive at contract whicb is broadly fair having regard to the. general economic conditions prevailing at the time were Inducing them to commit breach of contract with their employer, and thus inflicting economic injury on him, and therefore held liable for a civil conspiracy for which they could be sued for damages which could be recovered from them or from the trade union funds. Such strikes could also be banned by issue of appropriate injunction. Agreements between members to go on strike were also declared to be in restraint of trade and therefore also void. Other tortious acts committed by the workers and * The Paper presented at the 2nd International Seminar on Labour Law organised by LAWASIA Standing Committee on Labour Law at New Delhi on 28-30 Sept. 1990 ** M.A., LL.B. (Delhi), B.Se (Econ), Ph.D (Econ) (London), Barrister-at-Law, Senior Advocate, Supreme Court of India and Hony. Professor, Indian Law Institute, Chairman, Standing Committee on Labour Law, Law Asia, New Delhi. 2 CENTRAL INDIA LAW QUARTERLY [Vol. 4:1 their organisers and combinations could also lead to substantial damages being otherwise awarded against them and/or injunctions issued against them. 4. Trade unions In India came into existence mainly in the 20th century, and made a significant presence only after the First World War. By then, opinion all over the Western World, particularly with the formation of International Labour Organisation and the standards laid down by it, had crystallised in favour of permitting workmen to form trade unions, and to pursue their legitimate activities to protect labour against the superior bargaining strength of the employers. In addition there was a labour Government in England, whose Trade Union Wing, the British Trade Union Congress, was relatively friendly to their activities as long as they did not align themselves with the more radical wing of the national movement for independence. 5. The law in India, however, took its own time to adjust itself to the new conditions. Till the Trade Unions Act of 1926 was passed, consequent upon the uproar caused by the Injunction and damages awarded against one in a leading textRe mill in Madras, it was virtually impossible for trade unions to carry on their legitimate activities within the law, because of the legal difficulties arising out of the law relating to criminal conspiracy under section 120 A and 120 B of the Indian Penal code, and the ordinary law of contract regarding restraint of trade and law of civil conspiracy and tortious liability of trade unions and its office bearers and Issue. of injunction against strikes in respect of which the Indian Law had borrowed heavily from the common Law of England. 1 6. The Trade Unions Act of 1926, while it fell far short of the protection provided to trade unions in England by the Trade Disputes Act of 1906. stili gave certain basic protection to trade unions In, pursuit of their objective of carrying on collective bargaining activities vis-a-vis the employer for the various objects set out in the Act. The Act of 1926'has remained virtually In Its original form on the statute book ever since 1926, with certain minor amendments made from time to time, ttie major amendments made in the Act In 1947 having not been brought Into force till date. 7 Under Section 17 of the Act no office bearer or member of a registered trade union shall be liable to punishment under sub-section 2 of Section 120 B of the Indian Penal Code, 1860, in respect of any agreement made between members for the purpose of furthering any of See Setalvad, Common Law of India, HAMLYN Lectures, London, Stevensons & Sons Ltd. 1960 1991] COLLECTIVE BARGAINING IN INDIA 3 the objects of the trade union as are specified in Section 15 of the Act, unless the agreement Is an agreement to commit an offence. Further under Section 18 of the Act, immunity is given from civU suits or legal proceedings against any registered trade unions or any office bearer or member thereof in respect of any action taken in contemplation, or furtherance of a trade dispute, to which a member of the Trade Union is a party, on the ground only that such act induces others to break a contract of employment, or that It· is I in interference with the trade, business, or employment of some other person, or with the right of some other person to dispose of his capital or his labour, as he wills. Registered trade unions and their agents are also given immunity from civil suits or other legal proceedings in any civil court or in respect of any tortious acts done in contemplation, or in furtherance of a trade dispute, by any agent of the Trade Union, if it is proved that such person acted without the knowledge of, or contrary to express instruction. given by, the Executive of the Trade Union. Further agreements arrived at by the members of registered Trade Unions shall not be void or voidabiemereJy by reasons of the fact that any of the objects of the agreement are in restraint of trade. 8. Before the Industrial Disputes Act, 1947, collective bargaining was the exception rather than the rule in India. However, with the passing of the Industrial Disputes Act, 1947, collective baragaining was given encouragement. To start with, only settlements arrived in conciliation proceedings were given statutory status and binding force. However; by an amendment to the Act made in 1956,. bOateral agreements between workmen or their Trade Unions, and employers, were also given statutory recognition and enforceabHity. 9. -However, dichotomy still persists between a settlement arrived at bUaterally between the employer and his workmen or their trade union on their behalf, and settlements arrived at through the intervention of the Conciliation Machinery established under the Act. While the former are enforceable as between the employer and the parties to the settlement, a settlement arrived at through- the good offices of the conciliation officer has been given extended operation. It Is binding not only on the parties to the settlement, but is also binding on all the workmen of the establishment, whether such workmen are parties to the settlement or not, as decided by the· Supreme Court in Ramnagar Cane and Sugar Company v. Jatin Chakravortl on the theorv. that the conciliation officer Is requird to ensure not only that the settlement is voluntary, but also that it is fair and reasonable. 2 . IR 1960SC 1012, 4 CENTRAL INDIA LAW QUARTERLY [Vol. 4:1 10. As contrasted to settlement in conciliation proceedings, settlements arrived at outside the conciliation proceedings are binding only on the parties to the disputes as decided by the supreme court in Jhagra Khan Collieries (P) Ltd. v. Central Government Industrial Tribunal3 and in Tata chemical v. Workmen.4 11. The Supreme Court has also been anxious to encourage collective bargaining, and has often stated so, as in the case of state of Bihar v. D.N. Ganguli5 where the court held that it would be wholly unreasonable for an Industrial Tribunal to which the matter may be referred for adjudication, to insist upon adjudication of a dispute on merits, even after it has been informed that such dispute has been amicably settled between the parties. In such cases it should immediately make an award in terms of the settlement. In the case of Sirsllk Ltd. v. Government of Andhra Pradesh6 a settlement arrived betweenthe parties to the dispute was given preference to an award which had already been sent for publication to the Government by the Industrial Tribunal for its enforcement under the Act on the ground'lhat once such a settlement is arrived at, no dispute is left between the parties, and therefore the Tribunal's Award itself should not be enforced by the. Government by publishing it, as required under section 17 of the Act. 12. The supreme court has also encouraged settlement of disputes between the parties through collective bargaining even after the matter has been decided by the Industrial adjudication, and the Supreme Court is seized of the matter by way of Special Leave to Appeal as is evident from its judgement in the case of Amalgamated Coffee Estates Ltd. Vs. Their Workmen7 where while the appeal was being heard the Court was informed that there was a settlement between the parties and was requested to pass judgement in terms of the settlement arrived at through the agency of one of the many unions who claimed to represent the workmen. On a finding being returned to the court by the Tribunal, to which the case was remanded to by the supreme court to find the factual position, that a large number of workmen employed in the' undertaking concerned had accepted payment consistently with the terms of the settlement, and that the settlement was not arrived at by fraud or collusion, but was a result of voluntary agreement" betweenthe workmen and employer, the Supreme Court passed judgement in terms of the 3 1975 1 LW 163 (SC) = 1.975 L1C 137 (SC) 4 1978 lab I.C. 637. 5 1959 SCR 1191. 6 AIR 1964 SC 160, 7 1965 II LW 110 (SC) 1991] COLLECTIVE BARGAINING IN INDIA 5 settlement, and extended its operation to all the other Coffee Estates also who were not parties to the agreement, as the settlement was basically fair and reasonable and ensured .uniformity In condition of service in so far as the Coffee Estates represented before it were concerned. 13. In a land-mark judgement in the case of Herbertsons Ltd. v. WorkmenB the facts were that a dispute was referred for adjudication to the Tribunal which, after hearing, gave an award. The company appealed to the Supreme Court against the award by Special Leave. While the matter was pending before the SlJpreme Court in Appeal, the workmen changed their loyalties, and resigned,from the union which was party to the dispute, and joined another union. The Company granted rec(>gnition to the said union, to which the workmen had transferred their loyalty. A settlement was arrived at between this latter union and the management. Copies of this settlement were forwarded. to the. Government and the various other authorities so as to tnake it statutorily binding on the parties. It was common ground before the Court that this was settlement under Section 18(1) of the Industrial Disputes Act and not under Section 18(3) of the Act, that is to say it was a settlement outside conctlation proceedings and binding only on the parties to the dispute. The company made an application to the court to pass jUdgement In terms of the settlement. The factual position that emerged was that one of the unions which had 193 members on Its rolls had entered into the settlement, while another union which claimed to have 55 mernberson its rolls, did not accept the settlement. In the aforesaid circumstances, the Supreme Court framed an issue to find out Whether the settlement was fair and reasonable and ought to be accepted and remanded it to the Tribunal to return a finding on the issue. The Tribunal's finding was that the settlement was partly fair and partly Unfair. On this finding, it was urged that the Appeal should be decided on merits. But, the Supreme Court refused to do so, holding that when a recognised union negotiates with an. employer, workers as individuals do not come into the picture at all. The court further held that It is not necessary that such individual workers should know the implications of the settlement since the recogni~ed union, which is expected to protect the legitimate interests of labour, enters into a settlement in the best interest of labour. This should be the normal rule. It would, however,be different if the settlement is vitiated by mala fide and fraud or corruption or other inducements. As this was not so in the case under consideration, the court held that the settlement being in the course of collective bargaining, should be given due weight and consideration. The Supreme Court also em'phasiSed that there may be several factors 8 1977 Lab. rc. 162·AJR 1977. SC 322, 6 CENTRAL INDIA LAW QUARTERLY [Vol. 4:1 that may influence parties to come to a settlement. When such a settlement is reached, the Court should not test the settlement on the anvil of what the workmen would have got if the matter was decided on contest between the employer and workmen by third party adjudication. It observed that there is always delay and uncertainty in litigation. On the .other hand, by a settlement through collective bargaining in good faith,workmen get immediate benefits. There is also the likelihood of further advance in the shape of improved emoluments by voluntary settlement, avoiding friction and unhealthy litigation. This, said the Court, is the qUintessence of settlement which courts and tribunals endeavour to encourage. It Is in that spirit that the settlement has to be judged,and not by this yardstick adopted in scrutinising a1' award in adjudication. It further held that It is not possible to scan the settlement in bits and pieces, and hold some parts good and acceptable and others bad. Unless It can be demonstrated that the objectionable portion is such that It completely outweighs all the other advantages gained therein,the Court will be slow to hold a settlement as Unfair and unjust. 14. Recently the trend of Supreme Court judgements has been in favour of collective bargaining and settlements arrived bilaterally, and the court has not Insisted on formal compliance with Rules made under the Industrial Disputes Act, 1947, to make such settlement binding. In Hindustan Lever v. Management of Hindustan Leve,.g the Supreme Court gave sanctity to even a settlement arrived at by correspondence between the union and the management. Si,milar1y in Kuldip Singh vs Punjab and Sind Bank10 a settlement recorded only by way of minutes of discussion between the Staff Association and the Management representatives was held to be binding on the parties and given·the sanctity of a collective bargaining settlement. In both these cases, however, there was no question of inter-union rivalry and the workmen were represented by one union or Association only. These.ceses did not have the complications which arise in cases where the settlement Is arriVed at with only one of the Unions, even though there may be more then one union in an industry. Legislative intervention for encouraging Conective Bargaining. 15. The above judgements of the Supreme Court, giving encouragement to collective bargaining, have been given within the constraints provided .by .legislation on the subject. As a matter of fact, given the conditions In India, where there has been large scale unemployment and a large reserve of unemployed labour force to take 9 AIR 1984SC 516, 10 1989 II L1J 457 1991] COLLECTIVE BARGAINING IN INDIA 7 the place of workmen who go on strike, the strike weapon, by itself, has not been sufficiently effective in protecting trade unions and their office bearers and active members against victimisation by the employers. As a matter of fact, when the Royal Commission on Labour in India gave its report in 1931, it found little evidence of collective bargaining on the part of the employers with the workers through their Trade Unions. The employers blamed the outside leadership for their reluctance to bargain with·the trade unions on their demands. But the Royal Commission did .not find any fault with outside leadership being provlded, when the leadership inside the establishments of the employers, was exposed to vlctlmisatlon by the employers, If they should be active in taking up the cause of their rest of the workmen for getting a fair deal for them. 16. During the brief period of State Autonomy and the formation of Popular Governments in some of the Provinces from 1937 to 1940, the Congress governments which came into power in these provinces, tried to Introduce legislation for encouraging collecive bargaining and dealing effectively with victimisatiolJ and unfair labour practices by the employers. But then, these ministries resigned in 1940, on the issue of non-consultation with the representatives of the Indian people before the Government of India declared India's support for the Allies in World War II. It was only after power was transferred to Indiar:" hands, first by way of interim measure In September, 1964 and then permanently on 15th August,l947, that effective steps could be taken by the Government of India for encouraging collecting barganing. Amendments in the Trade Unions Act of 1926were made by the Trade Unions Amendment of 1947. Under this Act, a procedure was established for recognition of trade unions. A list of Unfair Labour Practices including victimisation by the employers was drawn up, and sanctions were introduced for dealing with such Victim'isation and Unfair Labour Practices. But these amendments in 1947, could not be brought into force for reasons which we shall state here after. • 17. Right upto the year 1939, the trade unions in India had only one Central Federation at the All India level-the All India Trade Union Congress. But differences cropped up among the trade unionists with regard to India's participation in the World War II. Firstly, the Radical Democratic Party led by Shri M.N. Roy, split away from the All India Trade Union Congress by forming the Indian Federation of Labour which, contrary to the stand of the Communist Party of India worked at tandem with the Indian National Congress, and lentaetive support to the Freedom struggle. Further, cause for division however arose with the entry of Russia on the side of Allies in 1947. The Communist Party of India which had hitherto opposed India's participation in the War, changed its stand, 8 CENTRAL INDIA LAW QUARTERLY (Vol. 4:1 and was of the view, that because of Russia's entry Into the War, what was previously an Imperialist War, had become a People's Warand India should actively support the British War effort by making some kind of compromise, short of complete transfer of power to Indian hands, with the Government of India. The Congress' leadership led by the Indian National Congress, however, was opposed to the war inspite of Russia's entry on the side of the Allies. Indeed, on 8th August, 1942 it declared complete opposition to British Rule in India and raised the "Quit India" slogan. As a result thereof the Congress leaders were put behind the Bars. The leaders of the Communist party of India were, however, released from custody, and in the absence of the Congress leaders, they established their complete organisational control over the All India Trade Union Congress. After coming back from jail, the leaders of the Indian National Trade Union Congress, tound it difficult to regain organisational control of the All India Trade Union Congress and formed the Indian National Trade Union Congress in 1947. That is how the division in the trade union movement on political lines began in India. In 1949, the Congress Socialists who later on formed the Socialist Party established their own trade union wing at All India level and called it the Hind Mazdoor Sabha. later, in the 60's even the All India Trade Union Congress split and there came into existence two All India Communist Parties with their corresponding All India Trade Union Federations. later the Jan Sangh (Now Bhartiya Janta Party) formed its own trade unions and Trade Union Federation. 18. Apart from the trade unions which are affiliated to the Central Trade Union Federations, divided on political lines, there have also been some local leaders who have also established their own trade unions, independent of the Federations. The result is that there is a multiplicity of trade unions, mainly on political grounds, but sometimes, due to personal factors. Due to this mUltiplicity of trade unions, and their different approaches, depending on what is more beneficial to them, the Government of India has not yet bee!) able to, inspite of repeated attempts, bring in legislation, to replace the rather unsatisfactory statutory provisions in the Trade Union Act 1926'and the Industrial Disputes Act, 1947, with regard to collective bargaining. 19. The main controversy which has dodged solution is the establishment of a bargaining agent who can enter into settlements which are binding on all the workmen. The Indian National Trade Union Congress, which is politically alligned with the Indian National Congress, has favoured the method of membership verification for deciding as to who should be the recongntsed bargaining agent of the workmen at the unit and the industry levels. The other Central Trade Union Federations have favoured secret ballot to decide the matter. To resolve this 1991] COLLECTIVE BARGAINING IN INDIA 9 controvesy the National Labour Commission was set up by the Government of India which gave its report in 1969. It recommended the setting up of Industrial Relations Commissions for exercising the functions of conciliation, adjudication and certification of the collective bargaining agents at the Central and State levels. It considered the rival contentions of the parties as to whetherthe recognition should be on the basis of membership, as pressed by the Indian National Trade Union Congress, or on the basis of secret ballot as desired by the other Central Trade Union Federations. Even the National Commission on Labour, could not come to a unanimous report, and a minute of dissent was recorded by the members of the Commission who belonged to the Indian National Trade Union Congress, that membership verification should be the only way of deciding on the collective bargaining agent and for its recongnition by the employers. The National Industrial Relations Commission noted the suspicion of the other trade union organisations against this insistence on the part of the Indian National Trade Union Congress on membership verification , because of their fear, that, with the Congress Governments in power at the Centre and in most of the States. the official machinery under the respective Ministries of Labour, would be inclined to favour the Indian National Trade Union Congress. The National Commission on Labour recommended that whether verification should be adopted to determine the bargaining agent, or the secret ballot method should be adopted for the purpose, should be left to the Central Industrial Relations Commission and the State Industrial Relations Commissions recommended by the National Commission on Labour as the proper authorities to deal with the labour disputes including conciliation, adjUdication and certification of the collective bargaining agent. 20. Inspite of the report of the Industrial Relations Commission, however, no legislation could be passed on the subject till date. The Janata Government which had a brief stint of office at the Centre from 1977to 1979 took up the matter seriously for passing a combrehensive industrial relations act to replace the present Industrial Disputes Act, the Trade Unions Act 1926 and the Industrial Employment Standing Orders Act 1946, by a more satisfactory method for resolving of industrial disputes, particularly in the matter of designation of Collective Bargaining Agent and about the modalities of determining the same. But even then there was no consensus. The Janata Government went out of office in mid 1979 and the Indian National Congress came back to office at the Centre and in most of the States in 1980, and again in 1985. 21. In 1986, the Trade Unions and Industrial Disputes (Amendment Bill 1966) was introduced in the Rajya Sabha, but even this Bill could not be passed because of the continued differences of opinion on some --- ------ --- -- 10 CENTRAL INDIA LAW QUARTERLY [Vol. 4:1 of the provisions of this Bill. The National Front Government which has gone out of office recently had formed a Committee under the chairmanship of an eminent trade unionist, Shri Rarnanujam, to make recommendations by arriVing at a consensus betweenthe various trade union federations, and the Employer Federations, but the Committee has not yet given its report on the subject. One does not know at this stage whether a consensus can be achievedamong the broad spectrum of trade union organisations for arriving at a compromise as to how the collective bargaining Agent should be determined, and how collective bargaining can be encouraged and legislation passed to substitute the present statutes on the Subject. 22. In the meantlrne, the above statutory provlslons continue. It must be'said, however, that the collective bargaining has spread rather rapidly In the Indian industry in the 10's and ap's. This has been, .however, not because of Government support, but due to the fact that In many of the establishmentsstrong trade unionshave emerged with their own internal leadership, who are not dominated by outside political leadership and have, generally speaking, steered clear of political alignments. It can be said In the year 1990, that in the large part of the public sector undertakings, the trade unions are well organised and enter into collective· bargaining agreements with their employers. In most of the large industries also trade unions are. pretty strong, and collective bargening is well entrenched. 23. This is not to say that the position of the law is satisfactory or does not matter. What has been achieved Is inspite of the law, and not because of the law. It is hoped therefore that some consensus will emerge in the not too'distant future on the subjeet, between the various rival trade union federations, and that political.divisions will play a lesser and lesser role among the trade union leadership, so .that there can be ultimately one Central Trade Union Federation which will certainly further strengthen collective bargaining In India and bring more and more the unorganised labour in the organised fold.