Class notes- Industrial relations

Lecture 5- Industrial Dispute Act, 1947

Introduction
Employers' and Workmen's Disputes Act, 1860 was the first enactment dealing with
the settlement of industrial disputes.
The World War I (1914-1919) brought a new awakening among the working class people
who were dominated by the employers regarding the terms and conditions of service and
wages. The workers resorted to strikes to fulfill their demands and the employers retaliated
by declaring lockouts. During the period 1928-29 the numerous strikes and lock-outs forced
the Government to enact the Trade Disputes Act, 1929.
But this Act failed to create favorable atmosphere in the industry and settle the disputes.
The main defect of the Act was that no provision was has been made to render the
proceedings unstatutable under the Act while restraint had been imposed on the right of
strike and lock-out in the public utility services. But, later this defect was overcome by
empowering under Rule 81-A, of the Defence of Indian Rules to refer industrial disputes to
adjudicator for settlement during the Second World War (1938-1945).

The Industrial Disputes Act 1947 came into force 1 April 1947 and extends to the
whole of India and regulates Indian labour law so far as that concerns trade unions as well
as Individual workman employed in any Industry within the territory of India.
The objective of the Industrial Disputes Act is to secure industrial peace and
harmony by providing machinery and procedure for the investigation and settlement of
industrial disputes by conciliation, arbitration and adjudication machinery which is provided
under the statute. The main and ultimate objective of this act is “Maintenance of Peaceful
work culture in the Industry in India” which is clearly provided under the Statement of
Objects & Reasons of the statute. The laws apply only to the organized sector.

Definition of Industrial Disputes

An industrial dispute may be defined as a conflict or difference of opinion between
management and workers on the terms of employment. It is a disagreement between an
employer and employees' representative; usually a trade union, over pay and other working
conditions and can result in industrial actions. When an industrial dispute occurs, both the
parties, that is the management and the workmen, try to pressurize each other. The
management may resort to lockouts while the workers may resort to strikes, picketing or
gheraos.
As per Section 2(k) of Industrial Disputes Act, 1947, an industrial dispute is defined as any
dispute or difference between-

• Parties to the dispute who may be

• Employers and workmen
• Employers and Employers
• Workmen and workmen
Any dispute which is connected with the employment or non-employment or the terms of
employment or with the conditions of labour, of any person.

• Individual disputes can be raised by workmen or their union.

• Industrial dispute doesn’t include mere personal quarrels, grumbling, or agitations.
• Industrial disputes can be initiated or continued by legal heirs after the death of the
workman.
• Employer’s failure to keep its oral assurance shall not be regard as industrial dispute.

Meaning of Industry-
Section 2 (j) of Industrial Dispute Act, 1947, " industry" means any systematic activity carried on by
co- operation between an employer and his workmen (whether such workmen are employed by
such employer directly or by or through any agency, including a contractor) for the production,
supply or distribution of goods or services with a view to satisfy human wants or wishes (not being
wants or wishes which are merely spiritual or religious in nature).

This definition is not exhaustive and cannot be treated as restricted in any sense has
therefore been subjected to immense judicial scrutiny. The landmark judgement is the Bangalore
Water Supply case, enlarged the definition to a large extent and over-ruled case precedents which
were a part of narrow interpretation, that is to say, before the Bangalore Water Supply case clubs,
hospitals, universities, solicitor firms, government departments were excluded from the definition of
industry but after the Bangalore judgement they have been declared as industry.

• Business, Trade occupation either for profit or non-profit motive are industry for this
purpose

Objective of the Act

The objective of the Industrial Disputes Act is to secure industrial peace and harmony by
providing machinery and procedure for the investigation and settlement of industrial
disputes by negotiations.
The Act also lays down:
(a) The provision for payment of compensation to the Workman on account of closure or
layoff or retrenchment.
(b) The procedure for prior permission of appropriate Government for laying off or
retrenching the workers or closing down industrial establishments
(c) Unfair labour practices on part of an employer or a trade union or workers.
Applicability
The Industrial Disputes Act extends to whole of India and applies to every industrial
establishment carrying on any business, trade, manufacture or distribution of goods and
services irrespective of the number of workmen employed therein.
Every person employed in an establishment for hire or reward including contract labour,
apprentices and part time employees to do any manual, clerical, skilled, unskilled, technical,
operational or supervisory work, is covered by the Act. Casual worker and part-time workers
are also are workmen.

• No Single workman can rise dispute unless related to Dismissal, discharge,

termination, retrenchment.
• When workmen may act as representative to other workman’s individual dispute it
become industrial dispute.
• Applicable to all existing industry not dead industry.
• Not appliable to permanently closed place of employment

Non- Employees under Industrial Dispute Act, 1947

This Act though does not apply to persons mainly in managerial or administrative capacity,
persons engaged in a supervisory capacity and drawing more than Rs. 10,000 per month or
executing managerial functions and persons subject to Army Act, Air Force and Navy Act or
those in police service or officer or employee of a prison.

Strikes
Strike is a very powerful weapon used by a trade union to get its demands accepted. It
means quitting work by a group of workers for the purpose of bringing pressure on their employer to
accept their demands. Section 2(q) of the Industrial Disputes Act, 1947 defines the term
strike, it says “Strike means a cessation of work by a body of persons employed in any industry
acting in combination, or a concerted refusal or a refusal under a common understanding of any
number of persons who are or have been so employed, to continue to work or to accept
employment.”

Types of strikes
1. Economic Strike:
Under this type of strike, members of the trade union stop work to enforce their economic demands
such as wages, bonus, and other conditions of work.

2. Sympathetic Strike
The members of a union collectively stop work to support or express their sympathy with the
members of other unions who are on strike in the other undertakings.

3. General Strike
It means a strike by members of all or most of the unions in a region or an industry. It
may be a strike of all the workers in a particular region of industry to force demands
common to all the workers. It may also be an extension of the sympathetic strike to express
general protest by the workers.
4. Tools down/ Pen down strike/ Sit Down Strike/ stay in strike:
When workers do not leave their place of work, but stop work, they are said to be on sit
down or stay in strike. It is also known as tools down or pen down strike. The workers
remain at their work-place and also keep their control over the work facilities.
5. Slow Down Strike:
Employees remain on their jobs under this type of strike. They do not stop work, but
restrict the rate of output in an organised manner. They adopt go- slow tactics to put
pressure on the employers.
Picketing
When workers are dissuaded from reporting for work by stationing certain men at the
factory gates, such a step is known as picketing. If picketing does not involve any violence, it
is perfectly legal. It is basically a method of drawing the attention of public towards the fact
there is a dispute between the management and the workers.
Gherao
It is a Hindi word which means to surround. The term ‘Gherao’ denotes a collective
action initiated by a group of workers under which members of the management of an
industrial establishment are prohibited from leaving the business or residential premises by
the workers who block their exit through human barricade.
Gheraos are quite common in India these days. Gheraos are resorted to not only in
industrial organisations, but also in educational and other institutions. The persons who are
gheraoed are not allowed to more nor do any work.
Gheraos have been criticised legally and morally. Legally gheraos amount to imposing
wrongful restraints on the freedom of some persons to move. That is why, courts have held
it as an illegal action. Gheraos tend to inflict physical duress on the persons affected. They
also create law and order problem. Morally, to gherao a person to press him to agree to
certain demands is unjustified because it amounts to getting consent under duress and
pressure. A person who is gheraoed is subjected to humiliation.
Moreover, a person who has made a promise under gherao is justified in going back over
the word after that. In short, as pointed out by a National Commission on Labour, gherao
cannot be treated as a form of industrial protest because it involves physical coercion rather
than economic pressure.
Whenever employees want to go on strike they have to follow the procedure
provided by the Act otherwise there strike deemed to be an illegal strike.
Lock-out
Lock-out is declared by the employers to put pressure on their workers. It is an act
on the part of the employers to close down the place of work until the workers agree to
resume the work on the terms and conditions specified by the employers.
Section 2 (l) of the Industrial Disputes Act, 1947, defines lock-out means the
temporary closing of a place of employment or the suspension of work, or the refusal by
an employer to continue to employ any number of persons employed by him.
Lock-outs are declared to curb the activities of militant workers. Generally, lock-out
is declared as a trial of strength between the management and its employees.

Restrictions & Prohibitions Strikes and Lockouts

Strikes and Lockouts must be Legal and Justified as per the Provisions of the Act.
Section 22(1) of The Industrial Dispute Act, 1947 put certain prohibitions on the right to
strike. It provides that no person employed in public utility service shall go on strike in
breach of contract:
a) Within 14 days of giving notice of strike or
b) Without giving to employer notice of strike within 6 weeks before striking; or
c) Before the expiry of the date of strike specified in any such notice as aforesaid; or
d) During the pendency of any conciliation proceedings before a conciliation officer
and 7 days after the conclusion of such proceedings.
Note: These provisions do not prohibit the workmen from going on strike but require them
to fulfil the condition before going on strike. Further these provisions apply to a public
utility service only. In case of strike or lockout in respect of industries declared as public
utility services, prior notice is compulsory either by employees or by management,
respectively to the government.

• No notice of strike and lockout is necessary in industrial establishments except in

public utility services.

Declaration of Public Utility Service

As per Section 2(n) (vi) of the Industrial Disputes Act, 1947, the ‘appropriate Government’
may declare any industry specified in the first Schedule of the Industrial Disputes Act, 1947
to be a public utility service for a period of six months by issuing a Notification in the Official
Gazette which may extend from time to time for any period not exceeding six months if in
the opinion of the appropriate Government public emergency or public interest requires
extension.
 • Public utility services may be carried out by Public companies (Public sector) or
business corporation (Private Sector)

General prohibition of strike

The provisions of Section 23 of the Industrial Disputes Act, 1947 are general in nature. It
imposes general restrictions on declaring strike in breach of contract in the both public as
well as non- public utility services in the following circumstances mainly: -
a) During the pendency of conciliation proceedings before a board and till the expiry of
7 days after the conclusion of such proceedings;
b) During the pendency and 2 month’s after the conclusion of proceedings before a
Labour court, Tribunal or National Tribunal;
c) During the pendency and 2 months after the conclusion of arbitrator, when a
notification has been issued under sub- section 3 (a) of section 10 A;
d) During any period in which a settlement or award is in operation in respect of any of
the matter covered by the settlement or award.
The principal object of this section seems to ensure a peaceful atmosphere to enable
a conciliation or adjudication or arbitration proceeding to go on smoothly. This section
because of its general nature of prohibition covers all strikes irrespective of the subject
matter of the dispute pending before the authorities. It is noteworthy that a conciliation
proceeding before a conciliation officer is no bar to strike under Section 23.

DISMISSAL, ETC., OF AN INDIVIDUAL WORKMAN TO BE DEEMED TO

BE AN INDUSTRIAL DISPUTE.

Section 2A of Industrial Disputes Act, 1947, where any employer discharges, dismisses, retrenches
or otherwise terminates the services of an individual workman, any dispute or difference between
that workman and his employer connected with, or arising out of, such discharge, dismissal,
retrenchment or termination shall be deemed to be an industrial dispute whether or not other
workman nor any union of workmen is a party to the dispute.

Difference in between the workman and his employer connected arising out of following activities
shall be deemed to the industrial dispute.

• Dismissal of workman
• Discharge of workman
• Retrenchment of the workman
• Termination of workman from his services
Dismissal and Discharge of workman
Discharge refers to termination of service due to any reason including retrenchment after following
the provisions of Industrial Disputes Act. An employee may be discharged from service for
misconduct after holding disciplinary action. But a discharged employee shall be eligible for unpaid
benefits from the company. On the other hand, dismissal is made for such gross negligence, the
gravity of offence is beyond tolerable. An employee dismissed will not be paid gratuity and unavailed
benefits.

Lay-offs
Termination of employment (with or without notice) by the employer or management.
Layoffs are not caused by any fault of the employees but by reasons such as lack of work, cash, or
material. According to Section 2 (kkk) of Industrial disputes act, 1947, "lay-off" means the failure,
refusal or inability of an employer on account of –

1) Shortage of coal,
2) Power or raw materials or the accumulation of stocks or
3) Break-down of machinery or
4) Natural calamity or

For any other connected reason to give employment to a workman whose name is borne on the
muster rolls of his industrial establishment and who has not been retrenched;

Right of Compensation by workmen laid-off

According to Section 25-C, workman has right to lay-off compensation subject to the following
conditions, they are:

• Workman name should be borne on muster rolls of the establishment and he/she is not a
badli workman or a casual workman; and
• The workman should have completed not less than one year continuous service as defined
under Section 25-B; and
• The workman should have laid-off, continuously or intermittently;
• Then the workman shall be entitled to lay-off compensation for all days during which he was
so laid-off;
• However, the workman shall not be paid lay-off compensation for such weekly holidays as
may intervene the period of lay-off.

The lay-off compensation is equal to 50% of the total of the basic wages and dearness allowance
that would have been payable to him, if he had not been so laid off.

Explanation: "Badli workman" means a workman who is employed in an industrial establishment in

the place of another workman whose name is borne on the muster rolls of the establishment, but
shall cease to be regarded as such for the purposes of this. section, if he has completed one year of

Maximum days allowed to Layoff of employee by employer

According to section 25C of Industry and dispute Act 1947, maximum days allowed to Layoff
of employee by employer is 45 days, for those days, employee who is laid-off is entitled for
compensation equal to 50% of the total of the basic wages and dearness allowance that would have
been payable to him, had he not been so laid off.

However, if this contingency is prolonging beyond a reasonable time, say 45 days, it would
be matter of serious concern. Both to the employer and to the workmen because both of them are
put to a loss of 50% wages i.e. The employer is required pay lay-off compensation without extracting
work from workmen and workmen too, would be losing 50% wages which he would have earned
had he not been so laid-off. Therefore, the parties can enter into an agreement not to continue lay-
off after a period of 45 days in a year.

Compulsory permission from competent authority by employer to lay off of workmen

Section 25M of Industrial Dispute act 1947, For Industrial establishments in which not less
than 100 workmen are employed, on an average per working day and are of not being seasonal
character and in which work is performed only intermittently, have to seek prior permission from
competent authority by the employer to layoff workman. if the employer does not apply to seek
prior permission or where such permission is refused by the competent authority specified above, to
effect lay-off, such lay-off shall be considered as illegal and the workmen laid-off shall be entitled to
all benefits as if they have not been laid-off.

Non-applicability of layoff provisions to certain establishments

According to section 25A of chapter VA of Industrial Dispute Act 1947, certain establishments do not
have any provisions relating to layoff of the employees by the employer. In such circumstances,
layoff would be considered without any authority of law.

Such establishments are:

• Industrial establishments in which less than 50 workmen are employed, on an average per
working day.
• Industrial establishments which are of a seasonal character and in which work is performed
only intermittently.
• Employees employed in the above said establishments do not have right for laid-off
compensation. However if there is any agreement between employer and employee for that
purpose or on the grounds of social justice, laid-off competition can be paid.

Retrenchment of the workman

Retrenchment is something akin to downsizing. When a company or government goes
through retrenchment, it reduces outgoing money or expenditures or redirects focus in an attempt
to become more financially solvent.

There are a host of legal provisions which govern the practice of retrenchment. Section 2 (oo) of the
Industrial Disputes Act, 1947 defines Retrenchment as the termination by the employer of the
service of a workman for any reason whatsoever, but does not include -

(a) Voluntary retirement of the workman, or

(b) Punishment inflicted by way of disciplinary action, or
(c) Retirement of the workman on reaching the age of superannuating if the contract of
employment between the employer and the workman concerned contains a stipulation
in that behalf; or
(d) termination of the service of the workman as a result of the non-removal of the
contract of employment between the employer and the workman concerned on its
 expiry or of such contract being terminated under a stipulation in that behalf contained
therein; or
(e) termination of the service of a workman on the ground of continued ill-health.

The principle of 'last come; First go'

Where any workman in an industrial establishment who is a citizen of India, is to be
retrenched and he belongs to a particular category of workmen in that establishment, in the absence
of any agreement between the employer and the workman in this behalf, the employer shall
ordinarily retrench the workman who was the last person to be employed in that category, unless
for reasons to be recorded the employer retrenches any other workman.

Conditions precedent to retrenchment of workmen

According to the Section 25F, No workman employed in any industry who has been in
continuous service for not less than one year under an employer shall be retrenched by that
employer until-

(a) the workman has been given one month’s notice in writing indicating the reasons for
retrenchment and the period of notice has expired, or the workman has been paid in lieu of such
notice, wages for the period of the notice;

(b) the workman has been paid, at the time of retrenchment, compensation which shall be
equivalent to fifteen days’ average pay [for every completed year of continuous service] or any part
thereof in excess of six months; and

(c) notice in the prescribed manner is served on the appropriate government [for such authority as
may be specified by the appropriate government by notification in the Official Gazette]. The
requirement of clause (c) of Section 25F, i.e., notifying the appropriate Government or authority
about the retrenchment, can be treated only as directory and not mandatory.

To an industrial establishment (not being an establishment of a seasonal character or in

which work is performed only intermittently) in which less than 50 employees were employed on
an, average per working day for the preceding twelve months.[Section 25K].

According to the Section 25N, Employee should have continuous service for not less than
one year under an employer

a) Three months notice in writing indicating the reasons for retrenchment or payment for the
period of the notice
b) Compensation which shall be equivalent to fifteen days’ average pay[for every completed
year of continuous service] or any part thereof in excess of six months.
c) An application for permission to specified authority for the intended retrenchment and a
copy of such application shall also be served simultaneously on the workmen concerned in
the prescribed manner.
d) Compulsory permission from competent authority by employer retrenchment of workmen

For Industrial establishments in which not less than 100 workmen are employed, on an average
per working day and are of not being seasonal character and in which work is performed only
intermittently, have to seek prior permission from competent authority by the employer to layoff
workman.
 If no application seeking permission to retrench workmen is made by the employer or where
such permission is refused, such retrenchment shall be deemed to be illegal and the workmen shall
be entitled to all benefits as if they have not been given any notice.

Comparison between Lay-off and Retrenchment