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Voluntary Arbitration Under Industrial Disputes Act, 1947: An Analysis Of The Law And Reality

"Justice delayed is Justice denied" is the only cluster of words often heard in case of judicial proceedings, but the current state of the ratio of pending cases in the Courts of Law considered to be  the 'Temples of Justice' clearly exudes that this rule is of seldom concern by the responsible practitioners of the same. A learned justice once said that "Judiciary was the last resort for justice for the common man".

One of the many reasons for such a delay may be the overburdened judicial system and the consequent delay in justice delivery. In order to tackle the issue, an Alternate Dispute Resolution system was introduced consisting of a set of dispute settlement mechanisms outside the courts of which Arbitration is one of the most popular mechanisms.

The decision of these systems is legally binding on the parties so involved. Industrial Disputes play a crucial role as any disturbance would altogether affect the effective functioning of the industries, thus the government introduced the system of Voluntary Arbitration for dispute resolution in industries. Unfortunately, this concept has not reached the deserved standards and certain reforms would resolve the existing drawbacks.

The research methodology of the study is a critical analysis of the crucial aspects ensuing inefficiency in the Arbitration System being followed in case of Industrial Disputes via reviewing certain ad rem articles with special reference to the legal provisions. The study figures out the existing drawbacks in the procedure being executed in the industries and subsequently offers certain necessary suggestions in order to actively contribute towards the resolution of the issue in place.

The aim of conducting the study is to critically analyse the potential determinants causing hindrance to the effective application of the statutory provisions concerned to the Voluntary Reference of Disputes to Arbitration as specified under the Industrial Disputes Act, 1947[1], thereby resulting in the existing gap between the Law and the actual Reality of the matters in this regard.

In view of the existing burdened state of the Nation's Judicial System and that of the Litigation Procedure which can often be expensive as well as time-consuming, an effective Dispute Resolution Mechanism was considered necessary. A response to this very need is the initiation of the Alternate Dispute Resolution (ADR) Procedure. Being a known fact that time is the most crucial factor and any delay in the resolution of disputes may be detrimental to the interest of the parties.

While considering the aspect of Industrial Disputes which on a general basis concerned with the individuals who work on regular wages in order to earn a living, thus such disputes demand speedy settlement. Therefore, the system of Voluntary Reference of Disputes to Arbitration is considered to be the efficient alternative for the settlement of disputes thereby serving the purpose.

Though the theoretical aspects of the subject matter stated supra hold appropriate in every concerned manner, the results of its application in the actual scenarios have not reached the required standards as yet, despite the existence of incredible potential in the process involved. This is the main objective for conducting a meticulous analysis of the subject matter herein.

Legal Framework of the Concept:
The system of 'Arbitration' is an Alternative Dispute Resolution Form by way of which disputes are resolved outside the courts. In simple terms, arbitration is a procedure in which a dispute is referred to a set of persons who act as 'Arbitrators' who thereby hear the facts and arguments of both parties and solve the dispute by delivering their decision for the same.

The point to be noted is that, though the settlement of dispute occurs outside the court, the decision so obtained in the matters concerned will be legally binding on both the parties who have mutually agreed to submit the dispute for settlement and such a decision will be enforceable in the Court of Law. The method of arbitration is less formal and less expensive when compared to a courtroom hearing or trial.

Arbitration in Industrial Disputes:

The term 'Industrial Dispute' has been defined under section 2 (k) of the Industrial Disputes Act, 1947 as:
"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 persons;[2]

The definition stated supra can be analysed and discussed under the following heads:

  1. There should exist a dispute  or difference;
  2. The dispute or difference should be between:
    1. Employer and employer;
    2. Employer and workmen; or
    3. Workmen and workmen
  3. The dispute or difference should be connected with:
    1. the employment or non-employment, or;
    2. terms of employment, or
    3. the conditions of labour of any person;
  4. The dispute should relate to 'industry' as defined under Section 2(j) of The Industrial Disputes Act, 1947.

In consideration of the aforementioned definition of 'Industrial Dispute', it is understood that there is a need for specific Dispute Resolution Machinery to pursue the settlement of the disputes that occurred which are thereby concerned with the effective functioning of the industry as a whole.

Thus, the Industrial Disputes Act, 1947 provides for the following authorities for conducting the necessary investigation and settlement of Industrial Disputes:
  1. Works Committee[3]
  2. Conciliation Officers[4]
  3. Boards of Conciliation[5]
  4. Courts of Inquiry[6]
The above-stated Stages of Adjudicating Authorities operate intra vires as per the concerned legal provisions laid in the legislation.

Voluntary Arbitration under Section 10 -A:

Industrial Disputes Act, 1947 is the only legislation that allows arbitration in the realm of labour law. Section 10-A has been added to The Industrial Disputes Act, 1947 by way of the amendment of 1956, providing for the reference of an industrial dispute to Voluntary Arbitration, which is stated in the Act as "Voluntary Reference of Disputes to Arbitration".

When any of the adjudicating authorities fail to resolve the conflict/dispute, the parties so involved can be advised to agree to refer their dispute for Voluntary Arbitration for settlement of the same. According to Section 10-A(1) and section 10-A(2) of the Industrial Disputes Act, 1947 Parties may mutually sign an arbitration agreement which is obligatory and follow the arbitral procedure at any time before the dispute is referred to adjudication under Section 10 or to a Labour Court, Tribunal or National Tribunal.

The dispute is referred to a neutral third party/parties thereby acceptable to the parties in dispute to act as arbitrators for their case (including the presiding officer of the Labour Court, Tribunal or National Tribunal) as may be specified in the agreement.

Nevertheless, before a reference may be made to the arbitrator, four conditions must be met:

  1. Industrial Disputes must exist or be apprehended;
  2. The agreement made by the parties must be in writing;
  3. Under Section 10-A, the reference must be made before a dispute has been referred to a labour court, tribunal or national tribunal;
  4. The name of the arbitrator(s) must be specified.

Voluntary Arbitration takes mainly two forms:

  1. Pre-Dispute Arbitration: There must be a contract between the parties before the dispute arises through an arbitration clause.
  2. Post-Dispute Arbitration: There may not be an arbitration clause beforehand, but the parties may enter into an agreement after the dispute arises to resolve the dispute through arbitration.

    Why Is Voluntary Arbitration Important? [7]
    The importance of Voluntary Arbitration can be understood by way of the following pointers:
    • It is expected to take into consideration the realities of the situation.
    • It is expected to meet the aspiration of the parties.
  3. It is based on 'voluntarism'.
  4. The fundamental position of the parties is not compromised; and finally
  5. It is expected to promote mutual trust.[8]
As per Section 10-A (1-A) of the Industrial Disputes Act, 1947, When an agreement provides for an even number of arbitrators, it will provide for the appointment of another person as an umpire who shall decide upon the reference if the arbitrators are divided in their opinion. The award of the umpire shall prevail and shall be deemed to be the arbitration award for the purposes of the Act.

As per Section 10 - A (3) and 10 - A (3-A) of the Industrial Disputes Act, 1947, a copy of the arbitration agreement has to be forwarded to the 'Appropriate Government'[9] and the Conciliation Officer and the former shall within one month from the date of receipt of such a copy publish the same in the Official Gazette and if the government is satisfied that the parties, who have signed the agreement for arbitration, represent the majority of each party, the Appropriate Government shall issue a notification in such a manner as may be prescribed.

Where any such notification has been issued, the employer and workmen who are not parties to the arbitration agreement, but are concerned in the dispute, shall be given an opportunity to present their case before the arbitrator(s).

As per Section 10 - A (4) and section 10 - A (4-A) the arbitrator(s) shall investigate the dispute and submit the Arbitration award signed by them to the Government.
Under sub-section (4-A) where an industrial dispute has been referred for arbitration and notification has been issued under sub-section (3-A), the Government may by order prohibit the continuance of any strike or lockout in connection with such dispute during the pendency of the arbitral proceedings.

The Arbitration Award as specified under sub-section (4) as stated supra has powers of a civil court order (i.e., adjudication award of Labour Court or Industrial tribunal) which thereby becomes enforceable and is binding on all parties to the agreement and all other parties summoned to appear in the proceedings as parties to dispute.[10]
If the arbitration agreement is not notified in the Official Gazette under Section 10-A, then it is only applicable to the parties who have agreed to refer the dispute for arbitration.

Voluntary Arbitration In Relation To Its Jurisdiction:

The jurisdiction of the arbitrators is derived from the agreement of the parties under Section 10-A when an arbitrator is appointed by the parties. An arbitrator(s) act beyond the jurisdiction when they decide a matter not referred to them by the parties.

In Raza Textile Labour Union vs. Maharaja Shri Umaid Mills Ltd. [11], the court quashed the decisions in three matters. This was because the award given in those three matters was not covered by the 167 disputes that were referred to him. Therefore, the court said that he had acted beyond his jurisdiction.

In Vaikuntam Estate vs. Arbitrator[12], the arbitrator exceeded the terms of reference. So the Madras High Court quashed the interim award of the arbitrator as he acted beyond his jurisdiction.

Thus, it is important to note that, an arbitrator ceases to have jurisdiction after the expiration of the time period that was mentioned in the agreement. The court as well stated that if the parties themselves do not raise any objections against the expiration of the time limit thereof of the arbitrator that was mentioned in the agreement then they cannot, later on, challenge the decision of the arbitrator under Article 226 of the Constitution.

It is important to understand that Arbitration is considered to be an efficient alternative to the adjudication procedure, and most importantly, both these dispute resolution mechanisms cannot be used simultaneously. In the ambit of Industrial Disputes, it is voluntary and is at the discretion of the parties to the dispute.

The arbitrator (s) is considered to be a quasi-judicial body and thus hereby is an independent individual and possessed all the attributes of a statutory arbitrator. An arbitrator is expected to be neutral and operate intra vires by following arbitration procedure and not indulging in any such practices which would result in the violation of the principles of Natural Justice.

The key element to section 10-A is sub-section 10-A (5), which states that provisions of the Arbitration Act, 1940 shall not be applicable to arbitrations under the section.   
 It was held in the case of Kingfisher Airlines vs. Captain Prithvi Malhotra and Ors[13], wherein an application under Section 8 of the Arbitration and Conciliation Act, 1996 (ANC Act) was filed to initiate arbitral proceedings, but the court stated that the procedure to be followed here would not be that of the ANC Act, but rather that of the Industrial Disputes Act.

The Labour Courts accepted arbitration application under Section-8 [14], but, in the case of Rajesh Korat vs. Innoviti [15], the High Court of Karnataka held that the procedure specified under the Industrial Disputes Act, 1947 should apply to the proceedings and no application of the ANC Act would be permitted.

Despite the judicial precedents, there is still a necessity for the legislature to make an amendment to the Act in place thereby issuing clarity over the stance of the ANC Act in this regard. The main reason is, Section 10-A (5) of the Industrial Disputes Act, 1947, only bars the application of the Arbitration Act, 1940 and not of the latest legislation.

In view of the aspects discussed in the earlier sections as yet, the Essentials Of Voluntary Arbitration can be inferred as under:
  1. Submission of the dispute to the arbitrator must be voluntary,
  2. Investigation and examination of witnesses.
  3. The decision is not necessarily binding on the parties
  4. Disputes arising out of agreements between the parties.
The ambiguity in the statutory provisions stated supra is one of the reasons for the inefficient execution of arbitration procedure in case of industrial disputes, along with other factors which thereby determine the result so obtained, which will further be discussed in the following sections of the article.

The Reality of Arbitration in Industrial Disputes: The Need for a Critical Review:
Voluntary Arbitration has been strongly recommended by the government and given a place in law. It was even held in the case of Karnal Leather Karamchari Sangathan vs. Liberty Footwear Co.,[16] that arbitration is the most efficient and effective way of settling disputes under the Industrial Disputes Act, 1947

For the reason that it resolves disputes in less than one year period and is less expensive in comparison with the other modes of dispute settlement. The existence of the fact along with various other advantages that lesser or no right to appeal against the arbitral awards gives arbitration an edge over litigation thereby making it the best settlement mechanism for industrial disputes.

But however, the experience shows that although the step has been strongly initiated by the government for over thirty years now, it is yet to take root. Several complications under the statute and huge differences of proceedings under the Industrial Disputes Act, 1947 and the ANC Act, could never garner arbitration the popularity it potentially is to gain.

During the last decade, not even 1 % of the disputes reported were referred for arbitration. The National Commission on Labour examined the working of arbitration as a method of settling disputes and found that it was yet to be accepted by the parties, particularly by the employers unreservedly.[17]

The major and most crucial hindrances in this regard as yet include the aspects like:
  • Choice of Suitable arbitrator acceptable to both parties;
  • Payment of arbitration fees - Unions can seldom afford to share such costs equally with the management;
  • The Sanctity and credibility of the decision by an arbitrator are also held in doubt;
  • Issues of transparency in arbitral proceedings.
Lack of required awareness and ample understanding of the system by the employers and trade unions.

Arbitration in the Industrial Disputes Act, 1947 is very stringent and the fact that law covers voluntary arbitration and places it almost parallel to adjudication though it is barely different. As aforementioned as one of the hindrances for the ineffective execution of the Voluntary Arbitration procedure in case of Industrial Disputes.

It mostly appears that arbitration under the legislation is not correctly understood by the employers and trade unions, this is one of the reasons why it is rarely put to usage.
Unlike the system in the United States where arbitration is well developed and allows the parties to autonomously conduct proceedings and hence trained professionals and specialists are appointed as arbitrators who are better at making decisions in the matters concerned than the judges or officers of the same cadre.

There were instances of trials made by India to promote Voluntary Arbitration. The need for wider acceptance of the same was emphasised during the Indian Labour Conference, 1962 and the same was reiterated in the Report by the National Commission on Labour (refer to page 324) in the year 1969.

Thereby stating that parties need to be less dubious about the arbitration system and give it chance so as to see the result which thereby creates a platform to make necessary corrections if required. It was even suggested in the Third FYP [18] that Voluntary Arbitration should be the norm and have an advantage over adjudication.

Taking all the said and discussed facts into consideration, despite the efforts and initiatives to necessarily promote it, voluntary arbitration has effortlessly exuded a seldom recognition or has failed to gain the potential it actually deserves. Arbitration under Industrial Disputes Act, 1947 in its current state is nothing but a mere provision. However, the proper application of arbitration to labour law outshines the actual potential of the proceedings. The existing provisions of Arbitration under the Industrial Disputes Act are technically obsolete which thereby requires reconsideration in light of the recent developments witnessed by the system of arbitration.

Proper implications of voluntary arbitration in industrial disputes, would lay a platform with certain vital merits such as speedy delivery of justice and cost-efficient procedure and thereby intends to promote premises for fair settlement of disputes, while simultaneously reducing the burden on the courts and thereby both management and labour may get their due share out of the results of their combined efforts and the industrial development and progress of the community do not suffer adversely due to labour unrest thus providing for a  better system of grievance redressal for the workmen.

There are certain challenges that lie ahead in the path of applying arbitration in labour law for industrial disputes, but as a known fact that nothing is impossible, similar is the case with the issue in the current context, thus desired results can be definitely achieved by taking certain serious and clear steps, thereby making the provision of Voluntary Arbitration a potential success.


The following suggestions are opinions developed out of the observations gathered from the study conducted:
  • Voluntary Arbitration is included in the Industrial Disputes Act, 1947 by way of an amendment in the year 1956 when the only legislation relating to arbitration was the Arbitration Act, 1940, which itself has several shortcomings. Thus, there is a need to revisit the current statutes and latest legislations relevant to the subject matter in a broader dimension as well as consider their effective and efficient application in Labour Law.
  • As stated earlier, one of the main reasons for the unfortunate situation of Voluntary Arbitration and its Application in Indian Industrial Disputes is the lack of proper awareness and sufficient understanding of the dispute settlement mechanism in place. Thus, there is an exigent need to amend the agenda of industrial training at all levels with special importance on a full-fledged awareness programme to impart all the necessary knowledge for the effective and flawless execution of the steps involved in Voluntary Arbitration.
  • The entire procedure of the arbitral proceedings must not be confidential and frequent updates regarding the same must be given to the parties involved without any form of bias.
  • As mentioned in the earlier sections of the article, the United States has a well-developed state of arbitral proceedings and as well maintains specially trained professionals to act as arbitrators and serve the purpose. Thus, as a part of the development of the STATE OF ARBITRATION SYSTEM in the industrial disputes in India, crucial steps in this regard must be taken by the government by degrees and appointment of a special team of officials to act as arbitrators at the state levels specially trained in this field is a must for experiencing expertise in the settlement procedure.
  • A neutral third party acting as an arbitrator in an industrial dispute referred for Voluntary Arbitration is an obligatory requirement. But unfortunately, the existence of bias and lack of credibility in the decision passed by the arbitrator is the reason for the non-preference of voluntary arbitration for the reference of industrial disputes. Thus every official in the special team (in suggestion stated supra) to act as arbitrator in case of a dispute must essentially undergo a formal interview procedure in order to understand the mindset and opinion mechanism of the arbitrator such that the fundamental commitments of Industrial Law, i.e., achievement of industrial peace and social justice can operate without any hurdles.
  • Necessary steps must be taken for the systematic execution of arbitral proceedings to ensure speedy delivery of justice to the dispute in place, for the main objective of the arbitration is the development of ways which further assist in reducing the burden on the courts to the maximum extent possible while providing for a better system of grievance redressal for workmen.
List Of Acronyms And Abbreviations:
& And
vs versus
Co. Company
 Regd. Registered
w.e.f with effect from
S. Section
Ors. Others
FYP Five Year Plan
ANC Arbitration and Conciliation
AIR All India Reporter
SCR Supreme Court Reports
ILLJ Indic Legal Law Journal
Bom CR Bombay Cases Reporter
LLR Labour Law Reporter
IJAL Indian Journal of Arbitration Law
Mad. Madras
Bom. Bombay
Raj. Rajasthan
  1. S.10-A, Industrial Disputes Act, 1947
  2. Industrial Disputes Act, (Act No. 14 of 1947) as amended by The Finance Act, 2017 (7 of 2017) (w.e.f. 26.5.2017) (India).
  3. S.3, Industrial Disputes Act, 1947
  4. S.4, Industrial Disputes Act, 1947
  5. S.5, Industrial Disputes Act, 1947
  6. S.6, Industrial Disputes Act, 1947
  7. Suresh C. Srivastava, Voluntary Labour Arbitration: Law and Policy,
  8. Manohar Lal, Problems of Arbitration from Management Point of View, 1 Arbitration News 32 (1996).
  9. S.2 (a), Industrial Disputes Act, 1947
  10. S.N.Misra, Labour & Industrial Laws (27th ed. 2013).
  11. Maharaja Shri Umaid Mills Ltd., ... vs The Textile Labour Union (16 September 1957) AIR 1958 Raj 34, (1960) IILLJ 364 Raj (India)
  12. Vaikuntam Estate vs. Arbitrator, (1968) ILLJ 93 Mad (India)
  13. 2013 (7) Bom CR 738 (India).
  14. The Arbitration and Conciliation Act, 1996 (26 of 1996), as amended by The Arbitration and Conciliation (Amendment) Act, 2019 (33 of 2019) and the Jammu and Kashmir Reorganisation Act, 2019 (34 of 2019) (w.e.f. 31-10-2019).
  15. Rajesh Korat vs Management Innoviti Embedded 7 IJAL (2018) 120 (India).
  16. Karnal Leather Karamchari  vs Liberty Footwear Company (Regd.) (1989) 990 AIR 247, 1989 SCR (3)1065
  17. Judgments of Supreme Court & High Courts on Employees' Provident Funds, Vol XLII, LLR
  18. Third Five-Year Plan (1961-1966)
Award Winning Article Is Written By:
  1. Amuktha Malyada Gudla, Student- BBA LLB (Hons) - School of Law, GITAM University, Visakhapatnam
  2. Dr J. Pratima, Assistant Professor, School of Law, GITAM University, Visakhapatnam
Awarded certificate of Excellence
Authentication No: JU317981916239-28-0623

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