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With the advancing industrial development, there has been a parallel increase
in the disputes between employers and employees for the furtherance of each
of their individual interest. Evidences show that such disputes have resulted
into hampering of economic development of the country. Therefore, it
becomes the responsibility of the state to interfere in such matters and ensure
that the dispute of some does not produce grave consequences for the society
at large. With the increase in globalisation, the role of the state has become
very crucial. With increasing complexities, it is not necessary that the state may
be able to deal with all the matter so that a proper conclusion can be reached.

Industrial Disputes are of two kinds: interest disputes and rights disputes. The
former category of disputes is related to the determination of the wage rate,
salary levels and working conditions of employment whereas the latter
category deals with determination, interpretation or application of the already
existing standards. Such kinds of dispute are popularly known as grievance
dispute. In these disputes, it is claimed that the workers have not been dealt in
accordance with the rules or contracts, laws and regulations or collective
agreements that govern individual employment. Such grievances may be
regarding retrenchment ,dismissal, payment of wages, working time, overtime,
demotion , promotion, transfer, seniority, job classification, work rules and
fulfilment of obligation relating to safety and health laid down in agreement.

In such cases where the parties have to come to a solution which establishes a
win – win situation for both the parties. It is not necessary that the state
intervention will be able to bring about this objective. The best alternative to
this situation can be brought about through conciliation or arbitration.

Conciliation

Conciliation refers to the reconciliation of the interests or differences of the

two parties. It is a process through which each of the parties first appoints
their representatives. These representatives are brought before a third party.
The mutual discussion takes place between the representatives of workers and
employers so that they can be persuaded to come to a common solution. An
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alternative name for this process is known as mediation. The third party can be
an individual or a group of people. Functions of this mediator include-

1. Remove the differences between the two parties.

2. Persuading the two parties to think in a manner that is based on an
approach of give and take i.e. a problem-solving approach
3. Persuade both the parties to necessarily reach a solution and refrain
from imposing his viewpoint
4. Change his approach depending on the need in each case and
depending upon other factors.

Conciliation under the Industrial Disputes Act

Under the Industrial Disputes Act, 1947, conciliation consists of the following
machinery

1. Conciliation Officer – Section 4 of the Industrial Dispute Act, 1947

deals with the appointment of such person as a conciliation officer, as
the government may deem fit. The powers of such conciliation
officers are same that of a civil court. It is expected out of him to give
a judgement within 14 days of commencement of conciliation
proceedings. The judgement given by such a person shall be binding
on both the parties. The functions of Conciliation officer consists of:

 Hold Conciliation proceedings in order to reach a settlement between

the two parties;
 Investigate into the matter and bring about settlement;
 Send a report and memorandum of settlement to the appropriate
government;
 In cases where no settlement could be reached then send a report
and memorandum of settlement to the government stating the steps
taken by him or her;
 Refrain from forcing a settlement

In cases where the conciliation process in progress, the Industrial Disputes Act,
prohibits strikes and lockouts.
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2. Board of Conciliation- In cases where the conciliation officer fails to

resolve the disputes between the two parties concerned, the
appropriate government, under Section 5 of the Industrial Disputes
Act may set up a Board of Conciliation for such purposes. Unlike the
conciliation officer, this board is not permanent in its existence. It is
created for ad hoc purposes and consists of a chairman and either
two or four members nominated on an equal basis by both the
parties. The power of this body is same as that of the Conciliation
officer i.e. of a civil court but it admits only those matters that are
recommended by the government. The duration in which the board is
required to give its judgement is within two months from the date on
which the matter is referred to it.

In the Indian matrix, settlement of disputes by the Board of Conciliation is

done very rarely whereas the settling of disputes by a Conciliation officer is
more prevalent and also flexible.

Arbitration

Arbitration is in some terms similar to Conciliation. In this method of dispute

resolution also, the unresolved dispute is referred by the parties to a dispute to
a third party who stands to be neutral and is commonly known as the
arbitrator. This method is different from conciliation because the judgement is
given by the third party in the former whereas parties themselves come to an
agreement in the latter category.

Unlike judges, the arbitrators do not enjoy judicial powers. The function of an
arbitrator is to listen to the viewpoints of both the parties and then deliver his
judgement. The decision is sent to the government who publishes it. The
judgement becomes enforceable and binding on both the parties.

Arbitration is of two kinds:

1. Voluntary Arbitration – It includes those situations where the two

parties to a dispute mutually agree to refer their matter to a third
party. One drawback of this method of arbitration is that the
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judgement would not necessarily become binding on both the parties.

In India, there are lot of factors that work against the successful
working of voluntary arbitration such as legal obstacles, limited
availability of trained arbitrators, scarcity in the amount of confidence
in the eyes of general public, complicated procedure, lack of appellate
procedure in case of non-satisfaction of the award, absence of
recognised unions which could bind the workers. According to Section
10-A of the Industrial Disputes Act, 1947, in cases where the
conciliation process fails, then it is advised that the parties opt for
voluntary arbitration.
2. Compulsory Arbitration – In cases where the government instructs
the two parties to opt for the process of arbitration. The judgement
produced by the arbitrator is binding on both the parties.

The disputes which are resolved by way of arbitration have certain advantages
such as it ensures the two parties that they have faith in each other, the
process is informal and flexible and nature, arbitration provides justice at
minimum cost and time, lastly mutual consent leads to building of trust and
healthy relations between the two parties.

Arbitration Agreements

If the parties to a dispute agree that the dispute is to be referred to an

arbitrator, they can make a written agreement for it. The parties need to enter
into an arbitration agreement in the prescribed form. Name of the arbitrator to
whom the matter will be referred to should be specified and a copy of such an
agreement must be sent to appropriate government which shall then be
published in an official gazette. Reference to more than one arbitrator can also
be made. In such a case each arbitrator needs to act on an individual basis.

Moreover, in order to make a reference of a dispute to the arbitrator it is

necessary that the dispute in question be an industrial one otherwise, the
reference would cease to be competent. In cases where the dispute is referred
to an arbitrator, under Section 10-A, it cannot be further referred to a tribunal
or a court for adjudication.
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Section 11 states that the arbitrator can proceed with the arbitration process
with his own procedure as he may think fit provided that such procedure is not
against the principles of natural justice. The industrial dispute referred to an
arbitrator can be investigated and adjudicated as per the arbitration
agreement and should be published by the government.

The arbitration referred to under the Section 10 shall not be affected by any of
the provisions of the Arbitration Act, 1940.

As far as the judicial review of an award of an arbitrator is concerned, the

Supreme Court has held that an arbitrator’s award cannot be against the
provisions laid down by the legislation and if not then it would be rendered
illegal. In Engineering Mazdoor Sabha v. Hind Cycles Ltd[1] the Supreme Court
has held that a writ can lie against an arbitrator under Article 226 of the Indian
Constitution.

Binding Value of an Arbitration Award

According to Section 18 of the Industrial Disputes Act, 1947, the arbitration

award becomes binding once it is enforceable on those parties who refer the
disputes to the Arbitrator. An arbitration award whose notification has been
issued under Section 10-A shall be binding on the parties to dispute. A
settlement within the meaning of section 18(3) is binding on both the parties
and continues to remain in force unless the same is altered by another
settlement.