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Labour Laws & International Labour

A Project Report of on

Legal Aspects & Flaws of


Collective Bargaining in India

Submitted to:

Submitted by:

Dr. Kusum
UILS, PU

Anupam Gupta
14/09, 10th

Semester
Chandigarh

UILS, PU, CHD

Table of Contents
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Sr. No.
1.
2.
3.

Particulars
Introduction
Meaning
Collective Bargaining in India
(A)Legal Aspects
(B)Flaws
Inter-Union Rivalry due to Multiplicity of
Trade Unions in India
Political Interference by Outsiders
Illiteracy and Poverty of Workers
Easy Access to adjudication

4.

Conclusion

Page
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3-4
4-11
4-8
8-11
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9-10
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INTRODUCTION
An individual is free to bargain for himself and safeguard his own interest. If an
individual workman seeks employment he stands in a weaker position before his master, who
having command over wealth stands in better position to dictate his own terms and the
individual has to accept the offer without any reserves for he has to earn something to feed
his family. However the position becomes different if a bargain is made by a body or
association of workmen. They can negotiate and settle their terms with the employer in a
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better way and secure better wages, better terms of employment and greater security. The
object of collective bargaining is to harmonise labour relations, promote industrial peace by
creating equality of bargaining power between the labour and the capital. Collective
bargaining can exist only in an atmosphere of political freedom. Any conditions of service
like, wages, hours of work, leave, gratuity, bonus, allowances and other like privileges can all
be settled by negotiation between the body of workmen and employer.
Generally speaking collective bargaining is regarded as a process whereby organised
labour and management negotiate the terms and conditions of employment which are
incorporated in an agreement called 'collective bargaining agreement". It's nature has been
changing from its beginning till now and has taken different form. It was quite different than
what it is today. It has covered a long journey since the early days of trade unionism. It has
been changing with the changing industrial scenario. In early days the employer negotiated
with a single trade union in a simple and informal way. Now-a-days it has assumed a
complex nature because of multi-trade unionism.

MEANING
The word "collective bargaining' was first used by Beatrice Webb about hundred
years ago in the beginning of twentieth century. But the term was not defined by Beatrice
Webb. According to International Labour Organisation "negotiations about working
conditions and terms of employment between an employer, a group of employers or one or
more organisations or employers on the one hand and one or more representative organisation
of workers on the other with a view to conclude agreement is known as "collective
bargaining".1
Thus "collective bargaining" is that arrangement whereby the wages and conditions of
employment of workmen are settled through a bargain between the employer and the
workmen collectively whether represented through their Union or by some of them on behalf
of all of them.
In the present day collective bargaining has become a general feature in all industry.
Any agreement collectively arrived at is generally observed by both the employers and
workmen who are not a party to it. Of course the Trade Union movement in India has not
1 I.L.O . Collective Bargaining; A Workers Education Manual. Geneva, 1960. p. 3.
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been able to reach that standard which its counterpart, in other developed countries could, yet
it has done much. The object of any labour movement at all times is "to seek an ever rising
standard of living, which means net only more money but more leisure and a richer cultural
life."2 Collective bargaining is not a means of seeking a voice in management. 3 it is, no doubt,
a method adopted by Trade Unions in championing the cause of their members.

COLLECTIVE BARGAINING IN INDIA


(A)

LEGAL ASPECTS:
Collective Bargaining in India emerged much later as compared to its emergence in

the other developed countries. Collective bargaining is a technique by which disputes


of employment are resolved amicably, peacefully and voluntarily by settlement between
labour unions and managements. The method of collective bargaining in resolving the
Industrial dispute, while maintaining industrial peace has been recognized as the bed rock of
the Act. A reflection of collective bargaining is found in Section 3 of the Industrial Disputes
Act, 1947.
Section 3 of the Industrial Disputes Act, 1947 provides that, in case of any industrial
establishment in which 100 or more workmen are employed or have been employed on any
day in the previous twelve months, the appropriate Government may by general or special
order require the employer to constitute a Works Committee consisting of the
representatives of employers and workmen engaged in the establishment. The number of
representatives of workers shall not be less than the number of representatives of employer.
Sub-section (2) of Section 3 of the Industrial Disputes Act, 1947 provides that "it shall be the
duty of the Works Committee to promote measures for securing and preserving amity and
good relations between the employer and the workmen and, to that end, to comment upon
matters of their common interest or concern and endeavour to compose any material
difference of opinion in respect of such matters."

2 Observations by George Meany-President of the American Federation of Labour in his article


"What American Labour wants" published in "Readers Digest" of July 1955.
3 Observations by George Meany-President of the American Federation of Labour in his article
"What American Labour wants" published in "Readers Digest" of July 1955.
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Under the provision of the Act, the settlement arrived at by process of collective
bargaining with the employer has been given a statutory recognition under Section 18 of the
Act. Under the Act two types of settlement have been recognised:
1. Settlement arrived in the course of conciliation proceeding before the authority. Such
settlements not only bind the member of the signatory union but also non-members as
well as all the present and future employees of the management.
2. Settlement not arrived in the course of conciliation proceedings but signed
independently by the parties to the settlement binds only such members who are
signatory or party to the settlement.
Section 19 of the Act prescribes the period of operation inter alia of such a settlement
and envisage the continuation of the validity of such a settlement unless the same is not
replaced by another set of settlement, while Section 29 prescribes the penalty for the breach
of such a settlement.4
The rule of collective bargaining has been incorporated in the Industrial Disputes Act,
1947, wherein the provision is made for Appointment of Conciliation Officers, charged
with the duty of mediation in and promoting the settlement of industrial disputes. On a
reference of a dispute to the Conciliation Officer, a Conciliation Board is constituted
consisting of the representatives of employees and employer with the Conciliation Officer as
its chairman. The memorandum of settlement duly signed by the parties is sent to the
appropriate Government for publication. The main task of the Conciliation Officer is to go
from one camp to the other and find out the greatest common measure of agreementto
investigate the dispute and do all such things as he thinks fit to arrive at a fair and amicable
settlement of the dispute.' A settlement arrived at by agreement between the employer and
workmen otherwise than in the course of conciliation proceedings shall be binding on the
parties to the agreement. A settlement comes into operation on such date and is binding for
such period as agreed upon by the parties. Dealing with the binding character of settlement
Mr. Justice Chagla has observed that:Private Agreement: Industrial law takes notice of any private settlement or
agreement arrived at between the parties in the course of an industrial dispute. Such a
private agreement belongs to the realm of contract; it may give rise to contractual
4http://www.mondaq.com/india/x/50440/employee+rights+labour+relations/Lab
our+And+Employment+Laws+Of+India
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rights; it has no sanction in industrial law.an industrial dispute does not end until a
settlement is arrived at which has been given a binding effect under the provision of
section 19(2) and such a settlement can only be arrived at when conciliation
proceedings are held under section 12 of the Industrial Disputes Act, 1947.5
From these observations, it would be wrong to infer that a private settlement in
respect of an industrial dispute does not end an industrial dispute. In this respect the
following observations of Chief Justice Chagla are relevant:
But when the parties do arrive at a settlement, the law gives to it a greater sanctity
than it gives to an award and therefore, the industrial law does not contemplate any
interference with finality of the settlement and it compels the settlement to run on for
the period mentioned in the settlement itself and neither party is permitted to
challenge that settlement during its duration. 6
The right of a Trade Union to speak legitimately on behalf of their members is
recognised in Indian Law but it does not in any way derogate an individual from his right to
judge for himself, independently of any Trade Union, as to an offer advantageous to him,
concerning his employment. The limits of the doctrine of collective bargaining inherent in the
representative capacity of the Trade Inions vis--vis freedom of individual worker to protect
his economic interest has been stated by Mr. Justice Anantanarayanan in Tamil Nadu
Electricity Workers Federation vs. Madras State Electricity Board, in the following words:
The whole theory of organised labour and its statutory recognition in Industrial
Legislation, is based upon the unequal bargaining power that prevails as between the
capitalist employer and an individual workman, or disunited workmen. Collective
Bargaining is the foundation of the movement and it is in the interest of labour that
statutory recognition has been accorded to Trade Union and their capacity to represent
workmen, who are members of such bodies. But, of course there are limits to this
doctrine, for otherwise, it may become a tyranny stifling the freedom of an individual
worker. It is not then that every workman must necessarily be member of Trade
Union, and that, outside its fold, he cannot exercise any volition or choice in matter
affecting his welfare. The representative powers of organisation of labour, with regard
to enactments, such as the Industrial Disputes Act, will have to be interpreted in the
light if the individual freedom guaranteed in the Constitution, and not as though such
freedom did not independently exist, as far as organised labour is concerned.
The Unions and the employers, while making collective bargaining must be
sufficiently watchful that the agreement arrived at should be in conformity not only with the
provisions of the general law touching upon the subject if dispute, but also be in conformity
with the provisions of the Industrial Law having a bearing with the subject matter of the
5 Poona Mazdoor Sabha vs. G.K. Dhutia, AIR 1956 Bom. 743.
6 Ibid.
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dispute. It has also to be borne in mind while making an agreement that the interest of the
workers who are not the members of the Trade Union are also protected and the workers are
not discriminated against.7
Significance of collective bargaining is found in the Five Year Plans of India also. In
the First Five Year plan it had been mentioned that the State should make efforts to promote
collective bargaining to settle the disputes mutually than through the adjudication through the
intervention of the Government. First Five Year Plan of India records that "the workers' right
of association, organization and collective bargaining is to be accepted without reservation as
the fundamental basis of mutually satisfactory relationship.8 Similarly, in the Fourth Five
Year Plan the significance of mutual agreements was underlined as in this Plan also
settlement of industrial disputes by mutual agreements was held to be the best solutions for
the settlement of disputes.
The Industrial Policy Resolution adopted by the Government of India in 1956,
declared that in a socialist democracy, labour is a partner in the common task of
development, and should be asked to participate in it with enthusiasm." To raise productivity,
promote industrial peace and create a sense of involvement amongst the workers, Article
43A was inserted in the Indian Constitution which formed a part of the Directive Principles
of State Policy.
Article 43-A of Indian Constitution provides that "the State shall take steps by
suitable legislations or in any other way to secure participation of workers in the
management of undertakings or other organisations engaged in the industry." Thus, it has
become incumbent upon the State to work towards the effective participation of workers in
the management.
But collective bargaining has not developed as desired in India. The Second
Commission on Labour reports that "We recognize that, in the area of determination of
industrial disputes in our country, adjudication is still the prevailing mode. We do hope that,
over time, collective bargaining and inbuilt arbitration will result in the bulk of the disputes
between parties being settled expeditiously.9
7 Mst. Deoli Bakaram vs. The State Industrial Court, Nagpur, AIR 1959 Bom. 70.
8 First Five Year Plan, 1951, p 573.
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(B)

FLAWS:
The collective bargaining scene in India is not very encouraging. The major emphasis

of both union and employers is to settle the disputes through adjudication rather than sorting
out the issues among themselves.
Whatever bargaining takes place, it is limited to large plants only. Smaller organisations
generally do not prefer this form of handling the issues. Several factors are responsible for
this state of affairs. These are listed below:

(1) Inter-Union Rivalry due to Multiplicity of Trade Unions in India


Strong and stable trade union is the first essential for effective bargaining. The provision
under the Trade Union Act, 1926 in India until its amendment in 2000 provided that any
seven or more members of trade union may apply for registration. Such provision in the
Trade Union Act, 1926 caused the emergence of more than one trade union within an
industrial unit. It has been seen that in India the average size of trade union in India is small
having an about of 500 members.
1. So due to the multiplicity of trade unions within an industrial unit divide the workers
in groups differing in their ideologies cause inter-union rivalries.
2. Division of workers belonging to different Trade Unions within the same industrial
unit divide the workers and weakens the unity of the workers, which ultimately
weakens their bargaining power.
3. As inter-union rivalries due to multiplicity of trade unions in his establishment, the
employer has to bargain with different representatives of the workers of different
trade unions. In such situation there is a possibility that one trade union may agree
with the employer on one issue whereas other trade union may not accept such
settlement with the employer.
4. There is lack of definite procedure to determine which union is to be recognised to
serve as a bargaining agent on behalf of the workers.
The thrust of the Ramanujam Committee (a bipartite committee with term of reference
"formulation of specific proposals for a new Industrial Relations Bill" comprising
representatives of employer's organizations and Central Trade Unions was constituted under
9 Report of National Commission on Labour, Vol. II, Ministry of Labour, Government of India, 2002,
p. 45
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the Chairmanship of Shri G Ramanujam) that led to the Amendment of the Trade Unions Act,
1926 also aimed at reducing multiplicity of Trade Unions, promoting internal democracy,
rank and file leadership of Trade Unions and facilitating their orderly growth and regulation.
See Statement of Objects and Reasons of the Trade Unions (Amendment) Bill, 2000. As
Section 4 of the Trade Unions Act, 1926 was amended with a view to making an additional
provision that "no Trade Union of workmen shall be registered unless ten per cent or one
hundred, whichever is less, of workmen engaged or employed in the establishment or
industry with which it is concerned, are on the date of filing the application for registration,
the members of such trade union and in no case a union shall be registered without a
minimum strength of seven members."

(2) Political Interference by Outsiders


Trade union movement is an outcome of labour movement which was started for the
workers by outsiders. These outsiders were socialists and philanthropists who, motivated by
their sheer sympathy for the poor and powerless workers who were exploited by their wealthy
and powerful workers had a missionary zeal to organise workers to improve their working
conditions. Those socialists and philanthropists started labour movement purely on
humanitarian basis with the sole purpose to ameliorate the working conditions of workers
without selfish vested interest. Such outsiders in fact laid down the foundation of labour
movement which was later on taken up by the workers themselves by the close of nineteenth
century.
Then in 1926, the Trade Union Act, 1926 that came into force in India also permitted
the outsiders to be the members of the executive of Trade Unions. Thus from the very
beginning there has been interference by the outsiders in the functioning of Trade Unions.
Although outside leadership played a definite and useful role in furthering the activities of the
Indian unions in the beginning and the leadership provided to the workers by the outsiders.
However, the outsiders' leadership is not an unmixed blessing as political aspirations and
orientations of the outsiders usually outweigh their commitment to the causes of the
workers whom they represent."10

10 Industrial Relations in India by Charles A. Myers and Subbiah Kannappan, Ed., 1970, p. 81.
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1. Due to the dominance of outsiders in Trade Unionism in the country, there is


multiplicity of unions which are weak and unstable, and do not represent majority
of the employees.
2. Since most of the trade unions are having political affiliations, they continue to be
dominated by the politicians, who use the Trade Unions and their members to
meet their political ends.
3. There has been very close association between the trade unions and political
parties. As a result, trade union movement has leaned towards political
orientations rather than collective bargaining.

(3) Illiteracy and Poverty of workers


Illiteracy coupled with poverty is another cause for the slow development of collective
bargaining in India. Report of the Second Commission on Labour records that "workers are
exploited because they are illiterate. socially backward, unskilled, unorganized, uninformed
and poor.11 In its report the Second Commission on Labour recommends that "a
comprehensive programme of education of workers has to be established with the key
objective to instil a sense of belonging in the workers vis-a-vis their work and organization,
through a better understanding of their work and the work organization; to improve the
bargaining power of the workers; to assist the workers to identifying skills he/she needs to
pick up and to encourage the workers to look at the alternatives in organization of their work.
The education programme should also discuss organization of workers, and the history of
Collective Bargaining.12

(4) Easy access to adjudication


In India, the law provides an easy access to adjudication. Under the Industrial Disputes
Act, the parties to the dispute may request the Government to refer the matter to adjudication
and the Government will constitute the adjudication and the government will constitute the
adjudicating machinery, i.e., Labour court or Industrial tribunal. Thus, the faith in the
collective bargaining process is discouraged.

11 Report of National Commission on Labour, Vol. II, Ministry of Labour, Government of India,
2002, p.101.
12 Ibid.
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CONCLUSION13
The National labour policy has to make itself more intelligible so as to resolve the
dilemmas in collective bargaining and thereby resolve the riddle of the multiple unionisms
and strengthen the labour movement, having majority representation union concept. Law
should be changed to upgrade the status of settlements following bipartite negotiations.
Provision for a statutory representative trade union, as the sole bargaining agent of the
workmen, will enable workers and employers to establish strong collective bargaining
relationships. As such, close interplay between collective bargaining and legislation must
continue which will lead to the growth of collective bargaining. The weapons of strikes and
lockouts must be regarded as strategically tactics instead of as means of conflict, if collective
bargaining is to be accepted as an effective method in industrial relationship. In our industrial
economy, collective bargaining is the most ideal method for settlement of industrial disputes,
and therefore, this institution has to be developed. In the working of collective bargaining,
some labour specialists find an emerging trend towards replacement of traditional distributive
agreements by those on productivity and improving the quality of work. It may, therefore, be
hoped, that this would lead to working for workers' participation in management. If so,
collective bargaining may develop and grow in an environment that is supportive. Still we
think there is a scope of thorough research and study for making the collective bargaining as
a full power of the Management.

Bibliography
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http://www.abhinavjournal.com/images/Commerce_&_Management/Apr13/2.pdf
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1. Mishra S.N.; Labour and Industrial Laws; Central Law


Publications; 27th Ed. 2013.
2. Paul, Meenu; Labour and Industrial Law; 8th Ed. 2011;
Allahabad Law Agency.

Webliography
1. http://www.abhinavjournal.com/images/Commerce_&_Man
agement/Apr13/2.pdf
2. http://www.mondaq.com/india/x/50440/employee+rights+l
abour+relations/Labour+And+Employment+Laws+Of+Ind
ia
3. http://www.scribd.com/doc/26670160/CollectiveBargaining-in-India-Project

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