IMPACT OF INDUSTRIAL DISPUTES ACT, 1947 ON INDIAN ECONOMY

INTRODUCTION

History is an ongoing dialogue between the past and the present, and educating the present is our
primary goal of learning history. Economic history may be considered to be a quest to
understand the essence of economic activity in the past. Such research is inherently rewarding,
but can also be helpful in shedding light on topics of interest to economic policy makers. Society,
however, should not only work on economic theory; we need an amalgam of economic, political
and social theory that forms the functioning of a society. We need successful institutions, in
other words.

Institutions are made up of structured rules and informal behavioral norms and their compliance
features (Douglass North), which organize human interactions and provide individuals with
incentives and disincentives to behave in a specific way. That opportunity and structure for
economic, political and social activity is therefore given by an effective institution. Although the
informal section contains expectations and the interpretation of these standards that regulate
people’s behavior. A society's transformation over time depends on structural change and is thus
helpful in understanding historical change.

When an organization grows, it has the capacity to boost the economy’s efficiency. Today, there
may be occasions when these organizations do not prove to be as successful as expected. It is
well known that there are both positive and negative effects on systems that develop overtime.
An agency, on the other hand, performs well because of lower information costs, greater
visibility and improved policy knowledge.

As economic historians, we will look at a structural reform in the Industrial Disputes Act, 1947,
in this report. How this shift in the Act affected the past and impacts the present and the future
further. There is also a debate in the later parts of how the Act was amended to explain the
consequences of it. The significance of labor and the regulations necessary for a peaceful and
safe work environment are also taken into account in this report. The work atmosphere cannot
always be calm in an industry.
Conflict of interests is often present, and these conflicts lead to disputes. As this conflict is due to
the state of the workers and is between the employer and the worker, it can be considered an
industrial dispute. The question to be answered now is how such conflicts can be avoided from
taking place. This topic will concentrate on the forth coming parts of the report.

The next part of the paper looks at the specifics of the Act, outlines it and discusses how the Act
came into being. The root, the reasoning behind the creation of the Act, its determinants, effects,
and the amendments created, followed by the reasons for those amendments.

HISTORY AND FORMATION

The origins of the 1947 Industrial Disputes Act can be traced back to the existence of India's
monopolist merchants, the East India Company. India became the center for the manufacture of a
range of goods due to cheap labor and raw materials, which were later sold at high prices on
international markets. This helped to make huge profits for the East India Company.

Some of the most desirable fabrics which posed a threat to the British Crown were produced and
exported by Indians at that time. Therefore, by imposing duties and tariffs on Indian silk, the
British chose to cut off this competition. This was a big return to the Indian economy. Since then,
the laws levied on Indians have been more extreme than those applied in Britain. This caused
Indian weavers to face utter isolation. From markets worldwide. Therefore, India became an
importer of British goods instead of an exporter of finished products.

We need to grasp the importance of industrial relations before delving into a more
comprehensive history (IR). In 1979, Clegg described it as “the study of employment rules,
together with the ways in which the rules are created and changed, interpreted and administered.”
Put more briefly, it's the work regulation report. As IR gained importance in the era of secure
jobs and unionized labor in manufacturing plants, more focus was put on public policies relating
to the problem of in-workplace labor management.

The main purpose of India's industrial relations law was to establish a safe and bonded labor
market for the economy. Such laws include the following acts: the Merchant Shipping Act
(1859), the Workmen's Breach of Contract Act (1860), the Workmen's Dispute Act (1860), the
Indian Factories Act (1881), the trade Unions Act (1926), the Trade Disputes Act (1929), the
Trade Disputes Act (1934) and the Trade Disputes Amendment Act (1938).

As there was an immediate need to preserve peace and harmony within the industry in order to
prevent further harm to the Indian economy, the failure of the above actions attracted a great deal
of attention. The introduction of the Industrial Disputes Act of 1947 was also included in the
government's priority list.

AN OVERVIEW OF INDUSTRIAL DISPUTES ACT, 1947

The Industrial Disputes Act was passed in 1947 “to provide for the investigation and settlement
of industrial disputes and for certain other purposes.”1 It provides a formal institutional
framework for the prevention and settlement of industrial disputes. For the prevention and
resolution of conflicts that occur in a sector, it offers a systematic institutional design. But how
does it describe an industry by this Act? What is an industrial dispute?

We refer to the meanings of these words under the Act to address this issue.

1. Industry

Section 2(j) of the 1947 Industrial Disputes Act described industry as "any kind of industry"
business, trade, industry, development, employer calling, and includes any worker calling,
service, jobs, handicraft, industrial occupation or advocacy. This definition is very wide. Both
entities that may and may not fall under a sector are not captured. “The definition of an industry
for these types of organizations has been the decisions of the numerous High Courts and the
Supreme Court are continuously altered.”2

“We also have an updated industry concept as per Industrial Disputes Act (Amendment), 1982.
Industry is characterized as any systematic activity carried out through cooperation between an
employer and its workers (whether such workers are employed directly by that employer or by or
through any agency, including a contractor) for the production, supply or distribution of goods or

1
Preamble, THE INDUSTRIAL DISPUTES ACT, 1947 ACT NO. 14 OF 1947
2
Some Judgments in this regard are- State of U.P V. Jai Bir Singh, (2005) 5, Executive Engineer (State of
Karnataka) V. K. Somasetty, (1997);
services in order to satisfy human desires or desires (not merely spiritual or religious desires in
nature).”3

This description also has its loopholes and by decisions has been subject to change. Discussing
them is beyond this paper’s reach.

2. Industrial Dispute

“Industrial disputes are specified by section 2(k) of the Industrial Disputes Act 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 labor, of any person. Any dispute or difference
between the employer and the employer, or between the employer and the worker, or between
the worker and the worker, connected with any person's employment or non-employment or
terms of employment or working conditions.”4

“Staff usually makes an argument which their employer refuses to honor. This assertion is
regarded as an industrial dispute. Staff who have been fired or have quit the industry for some
reasons may also make a lawsuit.”5 “A good reader can note that we have only spoken about
collective conflicts between employees and employers so far. But there are also occasions where
individual disputes, as in Western Co. v. Worker’s Union,”6

According to this decision, if and only if it is taken up by a significant number of employees or

by a registered group of workers, such as trade unions, an individual dispute may be regarded as
an industrial dispute.

ECONOMIC RATIONALE

The economic reasoning behind the Industrial Disputes Act's formulation is clear. They will
damage the economic growth rates of a country without a proper system in place for the
settlement of industrial disputes. The country’s massive losses are caused by strikes and lockouts
3
Industrial Disputes Act,1947 in P.L.Malik's Industrial Law, Volume 2, Page 1986-1987, 24th Edition,2013,
Eastern Book Company.
4
Industrial Disputes Act,1947 in P.L.Malik's Industrial Law, Volume 2, Page 1986-1987, 24th Edition,2013,
Eastern Book Company.
5
Traingular Motors Ltd. VS Bombay Automobile Employees' Union, 2 FJR 179 (LAT)
6
SCC 1 255 (1970); AIR 1970 SC 1205; (1970) 2 LLJ 256.
as they reduce the amount of production in the economy and thus reduce GDP. Given a closer
review of the economic logic behind the application of the act is presented below.

1. Collective Bargaining

“It is a mechanism in which labor unions, workers representatives and employers, through their
representatives, deal with and negotiate with a view to concluding or renewing a collective
agreement or resolving conflicts.”7

The workers come together to form a group, and the leaders of these unions negotiate with the
employer on matters related to the rise in pay, the working climate, hygiene, health and safety,
working hours, etc. More importantly, as a set of rules that keep labor in the workplace
regulated, disciplined and remunerated, trade unions use collective bargaining. Occasionally, in
the course of negotiation, employers purposefully pull due to political purposes; these intentional
actions create uncertainty and discord between the two sides, outside of the ongoing
negotiations.

2. Strikes and lock outs

The workers' demonstrations in the form of strikes and lockouts are causing the economy a huge
economic loss, in terms of productivity, income produced, GDP. Such strikes and lockouts are
counterproductive to both employers and workers. Disputes tend to decrease the profits of
organizations. Sometimes, both sides have varying experience and interpretation of the
bargaining gains that result in inevitable conflicts. Nevertheless, with the implementation of
additional policies, it is necessary to reduce the length of disputes.

A common myth that thrives among us is that stronger labor unions appear to increase the
probability of strikes and conflicts, but this may not be true. A strong labor union, on the one
hand, poses a monumental threat of going on strike; whether or not this threat is carried out
depends on how strong the adversary is and how cooperative it is.

7
Section: Module 2 - The Collective Bargaining Process.
If the employers are all ears and intent on solving the issue, the talks appear to go well. The
probability of a strike taking place rises if the case is the opposite. The execution of the risk
depends on what the intention of the employees is, from the result of the strike. A crucial factor
to remember is that the greater the probability of a strike, the greater the possibility that
employers will be able to bargain. This lowers the probability of a strike in turn. On the other
side, because of confrontations between powerful labor unions, enforcing lock-outs becomes
problematic for the employer. It is therefore in the hands of the trade unions to turn a negotiation
into a controversy.

What is important to understand is that all the surplus gained will be bagged by employers
without labor unions, and this is incredibly unequal even if it is dispute-free. Thus, the formation
of labor unions in the modern world has its own benefits and disadvantages. The same
consequences are triggered by collective bargaining between employers and workers.

If the employer has more bargaining power, so the likelihood of lock-outs increases. A powerful
union with greater bargaining power, on the opposite, will lead to a settlement between the two.
But the consequences are well felt if the talks go poorly.

3. Man-days

The man-days wasted due to strikes and strikes are another concern we must concentrate on with
lock-outs. In this time, man-days are the days considered in terms of the amount of work a
worker can do, which literally means the number of days missed per worker per day.

The number of disputes, which includes the number of strikes and strikes, is given. Lockouts in
India from 1947-1961. The table also contains the sum of missed man-days and the number of
employees involved at the time of the strikes and lockouts. With a total of 1,181 conflicts, the
year 1947 was the height of industrial strife, resulting in a loss of 1.62 million man-days.

We need action in order to reduce such detrimental effects on the economy. In situations like
this, the interference is from the state. For all these purposes, the 1947 Industrial Disputes Act
was established and enforced. In the upcoming pages, the critical importance of the Act will be
clarified.

CAUSES
There may be labor disputes between the employer-employer, the employer-employee, and the
employee-employee. It may be economic and non-economic to categorize the causes of an
industrial dispute.

Economic explanations include problems related to legitimate benefits, such as salaries and
allowances, working conditions, bonuses, leave or holidays without pay, working hours,
unreasonable layoffs or reductions, etc. Any of the things that fall under the non-economic
causes of an industrial conflict are undisciplined employee conduct, victimization, political
variables.

Here, we focus more on the other categorization of industrial conflict causes: industrial
conditions and factors of management. These are listed below:

1. Industrial Factories

These primarily involve numerous types of demonstrations, Gharaohs, strikes, etc. Workers'
demonstrations where strikes are a type of agitation where employees with the same desires
come together and avoid working to meet their demands by the worker, and gheraos is a form of
industrial action where employees imprison or surround their employers in a premises until their
demands are met or until they receive satisfactory responses.

Retrenchments, lockouts, dismissals, etc. are a form of protest as well, but from the Hand with
employers. Retrenchment entails withdrawing or dismissing any workers from a department to
cut costs. Lockouts are an act carried out during a confrontation by employers in which they do
not allow any workers to work or even enter the office, either by modifying the locks or
maintaining heavy security around the premises. Lockouts simply mean that the industry stops
working. Dismissals are the act of dismissing or withdrawing a worker without his/her will from
an industry.
Source: http://www.populstat.info/Asia/indiac.html

For several reasons, one of the key reasons that an employers' union or an employees' union
would take such negative actions can be accounted for. Low wage rates may be one of the
reasons. The pay rate earned by an employee does not increase in proportion to the rise in
commodity prices.

The population declined until 1920, as we can see from the number, which it was was in
proportion to the rate of wages. But the population began to grow after 1920, struggling to keep
pace with the stagnant levels of wage rates, leaving workers and their families in a position
where they had to fight for their survival. For instance, a family that had five members before
now had ten. They found it hard to reach their targets with the same sales. Thus, an increase in
salaries became a must to survive for the workers and their families.

In addition to low salaries, working hours, employee rights, incentives, protection, Some other
measures that led to nasty conflicts between employers and employees were in jobs, safety
measures in factories, canteens, leave and holidays with pay, etc.

2. Management Attitude’s

Even a minor conflict will take longer to find a settlement because of the lack of proper contact
between management and employees. Therefore, workers felt disconnected from the industry,
contributing to an increased number of conflicts. Managers were unable to accept any
organizations or alliances created by workers such as labor unions because such unions appear to
take substantial measures to be recognized and so that their complaints are heard by the higher
authorities, which adversely damaged management, employees and the nation in turn.

These sometimes often add to tension between the unions. The management was very adamant
about the recruitment, promotions, etc. and maintained that the management could make these
decisions only without the consultation or assistance of any of the workers, not even the
representatives named by the unions. These unions were left unheard once more. Management
debarred workers from the services and rewards they deserve, such as bonuses for good work,
additional overtime pay, promotions for good results on an ongoing basis, which led employees
to be less motivated to work.

Their only motivation left to work was to raise enough money to keep their ends fulfilled
because they knew that their work would never be rewarded for the amount of efforts they would
put in. This used to influence the output quality and quantity.