Introduction:
Considering how burdened our judicial system is, litigation can often be expensive and time consuming. Therefore, Arbitration has gained popularity over the years, as an efficient alternative. Industrial disputes at most times concern people who earn on a day-to-day basis to feed their families, thus, these need to be solved as soon as possible. Arbitration, due to its development over the years can be an important method to achieve this objective.
Arbitration in Industrial Disputes:
Industrial disputes act, 1947 (“ID act”) is the only legislation that allows arbitration in the realm of labour law. 1956 amendment to the ID act added Section 10A, providing for reference of an industrial dispute to voluntary arbitration. Parties may mutually sign an arbitration agreement and follow the arbitral procedure at any time before the dispute is referred to adjudication. The arbitration award under this section has powers of a civil court order and this section also prohibits strikes and lockouts during the pendency of arbitral proceedings. The key element to the section however, is section 10A (5), which states that provisions of Arbitration act, 1940 shall not be applicable to arbitrations under the section.
It was held in the case of Kingfisher Airlines v. Captain Prithvi Malhotra, wherein an application under section 8 of 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 ID act.
Even though the labor courts allowed arbitration application under section 8 in the case of Rajesh Korat v. Innoviti, Karnataka High Court went on to hold that the procedure under ID Act should apply to the proceedings and no application of ANC Act would be permitted.
Despite these judicial precedents, there is still need for the legislature to make an amendment to the Act and clarify the stance on the role of the ANC Act in this regard, since Section 10A (5) of the ID Act only bars application of Arbitration Act, 1940 and not of the more recent legislation.
Need for change:
It was held in the case of Karnal Leather Karamchari Sangathan v. Liberty Footwear Co., that arbitration is the most efficient and effective way of settling disputes under ID act. This is because it resolves disputes in a year or less, is cheaper than other modes and has less legal work. These advantages, along with lesser or no right to appeal against the arbitral award give it an edge over litigation, making it the best way to settle industrial disputes.
But, due to several complications under the statute and huge differences of proceedings between in arbitration under the ID Act and the ANC act, arbitration for industrial disputes could never garner the popularity that it potentially to gain.
Over the years, the ANC Act has seen following amendments, which increases its practical applicability to industrial dispute.
- Time bound proceedings: 2019 amendment to the Act introduced timelines to the process of arbitration. As per Section 23 (4), pleadings must finish within a period of 6 months from constitution of the tribunal, while the award must be rendered within 12 months from end of pleadings as per Section 29A. It is important for industrial disputes to be time bound as the livelihood of workmen is involved in it.
- Neutrality: Power disparity between parties cannot be written off in industrial disputes, and it can affect the case, regardless of who is legally right. Arbitrators necessarily have to be independent and impartial, and addition of Schedule 5 and Schedule 7 to the act, by the 2015 amendment ensure the same. Further, appointment of arbitrators needs equal involvement of both parties, ensuring balance between in the proceedings.
- Cost Effective: Litigation might seem cheaper, but arbitration costs the same, if not less than litigation. This is because arbitrations conclude quickly, while litigation may go on for years altogether, while the expenses keep piling up. Less procedural requirements bring down the cost to a great extent. Further, the addition of Schedule 4 by 2015 amendment prescribes model fees of arbitrators. Even though it is not binding, the purpose of this is to make people aware about the usual fees of arbitrators and prevent arbitrators from charging exorbitant amounts.
- Finality of award: An arbitration award can only be challenged under Section 34 of the Act, that too on limited grounds, a prominent one being public policy. Public policy is a very vast ground, but judicial precedents and amendments have been helpful in clarifying the scope of the same. The amendment of 2015 added an explanation to section 34 and narrowed down the scope of ‘public policy’ to the following:
- Award attained by fraud or corruption.
- Award contravenes fundamental policy of India
- Award is against basic notions of morality and justice
The application of section 34 was further improved by the amendment of 2019, which added the clause that no new facts or substance can be added to the matter that had not already been brought up before the tribunal. Finality of award can help in industrial disputes as endless appeals can lead to a delay in resolution and cost the parties severely.
- Easier Interim Reliefs: Arbitration Act has provisions for quick interim reliefs from the court and the tribunal under Section 9 and Section 17, respectively. Recently, emergency arbitration has also gained popularity, wherein parties can appoint an emergency arbitrator for interim reliefs prior to the constitution of an arbitral tribunal.
- Awarding of Costs: Even though courts have power to award costs in cases, it is not the usual norm in Indian courts. However, it is the global norm in arbitration to award costs to the party in whose favour the final award has been given. Section 31A, added by the 2015 amendment (is a first in India, as it) gives power to tribunals to award costs. This can be useful in industrial disputes as the reimbursement of costs would be a major help to the parties involved.
Arbitration in ID Act is very stringent and is barely different from what is termed as adjudication in the Act. This is also why it is barely used. Globally, arbitration in labour law is used as an extension of collective bargaining. The system of labour arbitration in USA is highly developed and allows parties to autonomously conduct proceedings; hence, they appoint trained professionals and specialists as arbitrators who are better at making decisions in said field than the judges.[i]
In the past, India has also tried to promote voluntary arbitration. The need for wider acceptance of voluntary arbitration was emphasised during the Indian Labour Conference, 1962, and was reiterated in the Report by the National Commission on Labour (refer page 324) in 1969, stating that parties need to be less skeptical about arbitration and give it a chance. The third five-year plan even suggested that voluntary arbitration should be the norm and have an advantage over adjudication.
Despite all these efforts, voluntary arbitration failed to gain the importance it should have. This can be attributed to lack of further development. It was included in the ID Act in 1956, when the only law related to arbitration was Arbitration Act, 1940, which itself had many shortcomings. There is a need to revisit the current statutes with a broader mind and consider their applicability in labour law, and the ways in which it can be helpful in reducing the burden on the courts, while providing a better system of grievances redressal for workmen.
Conclusion:
Arbitration under Industrial Disputes Act is nothing but a mere gimmick at this point. However, there is huge potential if arbitration is properly applied to the field of labour law. The provisions regarding Arbitration in the IT Act are stale and need reconsideration in the light of the development that arbitration has seen and continues to see.
It has multiple advantages, such as taking lesser time and money while also having lesser intervention by judiciary, which can be of great use to aggrieved labour in achieving justice. There are certain challenges that lie ahead in the path of applying arbitration in labour law, but it is not unachievable and the results would be more important and fruitful when compared to the lengthy procedures involved in it.
[i] Jerre Williams, Labor Relations and the Law 802 (3rd ed. 1965).
Ajay Lulla, a fourth-year student at the Institute of Law, Nirma University.
Picture Credits: Cyril Amarchand Blogs
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