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Role Of Government in Industrial Dispute Act: A critical Analysis

This article is written by Hansa Vani Verkila Nath student of National Law University Odisha, as part of her assignment in Legal and Research and Writing course conducted by LeDroit India.


The Industrial Disputes Act, 1947 governs Indian labor law as it pertains to trade unions and individual workers employed in any firm on the Indian mainland. The Industrial Dispute Act was one of the last items of legislation before the Indian Independence Act of 1947 was passed. By providing mechanisms and procedures for the investigation and settlement of industrial disputes by conciliation, arbitration, and adjudication, which are provided under the statute, the act was drafted to make provisions for the investigation and settlement of industrial disputes and to secure industrial peace and harmony.The primary goal for passing this Act was to “maintain peaceful work culture in the Industry in India,” as stated in the statute’s Statement of Objects & Reasons.
According to the Industrial Dispute Act, the provision providing worker compensation in case of layoffs, closures, or reductions in staff. The procedure for getting prior consent from the appropriate authority before laying off employees or closing down industrial operations the actions that companies, trade unions, and employees must take to end unfair labour practices. There are 40 sections in the act.


By acting as a mediator, regulator, and enforcement of labor rules and regulations, the government plays a critical role in industrial conflicts.

Conciliation and mediation: One of the main responsibilities of the government is to assist in the talks between the parties to the conflict. This may entail designating conciliators or mediators who attempt to bring the disputing parties together and assist them in coming up with solutions that both of them can agree on. These procedures may be governed by government organizations like labor departments or specialist mediation bodies.

Arbitration: The government may occasionally assist arbitration in situations where talks are unable to settle the conflict. In arbitration, a neutral third party renders a legally-binding judgment on the contentious topics. To guarantee justice and adherence to labor regulations, the government may administer or supply arbitration services.

Law and Regulation: Laws and regulations pertaining to labor relations, pay, working conditions, and dispute resolution procedures are enacted and enforced by governments. These regulations frequently tells obligations  and rights of employers and employees as well as the processes for handling conflicts. Laws pertaining to collective bargaining, health and safety standards, and minimum wages may also be established by governments.

Protection of the Public Interest: When it comes to labor conflicts, governments have a greater duty to safeguard the public interest. This can involve preventing interruptions to vital services, maintaining economic stability, and fostering social harmony. Governments may occasionally become personally involved in disputes in an effort to stop major disruptions or lessen their effects on the general population.

In general, the government plays a variety of roles in labor disputes, including regulation, enforcement, mediation, and social discourse promotion to guarantee just and peaceful settlement of disputes between employers and employees.

Economic Stability: Unresolved industrial disputes have the potential to impair supply chains, output, and general economic activity. To lessen these interruptions, governments step in, preserving company continuity and averting negative effects on the economy. Governments support employment possibilities, investor confidence, and economic progress by fostering stable labour relations.

 Labor Market Efficiency and Skill Development: Government efforts to settle labor disputes frequently incorporate provisions for capacity building, training, and skill development. Governments can improve worker productivity, competitiveness, and flexibility in a world economy that is changing quickly by investing in human capital. Furthermore, trust between employers and employees is fostered by successful conflict resolution, which promotes an efficient labour market.

Policy Innovation and Adaptation: Governments regularly examine and revise their industrial relations laws in response to changing labor market conditions and technological breakthroughs. They interact with stakeholders, keep an eye on new developments, and propose changes to deal with issues like automation, gig economy jobs, and digitalization. Governments guarantee that labour laws remain relevant and effective in protecting workers’ rights by encouraging innovation and adaptation.

Social Justice and Equity: It is the duty of governments to protect workers’ rights and advance fair labor practices. To stop unfair treatment, discrimination, and exploitation at work, they pass rules and regulations. Governments enable workers to bargain for better pay, benefits, and working conditions, so promoting social justice and lowering economic inequality. They do this by providing enforcement tools and encouraging collective bargaining.

In general, the government plays a variety of roles in labor disputes, including regulation, enforcement, mediation, and social discourse promotion to guarantee just and peaceful conclusion of disputes between them.



“The appropriate Government may, by general or special order, require the employer to form a Works Committee made up of representatives of employers and workers engaged in the industrial establishment if one hundred or more workers are employed, or have been employed on any day during the previous twelve months. The number of workers’ representatives on the Committee, however, must not be less than the number of employers’ representatives. The workers’ representatives will be selected in the manner specified by the Indian Trade Unions Act, 1926 (16 of 1926) from among the workers employed by the business, after consulting with any registered trade union”.

(2) “The Works Committee’s responsibility is to advocate for policies that will ensure and maintain goodwill and harmony between the employer and employees. To that end, the Committee will comment on issues that are relevant to both parties and will make an effort to reconcile any significant differences in viewpoint”.


(1) “The relevant Government may designate as many individuals as it deems appropriate to serve as conciliation officers, tasked with mediating and facilitating the resolution of labor disputes, by publishing a notice in the Official Gazette”.
(2) “A conciliation officer may be appointed permanently or for a certain amount of time, for a specific area, for a specified industry within a specified area, or for one or more specified industries”.


  • “When the need arises, the relevant Government may establish a Board of Conciliation to facilitate the resolution of an industrial dispute by notifying parties through the Official Gazette”.
    (2) “A Board will have a chairperson and two to four additional members, depending on what the relevant government determines is suitable”.
    (3) “Appointing individuals in equal numbers to represent the disputing parties will constitute the membership, with the chairman being an independent individual and each representative chosen on the proposal of the party in question”: As long as a party doesn’t submit the aforementioned recommendation within the allotted time, the relevant government will designate representatives based on its judgment.

(4) “A Board, having the prescribed quorum, may act notwithstanding the absence of the chairman or any of its members or any vacancy in its number:

Provided that if the appropriate Government notifies the Board that the services of the chairman or of any other member have ceased to be available, the Board shall not act until a new chairman or member, as the case may be, has been appointed”.


  • “When the need arises, the relevant Government may establish a Court of Inquiry by publishing a notice in the Official Gazette to investigate any subject that seems related to or pertinent to an industrial dispute”.
    (2) “A Court may be composed of one independent member or as many independent members as the relevant Government deems suitable. In the event that the Court has two or more members, one of them will serve as chairman”.
    (3) “If the court has the required quorum, it can nonetheless take action even if the chairman, any member, or any other member is not present”.

    As long as the relevant Government informs the Court that the chairman’s services are no longer available, the courts shall not act until a new chairman is appointed.


(1) “The relevant Government may establish one or more Labour Courts by publishing a notice in the Official Gazette. These courts will handle labor disputes pertaining to any subject listed in the Second Schedule and will also carry out any other tasks that may be delegated to them under this Act”.

(2) “Only one person, chosen by the relevant Government, shall serve as a member of a labor court”.
(3)” A person is ineligible to serve as a Labour Court presiding officer unless they are

(a) He currently serves as or was a High Court judge;” or
(b) “He has served as a District Judge or Additional District Judge for a minimum of three years”;

(c) “He has held any judicial office in India for a minimum of seven years; or

(d) He has served as the presiding officer of a Labour Court established under a Provincial Act or State Act for a minimum of five years”.


  • “The relevant Government may establish one or more Industrial Tribunals by publishing a notice in the Official Gazette. These tribunals will be used to settle labour disputes pertaining to any subject, regardless of whether it is listed in the Second or Third Schedules, and they will also be tasked with carrying out any other tasks that may be delegated to them under this Act”.
    (2) “The relevant Government shall appoint just one individual to serve as a tribunal member”.
    (3) A candidate cannot be appointed as a tribunal’s presiding officer unless they are

    (a) “He is or was a High Court judge; (b) He served as a District Judge or Additional District Judge for a minimum of three years”;

(4) “The relevant Government may designate two individuals as assessors to provide the Tribunal with advice about the matter at hand, should it deem it suitable to do so”.


(1) “For the purpose of resolving labor disputes that, in the Central Government’s opinion, involve issues of national importance or are of a kind that makes industrial establishments located in multiple States likely to be interested in or impacted by such disputes, the Central Government may establish one or more National Industrial Tribunals by notification in the Official Gazette”.
(2) “The Central Government will only appoint one person to serve as a National Tribunal”.
(3) “Unless an individual is, or has been, a judge of a High Court, they are ineligible to be appointed as the presiding officer of a National Tribunal”.

(4) “The Central Government may designate two people as assessors to provide the National Tribunal with advice about the matter at hand, should it deem it appropriate to do so”.

“7C. Disqualifications for the presiding officers of Labour Courts, Tribunals and National Tribunals

“No one who is either (a) not an independent individual or (b) has reached the age of 65 may be appointed to or remain in the position of presiding officer of a Labour Court, Tribunal, or National Tribunal”.

8. “Filling of vacancies”.-“If, for any reason a vacancy (other than a temporary absence) occurs in the office of the presiding officer of a Labour Court, Tribunal or National Tribunal or in the office of the Chairman or any other member of a Board or Court, then, in the case of a National Tribunal, the Central Government and in any other case, the appropriate Government, shall appoint another person in accordance with the provisions of this Act to fill the vacancy, and the proceeding may be continued before the Labour Court, Tribunal, National Tribunal, Board or Court, as the case may be, from the stage at which the vacancy is filled”.

9. “Finality of orders constituting Boards, etc”

(1) “No act or proceeding before any Board or Court may be called into question on the sole basis that there is a vacancy in the Board or Court or that there is a defect in the Board or Court’s constitution. Neither the appropriate Government nor the Central Government may in any way question an order designating any individual as the Chairman or any other member of a Board or Court or as the presiding officer of a Labour Court, Tribunal, or National Tribunal”.
(2) “A settlement reached during a conciliation proceeding cannot be deemed invalid only because it was reached after the time frame specified in sub-section (6) of Section 12 or sub-section (5) of Section 13, as applicable”.
(3) “No settlement reached during a conciliation proceeding before a board may be deemed invalid solely due to an unplanned or inadvertent absence of any board member—including the chairman—during any stage of the proceeding, provided that the settlement report is signed by the chairman and all other board members”.



In the ‘Bangalore Water Supply Case’, the Appellant Board successfully recovered a variety of sums as penalties and fined the respondent staff for instances of misbehavior. The workers filed Claims Application No. 5/72 in response, citing violations of natural justice principles in the disciplinary actions they faced under “Section 33C(2) of the Industrial Disputes Act”.

The Appellant Board filed a preliminary objection with the Labour Court, arguing that it does not meet the definition of a “”industry” under section 2(j) of the Industrial Disputes Act” because it is a statutory body tasked with providing citizens with basic amenities and thus fulfills a sovereign function. As a result, it was claimed that the workers were not considered to be “workmen,” casting doubt on the Labour Court’s authority to decide the workers’ petition.

The Board objected, but the Labour Court decided in the employees’ favour. The Appellant Board then filed two Writ Petitions with the Karnataka High Court in Bangalore, namely Nos. 868 and 2439 of 1973. The Division Bench of the High Court denied these petitions, claiming that the Appellant Board does, in fact, meet the requirements of “section 2(i) of the Industrial Disputes Act, 1947” for what constitutes a “industry.”


 In the “Bangalore Water Supply Case”, the main question was whether a statutory body performing what were deemed to be regal (sovereign) functions—activities necessary for providing citizens with basic amenities—could be categorized as a “industry” under the terms of “Section 2(j) of the Industrial Disputes Act, 1947”. The case concerned whether or not these kinds of activity may fall under the legal definition of labour conflicts.


 The Supreme Court of India ruled that a criteria should be taken into consideration for the meaning of the term “industry” and to hold any organization accountable under it.

The test was called the “Triple-Test” and required a number of requirements to be met in order for any establishment to be declared to fall under the description given in Section 2(j) of the Industrial Dispute Act of 1947.
The conditions, given under the “triple test” are as follows:

  1. “There should be an establishment of a systematic activity”.
  2. “The systematic activity should be between the employee and the employer in the establishment”.
  3. “The activity should give the output resulting out from production of goods, or, distribution of goods, or, the catering of services (not being religious or spiritual in nature, exception – prasad making establishment)”.



 The purpose of the act’s implementation was to provide mechanisms and protocols for the examination and resolution of labour disputes that would be available to all parties, regardless of size or industry. It even contains clauses governing circumstances for industry closure, retrenchment (a decrease in the scope of activities), and layoffs.

Regarding the legislation, this clause is controversial, especially in light of Chapter V-B. Over time, there have been numerous modifications made to this clause. The following is stated in the chapter:

An industrial enterprise that employs more than 50 people is required to notify the relevant authorities sixty days in advance of its closure, detailing the reasons for the closure. In 1982, it was extended to ninety days.
Layoffs, retrenchments, and closures require prior clearance from the appropriate government body if the establishment employs more than 300 people. The 1982 modification reduced this cap to 100 employees.

These two clauses are viewed as labor market rigidity ‘under Chapter V-B of the Industrial Disputes Act”. Ensuring that an employer cannot hire or fire an employee at will is the primary goal of this rule. They must ask the labor commissioner for permission before taking any such action. Since this topic is also on the concurrent list, state governments have imposed even more stringent regulations, making layoffs, retrenchments, and closures even more challenging.

Consequently, it has led to the following issues in the labour sector:

Reduced labour output
Reduced output
Reluctance to hire
Reduced expenditures Decreased overall productivity in manufacturing
India is not attractive to foreign investors.

 In addition to Chapter V-B, Section 9-A warrants attention. According to this clause, employers must give the Labour Commission 21 days’ notice before changing pay or other allowances. This strategy so prevents businesses from having to swiftly redeploy workers in order to satisfy time-bound requirements. The industry is requesting that this law be rationalized to reflect the needs of the contemporary globalized era. “The reason that only 6 percent of the labor force is employed in the organized manufacturing sector and the remainder in the unorganized sector is largely attributed to the intricacy of the Industrial Dispute Act’. The difficulty facing governments at all levels is striking a careful balance between the interests of the workforce and business.


 To sum up, the government has a significant and varied role in resolving labor conflicts. The goals of governments are to uphold industrial peace, defend workers’ rights, and guarantee the economy runs smoothly through law, regulation, and intervention. The government’s participation encompasses crucial facets such as labor law enforcement, social dialogue promotion, arbitration, mediation and conciliation, and public interest preservation.

Governments aim to promote fairness, justice, and social harmony in the workplace by balancing the interests of employers and employees through the establishment of dispute resolution procedures, negotiation facilitation, and enforcement of labour legislation. Any complex economy will inevitably have industrial disputes, but with the right government action and the collaboration of all parties involved, disagreements can be addressed amicably, promoting long-term economic progress.

 Moreover, the government’s role in labor conflicts goes beyond simple dispute resolution. It includes more general societal goals including social fairness, economic stability, and sustainable development. Here are some more ideas emphasizing the importance of the role played by the government.

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