VOLUNTARY ARBITRATION WITHIN INDUSTRIAL DISPUTES ACT

Author: Rithikha Ashokapathy

Introduction

With the extensive appellate process available in the Indian courts, one would be rather unreasonable to expect a quick judgment that resolves a dispute between two parties. In a conflict between an employer and workman, the workman would be at quite a disadvantage if his employment depends on the final verdict that is to be given by the courts after the multiple appeals that each party may or may not prefer. Keeping this in mind, the Indian legislature brought about a provision for voluntary arbitration under Section 10A of the Industrial Disputes Act, 1956.

I: Voluntary Arbitration under Section 10A

The Supreme Court has laid down clearly in the case of Booz Allen and Hamilton v SBI Home Finance Ltd &Ors[i]. that any dispute that is in rem or against the world will not be arbitrable, and any dispute which is in personam can be arbitrable. While the judgment discusses the non-arbitrability of disputes, it is criticised to be a vague judgment and does not talk about the arbitrability of labour disputes. However, the general perception over labour disputes have been that they carry large public policy issues and therefore leaving the dispute to be arbitrated by a private tribunal has been decided by the courts to not be a good idea[ii]. However, in the 1956 Amendment of the Industrial Disputes Act, Section 10A was brought about which essentially allowed arbitration of labour disputes when the disputes were voluntarily referred for arbitration. The statute states arbitration can be referred to if the workmen and the employer agree when a dispute exists or when it is apprehended. However, the same must be done before the dispute has been referred under Section 10 to a Labour Court or Tribunal. The arbitration agreement here must be in writing and signed by the parties. A copy of the agreement must be sent to the appropriate government and the conciliation and the appropriate government has an obligation to publish the arbitration agreement within a month.  Further the award so rendered by the tribunal must be submitted to the appropriate government. The aforementioned laws are the only set of procedural laws mentioned that governs arbitration under this Act. In addition to this, Section 10A(5) also mentions that nothing from the then Arbitration Act, 1940 shall be applicable to arbitrations within the Industrial Disputes Act.

II: Lack of Procedural Rules

When there are no procedural rules established for arbitration, it tends to be extremely difficult to proceed with arbitration successfully. The inclusion of the appropriate government in an arbitration and the grant of thirty days to publish the agreement is extremely unnecessary since it adds to the time period of the dispute. These provisions mentioned in the Act do not seem to make the resolution of the dispute easier. The party that will be affected more in this situation would be the worker since prolonging the dispute will only affect his or her livelihood with the lesser amount of salary or the effect on their rights during the period. Further, any party that would like to avoid arbitration despite there being an arbitration agreement can simply refuse to refer the dispute to the arbitrator and can proceed with adjudicatory mechanism under Section 10 instead. In some cases, the parties have approached an authority invoking Section 8 of the Arbitration and Conciliation Act which gives the Judicial Authorities the power to direct a dispute to arbitration.

III: Judiciary’s take on Procedure under Section 10A

Two judicial pronouncements address the issue of arbitrability of labour law disputes. In the case of Kingfisher Airlines Ltd v. Captain Prithvi Malhotra[iii], the pilots and other staff members of Kingfisher Airlines instituted proceedings before the Labour Courts for recovery of unpaid wages and other benefits. Kingfisher Airlines contested the Labour Court’s jurisdiction over the dispute relying on the arbitration agreement with the employees. To this, the labour court rejected Kingfisher’s arguments and upheld its jurisdiction. On appeal to the High Court of Bombay, it was held by the Court that any resolution of labour and industrial disputes must be resolved within the forum constituted under the Industrial Disputes Act. This is because, the Industrial Disputes Act was created as a welfare legislation for the benefit of the workers. It is because of their informality that the workmen can represent themselves in cases. The fora created under the Act would be equipped with rendering appropriate remedy for the disputes. Therefore, out of public policy reasons such as this, the Court in this case upheld the order of the Labour Court. The court further stated that the resolution of claims over arbitration of disputes must be dealt with by the Industrial Disputes Act itself.

In another case, Rajesh Korat v Management of Innoviti[iv], the Karnataka High Court allowed an application of reference to arbitration stating that there are strong public policy reasons in letting the tribunals and courts constituted under the Industrial Disputes Act to resolve labour disputes. Further, the court implicitly mentioned that arbitration of labour disputes would have to conform to the procedure under the Industrial Disputes Act and not the Arbitration and Conciliation Act[v].

In both these judgments, we can observe that the Courts have a firm opinion that the procedure under Arbitration and Conciliation Act will not be applicable to arbitration under Section 10A. The courts however have not acknowledged that there are barely any procedural law under the Industrial Disputes Act for arbitration of disputes. The legislation that was intended to benefit workers may not benefit them if the employers did not respect the arbitration agreement similar to how the employees pursued Labour court proceedings in the Kingfisher case.

IV: Employment Contracts

In addition to the abovementioned problems lie another very significant problem. It is an increasing practice today to include an arbitration clause in the employment agreement. In this situation, an employee agrees to the arbitration clause since his employment is at stake otherwise. In such a situation, an employer has a higher bargaining power. Further, in situations like this, the arbitration clause tends to mention the appointment of arbitrators and how they will be appointed, all by the employer itself. This kind of a situation gives a conveniently higher power to the employer. The independence and impartiality of the arbitrator may also come to be questioned and such a question is only fair. The Industrial Disputes Act is not well equipped with procedural rules to handle such a question. Further, when the workmen sign an employment agreement with an arbitration clause at the time of signing, the requirements as laid out under S.10A of the Act are usually not satisfied. In these situations, there is an apprehension of a dispute over the course of the workman’s employment. However, there is no actual consent since the workmen could not have foreseen the dispute by itself. This is problematic because the basis of any kind of arbitration is consent from both parties. If these disputes involved a slightly criminal nature, they should not be arbitrable. In addition, the cost of arbitration is not a nominal one and there is no provision within the Act that governs the same.

Conclusion

Section 10A was introduced with a welfare intent to make the resolution of disputes faster and more convenient for the labourers who would otherwise have to suffer through the long proceedings that the Civil Courts have to offer. Further the informal set up would help the workers in representing themselves better in prosecuting or defending themselves[vi]. However, the workers may suffer opting for arbitration since there are not enough procedural rules to uphold an arbitral award. Further, the mindset of the Judiciary has not been supportive of arbitration and arbitral awards. There are constant appeals that are allowed and examined by the court of laws. Even an award issued by the tribunal under section 10A can be subjected to appeal to the High Court under Article 226 and to the Supreme Court under Article 32. This will create more steps to the dispute resolution process and it ends up affecting the worker. At some point, the cost of the dispute resolution may exceed and that would be a huger problem to deal with.

Many a jurisdiction recognise the complexity in arbitrability of labour disputes and have removed the arbitrability of labour issues. In France, labour law disputes are considered non-arbitrable[vii]. Further, France follows the principle of “ordre public de protection”, which means to protect the weaker parties. In any international labour contracts, the French courts have ruled that the employee has the choice to take the disputes to arbitration or not and the employer cannot invoke the arbitral tribunal’s jurisdiction under the arbitration agreement against the employee[viii]. Further, in order to protect the employees from being affected by the tribunal’s determination of its own jurisdiction, the competence-competence principle was held to not be applicable to labour disputes[ix]. The Indian legislature could also implement laws similar to the French laws or back up the current Section 10A with sufficient procedural law and thereby make the labour laws actively beneficial and welfare oriented.

[a]Law

[i]Booz Allen and Hamilton v SBI Home Finance Ltd & Ors (2011) 5 SCC 532.

[ii]Rajasthan State Road Transportation Corporation v. Krishna Kant, AIR 1995 SC 1715.

[iii]Kingfisher Airlines v Prithvi Malhotra, 2013 (7) BomCR 738 (Bom HC)

[iv]Rajesh Korat v Management of Innoviti, 34537/2015, Apr.21, 2017, Kar HC

[v]Prakash A, Bhide P, “Whether Employment Disputes can be settled through Arbitration?”, BW Online Bureau, 6 Jun 2018, <http://bwpeople.businessworld.in/article/Whether-Employment-Disputes-can-be-settled-through-Arbitration-/06-06-2018-151159/>, accessed on 12March 2020 ; Shetty, Smaran S, November 26, 2017, Kluwer Arbitration Blog, “Arbitration of labor disputes in India: Towards a public policy theory of arbitrability”, <http://arbitrationblog.kluwerarbitration.com/2017/11/26/arbitration-labor-disputes-india-towards-public-policy-theory-arbitrability/> accessed on 12 March 2020

[vi]supra at 3.

[vii]Tarasewicz. Y, “Worlds of Work: Employment Dispute Resolution Systems Across The Globe”, Cambridge University, July 21, 2011.

[viii]Soc. 16 February 1999, Société Château Tour Saint Christophe v. Aström, and Soc. 4 May 1999, Picquet v. Société Sacinter, Rev. Arb. 1999, p. 290; Ziade R, Peterson P, IBA,“2016 Research Project: Comparative Study of ‘Arbitrability’ under the New York Convention”

[ix]Soc. 30 November 2011, Société Deloitte conseil v. M E. Serant et autre, Rev. Arb. 2012 (first case), p.

333.

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