The Industrial Disputes Act 1947

The Industrial Disputes Act, 1947 regulates Indian labour law so far as that concerns trade unions as well as individual workmen employed in any industry in the Indian mainland. The Industrial Dispute Act was one of the last legislative acts before the passing of the Indian Independence Act of 1947.

It is an important Act for from the IAS Exam perspective and UPSC aspirants must go through the details of the Industrial Disputes Act, 1947 described further below in this article.

Overview of the Industrial Disputes Act, 1947

A cursory detail of the Industrial Dispute Act is given in the table below:

Industrial Disputes Act, 1947

To learn more about the legislation passed in British India, click on the linked article.

Objectives of the Industrial Disputes Act, 1947

The act was drafted to make provision for the investigation and settlement of industrial disputes and to secure industrial peace and harmony by providing mechanisms and procedures for the investigation and settlement of industrial disputes by conciliation, arbitration and adjudication which is provided under the statute.

This Act was passed with the key objective of “Maintenance of Peaceful work culture in the Industry in India” which is mentioned under the Statement of Objects & Reasons of the statute.

The Industrial Dispute Act also lays down:

1. The provision for payment of compensation to the workman on account of closure or layoff or retrenchment.
2. The procedure for prior permission of the appropriate Government for laying off or retrenching the workers or closing down industrial establishments
3. The actions to be taken against unfair labour practices on the part of an employer, a trade union or workers.

UPSC aspirants must also refer to the List of Important Acts that Transformed India in the linked article for the upcoming Civil Services exam preparation.

Industrial Disputes Act, 1947 – UPSC Notes:- Download PDF Here

Controversy Regarding the Industrial Disputes Act, 1947

The act was implemented to provide for machinery and procedures for the investigation and settlement of industrial disputes, applicable to all irrespective of size and sector. It even has provisions regarding conditions for layoffs, retrenchment (reduction in the size of operations) and closure of industry.

This clause raises controversy regarding the act, particularly as per Chapter V-B. There have been multiple amendments that have been made over the years for this clause. The chapter states the following:

1. If an industrial establishment employs more than 50 persons, it needs to give 60 days’ notice, citing reasons of closure to the appropriate government before the closure of the industry. It was increased to 90 days in 1982.
2. If the establishment employs more than 300 employees, it must obtain prior approval of the proper government authority regarding approval for layoffs, retrenchment and closure. This limit was lowered to 100 employees in the 1982 amendment.

These two provisions of Chapter V-B of the Industrial Disputes Act are interpreted as rigidity in the labour market. The main objective of this provision is to ensure that an employer cannot hire or fire an employee at will. To take any such action, they need to seek permission from the labour commissioner.  This subject is also under the concurrent list which is why individual states have made even stricter rules and conditions so that the layoff, retrenchment and closure become even more difficult.

As a result, it has caused the following problems in the labour industry:

1. Lower output by labour
2. Lower productivity
3. Hesitation in hiring
4. Lower investments
5. Lower overall manufacturing performance
6. Foreign investors are deterred from investing in India.

Apart from Chapter V-B, Section 9-A is also a cause of concern. This section says that if employers are modifying the wages and other allowances, they need to provide the labour commission a notice 21 days in advance. Thus, if employers quickly need to redeploy the employees to meet certain time-bound targets, this practice disallows that.

What the industry demands, is that this law needs rationalization as per the demand of the current era of globalization. It is the complexity of the Industrial Dispute Act that is generally held responsible for the fact that only 6% of the total labour force is working in the organised manufacturing sector and the remaining are employed in the unorganised sector.

The challenge for the governments (centre/state) is to make a delicate balance between labour welfare and industry welfare.

Aspirants preparing for the upcoming Civil Services Exam can visit the UPSC Syllabus page and get the detailed syllabus and exam pattern for the prelims and mains examination for the upcoming recruitment.

For any further exam updates, study material or preparation tips, candidates can turn to BYJU’S for assistance.

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