Introduction to Industrial Relations

Industrial relation means the relationship between

employers and employees in course of employment in
industrial organisations. However, the concept of Industrial
Relations has a broader meaning. In a broad sense, the term
Industrial Relations includes the relationship between the
various unions, between the state and the unions as well as
those between the various employers and the government.
Relations of all those associated in an industry may be called
Industrial Relations.

According to International Labour Organisation, Industrial

relations comprise relationships between the state on one
hand and the employers and employees organisation on
the other, and the relationship among the occupational
organisations themselves.
According to J.T. Dunlop, Industrial relations are the
complex interrelations among managers, workers and
agencies of the government

Features of Industrial Relations:

Industrial relations are outcomes of employment

relationships in an industrial enterprise. These relations
cannot exist without the two parties namely employers
and employees.
Industrial relations system creates rules and regulations to
maintain harmonious relations.
The government intervenes to shape the industrial
relations through laws, rules, agreements, terms, charters
etc.
Several parties are involved in the Industrial relations
system. The main parties are employers and their
associations, employees and their unions and the
government. These three parties interact within economic
and social environment to shape the Industrial relations
structure.
Industrial relations are a dynamic and developing concept,
not a static one. They undergo changes with changing
structure and scenario of the industry as and when change
occurs.

Industrial relations include both individual relations and

collective relationships.

Objectives of Industrial Relations:

To maintain industrial democracy based on participation of

labour in the management and gains of industry.
To raise productivity by reducing tendency of high labour
turnover and absenteeism.
To ensure workers participation in management of the
company by giving them a fair say in decision-making and
framing policies.
To establish a proper channel of communication.
To increase the morale and discipline of the employees.
To safeguard the interests of the labour as well as
management by securing the highest level of mutual
understanding and goodwill between all sections in an
industry.
To avoid all forms of industrial conflicts so as to ensure
industrial peace by providing better living and working
standards for the workers.
To bring about government control over such industrial
units which are running at a loss for protecting the
livelihood of the employees.

Importance of Industrial Relations:

1. Uninterrupted Production: The most important benefit
of industrial benefits is that it ensures continuity of
production. This means continuous employment for all
involved right from managers to workers. There is
uninterrupted flow of income for all. Smooth running of
industries is important for manufacturers, if their products
are perishable goods and to consumers if the goods are
for mass consumption (essential commodities, food grains
etc.). Good industrial relations bring industrial peace which
in turn tends to increase production.
2. Reduction in Industrial disputes: Good Industrial
relations reduce Industrial disputes. Strikes, grievances
and lockouts are some of the reflections of Industrial
unrest. Industrial peace helps in promoting co-operation
and increasing production. Thus good Industrial relations

help in establishing Industrial democracy, discipline and a

conducive workplace environment.
3. High morale: Good Industrial relations improve the
morale of the employees and motivate the worker workers
to work more and better.
4. Reduced wastage: Good Industrial relations are
maintained on the basis of co-operation and recognition of
each other. It helps to reduce wastage of material,
manpower and costs.
5. Contributes to economic growth and development.
Causes of poor Industrial Relations:
1. Economic causes: Often poor wages and poor working

2.

3.

4.

5.

conditions are the main causes for unhealthy relations

between
management
and
labour.
Unauthorised
deductions from wages, lack of fringe benefits, absence of
promotion opportunities, faulty incentive schemes are
other economic causes. Other causes for Industrial
conflicts are inadequate infrastructure, worn-out plant and
machinery, poor layout, unsatisfactory maintenance etc.
Organisational causes: Faulty communications system,
unfair practices, non-recognition of trade unions and
labour laws are also some other causes of poor relations in
industry.
Social causes: Uninteresting nature of work is the main
social cause of poor Industrial relations. Dissatisfaction
with job and personal life culminates into Industrial
conflicts.
Psychological causes: Lack of job security, nonrecognition of merit and performance, poor interpersonal
relations are the psychological reasons for unsatisfactory
employer-employee relations.
Political causes: Multiple unions, inter-union rivalry
weaken the trade unions. Defective trade unions system
prevailing in the country has been one of the most
responsible causes for Industrial disputes in the country.

Suggestions to improve Industrial Relations:

1. Sound personnel policies: Policies and procedures
concerning the compensation, transfer and promotion, etc.
of employees should be fair and transparent. All policies
and rules relating to Industrial relations should be fair and
transparent to everybody in the enterprise and to the
union leaders.
2. Participative
management:
Employees
should
associate workers and unions in the formulation and
implementation of HR policies and practices.
3. Responsible unions: A strong trade union is an asset to
the employer. Trade unions should adopt a responsible
rather than political approach to industrial relations.
4. Employee welfare: Employers should recognise the need
for the welfare of workers. They must ensure reasonable
wages, satisfactory working conditions, and other
necessary facilities for labour. Management should have a
genuine concern for the welfare and betterment of the
working class.
5. Grievance procedure: A well-established and properly
administered system committed to the timely and
satisfactory redressal of employees grievances can be
very helpful in improving Industrial relations. A suggestion
scheme will help to satisfy the creative urge of the
workers.
6. Constructive attitude: Both management and trade
unions should adopt positive attitude towards each other.
Management must recognise unions as the spokesmen of
the workers grievances and as custodians of their
interests. The employer should accept workers as equal
partners in a joint endeavour for good Industrial relations.
7. Creating a proper communication channel to avoid
grievances
and
misunderstandings
among
employees
8. Education and training imparted to the employees

DIFFERENT APPROACHES OF INDUSTRIAL RELATIONS

The Marxist Approach
The class conflict analysis of industrial relations derives its
impetus from Marxist social thinking and interpretation.
Marxism is essentially a method of social enquiry into the
power relationships of society and a way of interpreting social
reality. The application of Marxian theory as it relates to
industrial relations derives indirectly from later Marxist scholars
rather than directly from the works of Marx himself. Industrial
relations, according to Marxists, are in the first instance,
market-relations. To Marxists, industrial relations are essentially
politicized and part of the class struggle. For Marxists industrial
and employee relations can only be understood as part of a
broader analysis of capitalist society in particular the social
relations of production and the dynamics of capital
accumulation. As Marx himself put it, the mode of production
in material life determines the general character of the social,
political and spiritual process of life. The Marxist approach is
primarily oriented towards the historical development of the
power relationship between capital and labour. It is also
characterised by the struggle of these classes to consolidate
and strengthen their respective positions with a view to
exerting greater influence on each other. In this approach,
industrial relations is equated with a power-struggle. The price
payable for labour is determined by a confrontation between
conflicting interests. The capitalist ownership of the enterprise
endeavours to purchase labour at the lowest possible price in
order to maximise their profits. The lower the price paid by the
owner of the means of production for the labour he employs,
the greater is his profit. The Marxist analysis of industrial
relations, however, is not a comprehensive approach as it only
takes into account the relations between capital and labour. It is
rather, a general theory of society and of social change, which

has implications for the analysis of industrial relations within

what Marxists would describe as capitalist societies.

The Pluralist Approach

Pluralism is a major theory in labour-management relations,
which has many powerful advocates. The focus is on the
resolution of conflict rather than its generation, or, in the words
of the pluralist, on the institutions of job regulation. Kerr is one
of the important exponents of pluralism. According to him, the
social environment is an important factor in industrial conflicts.
The isolated masses of workers are more strike-prone as
compared to dispersed groups. When industrial jobs become
more pleasant and employees get more integrated into the
wider society, strikes will become less frequent. Ross and
Hartmans cross national comparison of strikes postulates the
declining incidents of strikes as societies industrialise and
develop appropriate institutional framework. They claim that
there has been a decline in strike activity all over the world in
spite of an increase in union membership. The theories on
pluralism were evolved in the mid-sixties and early seventies
when England witnessed a dramatic resurgence of industrial
conflicts. However, the recent theories of pluralism emanate
from British scholars, and in particular from Flanders and Fox.
According to Flanders, conflict is inherent in the industrial
system. He highlighted the need for a formal system of
collective bargaining as a method of conflict resolution. Fox
distinguishes between two distinct aspects of relationship
between workers and management. The first is the market
relationship, which concerns with the terms and conditions on
which labour is hired. This relationship is essentially economic
in character and based on contracts executed between the
parties. The second aspect relates to the managements
dealing with labour, the nature of their interaction, negotiations
between the union and management, distribution of power in
the organisation, and participation of the union in joint decisionmaking. The major critics of the pluralist approach are the
6

Marxists according to whom exploitation and slavery will

continue unabated in the institutional structure of pluralism.
The only difference is that in such a social structure, the worker
will be deemed to be a better-paid wage slave.

Webers Social Action Approach

The social action approach of Weber has laid considerable
importance to the question of control in the context of
increasing rationalisation and bureaucratisation. Closely related
to Webers concern related to control in organisations was his
concern with power of control and dispersal. Thus a trade
union in the Webers scheme of things has both economic
purposes as well as the goal of involvement in political and
power struggles. Some of the major orientations in the
Weberian approach have been to analyse the impact of technoeconomic and politico-organisational changes on trade union
structure and processes, to analyse the subjective
interpretation of workers approaches to trade unionism and
finally to analyse the power of various components of the
industrial relations environment government, employers,
trade unions and political parties. Thus the Weberian approach
gives the theoretical and operational importance to control as
well as to the power struggle to control work organisations a
power struggle in which all the actors in the industrial relations
drama are caught up.
The Human Relations Approach
In the words of Keith Davies, human relations are the
integration of people into a work situation that motivates them
to work together productively, cooperatively and with
economic, psychological and social satisfactions. According to
him, the goals of human relations are: (a) to get people to
produce, (b) to cooperate through mutuality of interest, and (c)
to gain satisfaction from their relationships. The human
relations school founded by Elton Mayo and later propagated by

Roethlisberger, Whitehead, W.F. Whyte, and Homans offers a

coherent view of the nature of industrial conflict and harmony.
The human relations approach highlights certain policies and
techniques to improve employee morale, efficiency and job
satisfaction. It encourages the small work group to exercise
considerable control over its environment and in the process
helps to remove a major irritant in labour-management
relations. But there was reaction against the excessive claims
of this school of thought in the sixties. Some of its views were
criticised by Marxists, pluralists, and others on the ground that
it encouraged dependency and discouraged individual
development, and ignored the importance of technology and
culture in industry. Taking a balanced view, however, it must be
admitted that the human relations school has thrown a lot of
light on certain aspects such as communication, management
development, acceptance of workplace as a social system,
group dynamics, and participation in management.
The Gandhian Approach
Gandhiji can be called one of the greatest labour leaders of
modern India. His approach to labour problems was completely
new and refreshingly human. He held definite views regarding
fixation and regulation of wages, organisation and functions of
trade unions, necessity and desirability of collective bargaining,
use and abuse of strikes, labour indiscipline, workers
participation in management, conditions of work and living, and
duties of workers. The Ahmedabad Textile Labour Association, a
unique and successful experiment in Gandhian trade unionism,
implemented many of his ideas. Gandhiji had immense faith in
the goodness of man and he believed that many of the evils of
the modern world have been brought about by wrong systems
and not by wrong individuals. He insisted on recognising each
individual worker as a human being. He believed in non-violent
communism, going so far as to say that if communism comes
without any violence, it would be welcome. Gandhiji laid down
certain conditions for a successful strike. These are: (a) the
cause of the strike must be just and there should be no strike
without a grievance; (b) there should be no violence; and (c)
non-strikers or blacklegs should never be molested. He was
not against strikes but pleaded that they should be the last
weapon in the armory of industrial workers and hence should
not be resorted to unless all peaceful and constitutional
8

methods of negotiations, conciliation and arbitration are

exhausted. His concept of trusteeship is a significant
contribution in the sphere of industrial relations. According to
him, employers should not regard themselves as sole owners of
mills and factories of which they may be the legal owners. They
should regard themselves only as trustees, or co-owners. He
also appealed to the workers to behave as trustees, not to
regard the mill and machinery as belonging to the exploiting
agents but to regard them as their own, protect them and put
to the best use they can. In short, the theory of trusteeship is
based on the view that all forms of property and human
accomplishments are gifts of nature and as such, they belong
not to any one individual but to society. Thus, the trusteeship
system is totally different from other contemporary labour
relations systems. It aimed at achieving economic equality and
the material advancement of the have-nots in a capitalist
society by non-violent means. Gandhiji realised that relations
between labour and management can either be a powerful
stimulus to economic and social progress or an important factor
in economic and social stagnation. According to him, industrial
peace was an essential condition not only for the growth and
development of the industry itself, but also in a great measure,
for the improvement in the conditions of work and wages. At
the same time, he not only endorsed the workers right to
adopt the method of collective bargaining but also actively
supported it. He advocated voluntary arbitration and mutual
settlement of disputes. He also pleaded for perfect
understanding between capital and labour, mutual respect,
recognition of equality, and strong labour organisation as the
essential factors for happy and constructive industrial relations.
For him, means and ends are equally important.
Human Resource Management Approach
The term, human resource management (HRM) has become
increasingly used in the literature of personnel/industrial
relations. The term has been applied to a diverse range of
management strategies and, indeed, sometimes used simply as
a more modern, and therefore more acceptable, term for
personnel or industrial relations management. Some of the
components of HRM are: (i) human resource organisation; (ii)
human resource planning; (iii) human resource systems; (iv)
human
resource
development;
(v)
human
resource
9

relationships; (vi) human resource utilisation; (vii) human

resource accounting; and (viii) human resource audit. This
approach emphasises individualism and the direct relationship
between management and its employees. Quite clearly,
therefore, it questions the collective regulation basis of
traditional industrial relations.

PERSPECTIVES ON INDUSTRIAL RELATIONS

The important perspectives on Industrial Relations are;
1. Unitary Perspective:
In unitarism, the organization is perceived as an integrated and
harmonious system, viewed as one happy family. A core
assumption of unitary approach is that management and staff,
and all members of the organization share the same objectives,
interests and purposes; thus working together, hand-in-hand,
towards the shared mutual goals. Furthermore, unitarism has a
paternalistic approach where it demands loyalty of all
employees. Trade unions are deemed as unnecessary and
conflict is perceived as disruptive.
From employee point of view, unitary approach means that:

Working practices should be flexible. Individuals should be

business process improvement oriented, multi-skilled and
ready to tackle with efficiency whatever tasks are
required.
If a union is recognized, its role is that of a further means
of communication between groups of staff and the
company.
The emphasis is on good relationships and sound terms
and conditions of employment.
Employee participation in workplace decisions is enabled.
This helps in empowering individuals in their roles and
emphasizes team work, innovation, creativity, discretion in
problem-solving, quality and improvement groups etc.
10

Employees should feel that the skills and expertise of

managers supports their endeavors.

From employer point of view, unitary approach means that:

Staffing policies should try to unify effort, inspire and

motivate employees.
The organizations wider objectives should be properly
communicated and discussed with staff.
Reward systems should be so designed as to foster to
secure loyalty and commitment.
Line managers should take ownership of their
team/staffing responsibilities.
Staff-management conflicts from the perspective of the
unitary framework are seen as arising from lack of
information, inadequate presentation of managements
policies.
The personal objectives of every individual employed in
the business should be discussed with them and
integrated with the organizations needs

2. Pluralistic-Perspective :
In pluralism the organization is perceived as being made up of
powerful and divergent sub-groups management and trade
unions. This approach sees conflicts of interest and
disagreements between managers and workers over the
distribution of profits as normal and inescapable. Consequently,
the role of management would lean less towards enforcing and
controlling and more toward persuasion and co-ordination.
Trade unions are deemed as legitimate representatives of
employees. Conflict is dealt by collective bargaining and is
viewed not necessarily as a bad thing and if managed could in
fact be channeled towards evolution and positive change.
Realistic managers should accept conflict to occur. There is a
greater propensity for conflict rather than harmony. They
should anticipate and resolve this by securing agreed
procedures for settling disputes.
The implications of this approach include:

The firm should have industrial relations and personnel

specialists who advise managers and provide specialist
11

services in respect of staffing and matters relating to

union consultation and negotiation.
Independent external arbitrators should be used to assist
in the resolution of disputes.
Union recognition should be encouraged and union
representatives given scope to carry out their
representative duties
Comprehensive
collective
agreements
should
be
negotiated with unions

3. Marxist Perspective:
This view of industrial relations is a by product of a theory of
capitalist society and social change. Marx argued that:

Weakness and contradiction inherent in the capitalist

system would result in revolution and the ascendancy of
socialism over capitalism.
Capitalism would foster monopolies.
Wages (costs to the capitalist) would be minimized to a
subsistence level.
Capitalists and workers would compete/be in contention to
win ground and establish their constant win-lose struggles
would be evident.

This perspective focuses on the fundamental division of interest

between capital and labor, and sees workplace relations
against this background. It is concerned with the structure and
nature of society and assumes that the conflict in employment
relationship is reflective of the structure of the society. Conflict
is therefore seen as inevitable and trade unions are a natural
response of workers to their exploitation by capital.

12

DETERMINING FACTORS OF INDUSTRIAL RELATIONS

The relationship between Employer and employee or trade
unions is called Industrial Relation. Harmonious relationship is
necessary for both employers and employees to safeguard the
interests of the both the parties of the production. In order to
maintain good relationship with the employees, the main
functions of every organization should avoid any dispute with
them or settle it as early as possible so as to ensure industrial
peace and higher productivity.
Good industrial relations depend on a great variety of factors.
Some of the more obvious ones are listed below:
1. History of industrial relations No enterprise can escape
its good and bad history of industrial relations. A good history is
marked by harmonious relationship between management and
workers. A bad history by contrast is characterized by militant
strikes and lockouts. Both types of history have a tendency to
perpetuate themselves. Once militancy is established as a
mode of operations there is a tendency for militancy to
continue. Or once harmonious relationship is established there
is a tendency for harmony to continue.
2. Economic satisfaction of workers Psychologists
recognize that human needs have a certain priority. Need
number one is the basic survival need. Much of men conducted
are dominated by this need. Man works because he wants to
survive. This is all the more for underdeveloped countries
where workers are still living under subsistence conditions.
13

Hence economic satisfaction of workers is another important

prerequisite for good industrial relations.
3. Social and Psychological satisfaction Identifying the
social and psychological urges of workers is a very important
steps in the direction of building good industrial relations. A
man does not live by bread alone. He has several other needs
besides his physical needs which should also be given due
attention by the employer. An organization is a joint venture
involving a climate of human and social relationships wherein
each participant feels that he is fulfilling his needs and
contributing to the needs of others. This supportive climate
requires economic rewards as well as social and psychological
rewards such as workers participation in management, job
enrichment, suggestion schemes, re-dressal of grievances etc.
4. Off-the-Job Conditions An employer employs a whole
person rather than certain separate characteristics. A persons
traits are all part of one system making up a whole man. His
home life is not separable from his work life and his emotional
condition is not separate from his physical condition. Hence for
good industrial relations it is not enough that the workers
factory life alone should be taken care of his off-the-job
conditions should also be improved to make the industrial
relations better.
5. Enlightened Trade Unions The most important condition
necessary for good industrial relations is a strong and
enlightened labor movement which may help to promote the
status of labor without harming the interests of management,
Unions should talk of employee contribution and responsibility.
Unions should exhort workers to produce more, persuade
management to pay more, mobilize public opinion on vital labor
issues and help Government to enact progressive labor laws.
6. Negotiating skills and attitudes of management and
workers Both management and workers representation in
the area of industrial relations come from a great variety of
backgrounds in terms of training, education, experience and
attitudes. These varying backgrounds play a major role in
shaping the character of industrial relations. Generally
speaking, well-trained and experienced negotiators who are
motivated by a desire for industrial peace create a bargaining
14

atmosphere conducive to the writing of a just and equitable

collective agreement. On the other hand, ignorant,
inexperienced and ill-trained persons fail because they do not
recognize that collective bargaining is a difficult human activity
which deals as much in the emotions of people as in their
economic interests. It requires careful preparation and top
notch executive competence. It is not usually accomplished by
some easy trick or gimmick. Parties must have trust and
confidence in each other. They must possess empathy, i.e. they
should be able to perceive a problem from the opposite angle
with an open mind. They should put themselves in the shoes of
the other party and then diagnose the problem. Other factors
which help to create mutual trust are respect for the law and
breadth of the vision. Both parties should show full respect for
legal and voluntary obligations and should avoid the tendency
to make a mountain of a mole hill.
7. Public policy and legislation When Government,
regulates employee relations, it becomes a third major force
determining industrial relations the first two being the employer
and the union. Human behavior is then further complicated as
all three forces interact in a single employee relation situation.
Nonetheless, government in all countries intervenes in
management union relationship by enforcing labor laws and
by insisting that the goals of whole society shall take
precedence over those of either of the parties. Government
intervention helps in three different ways 1) it helps in catching
and solving problems before they become serious. Almost
every one agrees that it is better to prevent fires them to try
stopping them after they start; 2) It provides a formalized
means to the workers and employers to give emotional release
to their dissatisfaction; and 3) It acts as a check and balance
upon arbitrary and capricious management action.
8. Better education - With rising skills and education workers
expectations in respect of rewards increase. It is a common
knowledge that the industrial worker in India is generally
illiterate and is misled by outside trade union leaders who have
their own axe to grind. Better workers education can be a
solution to this problem. This alone can provide worker with a
proper sense of responsibility, which they owe to the
organization in particular, and to the community in general.

15

9. Nature of industry In those industries where the costs

constitute a major proportion of the total cast, lowering down
the labor costs become important when the product is not a
necessity and therefore, there is a little possibility to pass
additional costs on to consumer. Such periods, level of
employment and wages rise in decline in employment and
wages. This makes workers unhappy and destroys good
industrial relations.

REQUIREMENTS
OF
A
RELATION PROGRAMME

SUCCESSFUL

INDUSTRIAL

Todays professional industrial relations director, or by whatever

title he is designated, no longer views his job as personalizing
management, or that of a social worker in a factory, or a union
buster, he looks upon his department as an adjunct to
management supervision at all levels; he keeps other
executives informed about new discoveries, programme trends
and needs. At the same time, he provides efficient service in
the operation of several centralized services. A successful
industrial relations programme reflects the personnel
viewpoint, which is influenced by three main considerations:

Individual thinking
Policy awareness and
Expected group reaction

Individualized thinking makes if imperative for the

administrator to consider the entire situation in which the
affected individual is placed. Policy awareness underscores the
idea of the consistency of treatment and the precedent value of
any decision which a management takes; while expected group
reaction balances what we know of human nature in groups
against an individuals situation in the light of the policy that
has been formulated and implemented. In all these different
circumstances, reality demands that all the three aspects of the
personnel viewpoint should be considered at once in terms of

16

the past, the present and the future. This viewpoint is held at
all the levels of management from the top to the bottom, from
the top executives and staff to the line and supervisory
personnel.
The basic requirements on which a successful industrial
relations programme is based are :
Top Management Support: Since industrial relations is a
functional staff service, it must necessarily derive its authority
from the line organization. This is ensured by providing that the
industrial relations director should report to a top line authority
to the president, chairman or vice president of an organization.

Sound Personnel Policies: These constitute the business

philosophy of an organization and guide it in arriving at its
human relations decisions. The purpose of such policies is to
decide, before any emergency arises, what shall be done about
the large number of problems which crop up every day during
the working of an organization. Policies can be successful only
when they are followed at all the level of an enterprise, from
top to bottom.
Adequate
Practices
should
be
developed
by
professionals: In the field to assist in the implementation of
the policies of an organization. A system of procedures is
essential if intention is to be properly translated into action.
The procedures and practices of an industrial relations
department are the tool of management which enables a
supervisor to keep ahead of his job that of the time-keeper, rate
adjuster, grievance reporter and merit rater.
Detailed Supervisory Training : To ensure the
organizational policies and practices are properly implemented
and carried into effect by the industrial relations staff, job
supervisors should be trained thoroughly, so that they may
convey to the employees the significance of those policies and
practices. They should, moreover, be trained in leadership and
in communications.

17

Follow-up of Results: A constant review of an industrial

relations programme is essential, so that existing practices may
be properly evaluated and a check may be exercised on certain
undesirable tendencies, should they manifest themselves. A
follow up of turnover, absenteeism, departmental morale,
employee grievances and suggestion; wage administration, etc.
should be supplemented by continuous research to ensure that
the policies that have been pursued are best fitted to company
needs and employee satisfaction. Hints of problem areas may
be found in exit interviews, in trade union demands and in
management meetings, as well as in formal social sciences
research.
An industrial relations system consists of the whole gamut of
relationships between employees and employees and
employers which are managed by the means of conflict and
cooperation.

A sound industrial relations system is one in which relationships

between
management
and
employees
(and
their
representatives) on the one hand, and between them and the
State on the other, are more harmonious and cooperative than
conflictual and creates an environment conducive to economic
efficiency and the motivation, productivity and development of
the employee and generates employee loyalty and mutual
trust.

18

INTRODUCTION TO INDUSTRIAL DISPUTES,ITS

PREVENTION AND SETTLEMENT
Industrial disputes are organised protests against existing
terms of employment or conditions of work. According to the
Industrial Dispute Act, 1947, an Industrial dispute means
Any dispute or difference between employer and employer or
between employer and workmen or between workmen and
workmen, which is connected with the employment or nonemployment or terms of employment or with the conditions of
labour of any person
In practice, Industrial dispute mainly refers to the strife
between employers and their employees. An Industrial dispute
is not a personal dispute of any one person. It generally affects
a large number of workers community having common
interests.
Prevention of Industrial Disputes:
The consequences of an Industrial dispute will be harmful to the
owners of industries, workers, economy and the nation as a
whole, which results in loss of productivity, profits, market

19

share and even closure of the plant. Hence, Industrial disputes

need to be averted by all means.
Prevention of Industrial disputes is a pro-active approach in
which an organisation undertakes various actions through
which the occurrence of Industrial disputes is prevented. Like
the old saying goes, prevention is better then cure.

1. Model Standing Orders: Standing orders define and

regulate terms and conditions of employment and bring about
uniformity in them. They also specify the duties and
responsibilities of both employers and employees thereby
regulating standards of their behaviour. Therefore, standing
orders can be a good basis for maintaining harmonious
relations between employees and employers.
Under Industrial Dispute Act, 1947, every factory employing
100 workers or more is required to frame standing orders in
consultation with the workers. These orders must be certified
and displayed properly by the employer for the information of
the workers.
2. Code of Industrial discipline: The code of Industrial
discipline defines duties and responsibilities of employers and
workers. The objectives of the code are:

To secure settlement of disputes

conciliation and voluntary arbitration.

by

negotiation,

20

To eliminate all forms of coercion, intimidation and

violence.
To maintain discipline in the industry.
To avoid work stoppage.
To promote constructive co-operation between the parties
concerned at all levels.

3. Works Committee: Every industrial undertaking employing

100 or more workers is under an obligation to set up a works
committee consisting equal number of representatives of
employer and employees. The main purpose of such
committees is to promote industrial relations. According to
Indian Labour Conference work committees are concerned
with:

Administration of welfare & fine funds.

Educational and recreational activities.
Safety and accident prevention
Occupational diseases and protective equipment.
Conditions of work such as ventilation, lightening,
temperature & sanitation including latrines and urinals.
Amenities such as drinking water canteen, dining rooms,
medical & health services.

The following items are excluded from the preview of the work
committees.

Wages and allowances

Profit sharing and bonus
Programs of planning and development
Retirement benefits
PF and gratuity
Housing and transport schemes
Incentive schemes
Retirement and layoff

4. Joint Management Councils: Just to make a start in labour

participation in management, the govt: suggested in its
Industrial Resolution 1956 to set up joint management councils.
It consists of equal numbers of workers and employers
(minimum 6 & maximum 12) decisions of the JMC should be
21

unanimous and should be implemented without any delay. JMC

members should be given proper training. JMC should look after
3 main areas:1. information sharing
2. consultative
3. administrative
Representation of workers to the JMCs should be based on the
nomination by the representation.
Objectives

Satisfy the psychological needs of workers

Improve the welfare measures
Increase workers efficiency
Improve the relation and association between workers,
managers and promoters.

JMC deals with matters like:

Employee welfare
Apprenticeship scheme

5. Suggestion Schemes:
6. Joint Councils: Joint Councils are set up for the whole unit
and deals with matters relating optimum production and
efficiency and the fixation of productivity norms for man and
machine for the as a whole. in every industrial unit employing
500 and more workers there should be a Joint Council for the
whole unit.
Features

Members of the council must be actually engaged in the

unit.
The chief executive of the unit will be the chairman of the
council and vice chairman will be nominated by worker
members.
Term of the council will be two years.
JC shall meet at once in a quarter.
Decision of the council will be based on consensus and not
on voting.
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Functions

Optimum use of raw materials and quality of finished

products
Optimum
production,
efficiency
and
function
of
productivity norms of man and machine as a whole.
Preparation of schedules of working hours and of holidays.
Adequate facilitates for training.
Rewards for valuable and creative suggestions received
from workers.

7. Collective Bargaining: Collective Bargaining is a process

in which the representatives of the employer and of the
employees meet and attempt to negotiate a contract governing
the
employer-employee-union
relationships.
Collective
Bargaining involves discussion and negotiation between two
groups as to the terms and conditions of employment.
8. Labour welfare officer: The factories Act, 1948 provides
for the appointment of a labour welfare officer in every factory
employing 500 or more workers. The officer looks after all
facilities in the factory provided for the health, safety and
welfare of workers. He maintains liaison with both the employer
and the workers, thereby serving as a communication link and
contributing towards healthy industrial relations through proper
administration of standing orders, grievance procedure etc.
9. Tripartite bodies: Several tripartite bodies have been
constituted at central, national and state levels. The India
labour conference, standing labour committees, Wage Boards
and Industries Committees operate at the central level. At the
state level, State Labour Advisory Boards have been set up. All
these bodies play an important role in reaching agreements on
various labour-related issues. The recommendations given by
these bodies are however advisory in nature and not statutory.
Machinery for settlement of Industrial Disputes:
1. Conciliation: Conciliation refers to the process by which
representatives of employees and employers are brought
together before a third party with a view to discuss, reconcile
their differences and arrive at an agreement through mutual
consent. The third party acts as a facilitator in this process.
23

Conciliation is a type of state intervention in settling the

Industrial Disputes. The Industrial Disputes Act empowers the
Central & State governments to appoint conciliation officers
and a Board of Conciliation as and when the situation demands.
Conciliation Officer: The appropriate government may, by
notification in the official gazette, appoint such number of
persons as it thinks fit to be the conciliation officer. The duties
of a conciliation officer are:
a)
To hold conciliation proceedings with a view to arrive at
amicable settlement between the parties concerned.
b)
To investigate the dispute in order to bring about the
settlement between the parties concerned.
c)
To send a report and memorandum of settlement to the
appropriate government.
d)
To send a report to the government stating forth the steps
taken by him in case no settlement has been reached at.
The conciliation officer however has no power to force a
settlement. He can only persuade and assist the parties to
reach an agreement. The Industrial Disputes Act prohibits
strikes and lockouts during that time when the conciliation
proceedings are in progress.
2. Arbitration: A process in which a neutral third party listens
to the disputing parties, gathers information about the dispute,
and then takes a decision which is binding on both the parties.
The conciliator simply assists the parties to come to a
settlement, whereas the arbitrator listens to both the parties
and then gives his judgement.
Advantages of Arbitration:

It is established by the parties themselves and therefore

both parties have good faith in the arbitration process.
The process in informal and flexible in nature.
It is based on mutual consent of the parties and therefore
helps in building healthy Industrial Relations.

Disadvantages:
24

Delay often occurs in settlement of disputes.

Arbitration is an expensive procedure and the expenses
are to be shared by the labour and the management.
Judgement can become arbitrary when the arbitrator is
incompetent or biased.

There are two types of arbitration:

Voluntary Arbitration: In voluntary arbitration the

arbitrator is appointed by both the parties through mutual
consent and the arbitrator acts only when the dispute is
referred to him.
Compulsory Arbitration: Implies that the parties are
required to refer the dispute to the arbitrator whether they
like him or not. Usually, when the parties fail to arrive at a
settlement voluntarily, or when there is some other strong
reason, the appropriate government can force the parties
to refer the dispute to an arbitrator.

4. Adjudication: Adjudication is the ultimate legal remedy

for settlement of Industrial Dispute. Adjudication means

intervention of a legal authority appointed by the
government to make a settlement which is binding on
both the parties. In other words adjudication means a
mandatory settlement of an Industrial dispute by a labour
court or a tribunal. For the purpose of adjudication, the
Industrial Disputes Act provides a 3-tier machinery:

Labour court
Industrial Tribunal
National Tribunal

a) Labour Court: The appropriate government may, by

notification in the official gazette constitute one or more labour
courts for adjudication of Industrial disputes relating to any
matters specified in the second schedule of Industrial Disputes
Act. They are:

Dismissal or discharge or grant of relief to workmen

wrongfully dismissed.
Illegality or otherwise of a strike or lockout.
Withdrawal of any customary concession or privileges.

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Where an Industrial dispute has been referred to a labour court

for adjudication, it shall hold its proceedings expeditiously and
shall, within the period specified in the order referring such a
dispute, submit its report to the appropriate government.
b) Industrial Tribunal: The appropriate government may, by
notification in the official gazette, constitute one or more
Industrial Tribunals for the adjudication of Industrial disputes
relating to the following matters:

Wages
Compensatory and other allowances
Hours of work and rest intervals
Leave with wages and holidays
Bonus, profit-sharing, PF etc.
Rules of discipline
Retrenchment of workmen
Working shifts other than in accordance with standing
orders

It is the duty of the Industrial Tribunal to hold its proceedings

expeditiously and to submit its report to the appropriate
government within the specified time.
c) National Tribunal: The central government may, by
notification in the official gazette, constitute one or more
National Tribunals for the adjudication of Industrial Disputes in

Matters of National importance

Matters which are of a nature such that industries in more
than one state are likely to be interested in, or are
affected by the outcome of the dispute.

It is the duty of the National Tribunal to hold its proceedings

expeditiously and to submit its report to the central
government within the stipulated time.

26

PREVENTION OF MONEY LAUNDERING ACT

Introduction:Money laundering involves disguising financial assets so that
they can be used without detection of the illegal activity that
let to its production. Through the process of money
laundering a person converts illegal money into a legal entity.
Whosoever directly or indirectly attempts to indulge or
knowingly assists or knowingly is a party or is actually involved
in any process or activity connected with the proceeds of crime
and projecting it as untainted property shall be held guilty of
the offence of money laundering.
The Schedule to the Prevention of Money Laundering Act
(henceforth, PMLA), 2002, lists some of the offences under the
following Legislations: Offences under the India Penal Code
(part A) eg. Waging or attempting to wage war, or abetting
waging of war against the Government of India, Conspiring to
commit offences punishable by s.121 against the state
1. Offences under the Narcotic Drugs and Psychotropic
Substances Act, 1985- eg. Contravention in relation to opium
poppy and opium.
2. Offences under India Penal Code (part B) eg. Murder,
kidnapping for ransom, counterfeiting currency notes or bank
notes.
3. Offences under the Arms Act, 1959- eg. Knowingly
purchasing arms from unlicensed person not entitled to
purchase the same.
4. Offences under the Wildlife (Protection) Act, 1972- eg.
Contravention of provisions of s.48 relating to purchase of
animals etc by license.
5. Offence under the Immoral Traffic (Prevention) Act,
1956- eg. Seducing or soliciting for purpose of prostitution.
6. Offences under the Prevention of Corruption Act, 1988eg. Taking gratification for exercise of personal influence, with
public servant

27

The innumerate under therefore stated Acts generate huge

sums. The launderer converts these sums into untainted money
by investing them into shares or banks and thereby converts
the essential character of the money.
Genesis:The UN General Assembly, in its Special Session (1999), came
up with a political declaration that required the Member-States
to adopt money laundering legislation and programme.
Moreover with the changed economic scenario and the dynamic
process of liberalization laws like Foreign Exchange
Management Bill in place of earlier FERA was felt to be much
static and harsh. As is said in Latin Summum Jus Suma Injuria
(too much legislation, too much of regulations create problems
for a man) hence it was felt that a new law was required to
curtail the powers of launderers. Accordingly on the
Recommendations of the Standing Committee on Finance on
4th March, 1999 the Bill was presented in the Lok Sabha and
the Act was incorporated and enacted on 17th January, 2003.
Significance:The PMLA was a very peculiar legislation. The Civil Procedure
Code, 1908 and the Criminal Procedure Code, 1973 were
clubbed together. Moreover, the Act had hit the source of illegal
money itself.
Enactment:With the PMLA coming into force, banks, financial institutions
and financial intermediaries will have to mandatorily report to
Government all suspicious transactions and those over Rs.10
Lakh. As per the provisions of the Act, every banking company,
financial institution and intermediary needs to maintain a
record of all transactions, the nature and value of which is
being prescribed in the rules. Financial institutions, including
chit funds, cooperative banks and intermediaries like stock
brokers, share transfer agents, underwriters and investment
advisers were to be registered with SEBI. The Financial
Intelligence Unit (FIU-IND) was set up as a multi-disciplinary
unit for establishing links between suspicious or unusual
financial transactions and criminal activities.
Legislations in consonance with PMLA:1. Banking Regulation Act, 1949.
28

2. Chit Funds Act, 1982.

3. Deposit Insurance and Credit Guarantee Corporation Act,
1961
4. NABARD Act, 1981.
5. National Housing Bank Act, 1987.
6. Reserve Bank of India Act,1934.
7. Securities and Exchange Board of India act,1992.
International support system:It stands highly imperative to exchange information at an
international level in order to make the enforcement of a law
efficient. FIUs therefore have the ability to exchange financial
information that stands helpful to follow the financial trail in
respect to investigation and enforcement of law in activities
related to terrorism and uncovering financial assets.

FATF: - The Financial Action Task Force (FATF) is an intergovernmental body which sets standards, and develops
and promotes policies to combat money laundering and
terrorist financing. The Force has provided forty
Recommendations and Nine Special Recommendations
that provide a complete set of counter measures against
money laundering. These Recommendations have been
recognized, endorsed and adopted by many international
bodies as the international standards for combating Money
Laundering.
Egmont Group: - The Egmont Group serves as an
international network fostering improved communication
and interaction among FIUs. Egmont Group is named after
the venue in Brussels where the first such meeting of FIU
was held in June, 1995. The goal of the Group is to provide
a platform for FIUs around the world to improve support to
their respective governments in the fight against money
laundering terrorist financing and other financial crimes.
Asia/Pacific Group: - The Asia/Pacific Group on money
laundering (APG) was officially established as an
autonomous regional anti-money laundering body in
February, 1997 at the Fourth Asia/Pacific Money
Laundering Symposium in Bangkok, Thailand. The purpose
of APG is to facilitate the adoption, implementation and
enforcement of internationally accepted anti-money
laundering and anti terrorist financing standards set out in
29

the recommendations of the FATF. The APG undertakes

studies of methods and trends of money laundering and
the financing of terrorism in Asia/Pacific region. It is a
voluntary and co-operation international body established
by agreement among its members and is autonomous.
Why amend the Anti-Money Laundering Act:In the recent years there has been a sudden upsurge in
organized crimes and terrorist activities. Like any other activity
even these anti-social activities need financial support. This
financial support is provided through illegal money which is
laundered in economy of a country. Money laundering has
recently gained urgency of attention due to its links with
terrorist activities. RBI, SEBI and IRDA are under the purview of
PMLA. It allows search and seizure of suspected properties by
officials and stipulates punishment of minimum three years
imprisonment for the Guilty.
Money laundering can be checked by monitoring illegal forex
transactions, real estate, gems and jewellery and high value
purchases. In India, however, PMLA regulates only banking
companies, financial institutions and intermediaries to maintain
records, furnish information and verify identity of the
customers. It does not deal with tapping of information within
the ambit of informal economy as in case of forex transactions,
because lot of dealing in this avenue is done through informal
channels. The PMLA makes it illegal to enter into a transaction
related to funds derived from criminal activities as also to
possess or transfer such funds.
Financial institutions and intermediaries registered with SEBI
are required to furnish to the income-tax authorities, details of
all transactions also need to be furnished. However, this task of
furnishing information and maintaining records is indeed a
titanic one. Infrasoft Technologies Ltd. has launched OMNI
Enterprise, anti-money laundering software that offers reporting
and query capabilities. This software is widely used by banks in
UK.
In 2000, black money was estimated to account for more than
40% of Indians GDP (approximately $150 billion). The IMF
estimates the global volume of money laundering to be
30

somewhere between $600 billion to $1.8 trillion a year. With

such statistics, in India, there are absolutely no estimates
regarding spending on anti money laundering measures by
banks and financial institutions. Whereas, in USA, the collective
spending by banking, insurance and fund management
companies on anti money laundering measures is estimates to
be $ 10.9 billion between 2003 and 2005.
With PMLA in force it is very crucial for the Banks to find AML
software to check, identify and report suspicious transactions
regularly. Failure to comply with this demand would result in
losing business and fighting legal battles. Despite of all the
afore stated problems, Infrasoft OMNI AML software has found
no takers. The major part of the blame for not making use of
the software is , however, shelved on the shoulders of strict and
static RBI Rules.
It should be realized that PMLA is not a one-time legislation.
The Act was amended to resolve the technicalities. India has
only made amendments in respect to 11 out of 20 categories
prescribed by FATF. This clearly means that amendments are
required to be made in other categories as well particularly
enclosing within its scope- terrorism financing, smuggling,
piracy etc.- to cope with the International Standards. Without
which the India banks would get paralyzed in developed
nations.
Apart from the banking and other financial institutions and
intermediaries the Act also extends upon the working of
International Payment gateways such as Visa and Master card
along with money transfer providers. However, it is strongly felt
that PMLA should incorporate within its ambit the casinos,
because a huge amount of money, in form of informal
transactions, is being operated upon through such places.
Conclusion:The menace of money laundering is highly diabolical in nature.
It hits not only at the root of a countrys financial structure but
also kills its social structure by financing anti-social activities. It
is as a matter of great grief that despite of having innumerable
enactments and legislation, India is still under the vigilance of
the Interpol because of her relaxed attitude towards the threat
posed by money laundering. Hence, it is extremely important to
31

catch hold of the growing threat of money laundering by

legislating and implementing amendments in he present law of
Anti- money Laundering.

32