Collective bargaining as a process needs the union and the employer to come to an agreement so that disputes are resolved amicably without affecting the industrial peace and harmony. The Apex court in its judgment P. Virudhachalam & Ors vs The Management of Lotus Mills & Anr. (1998 1 SCC 650 = 1998 (78) FLR 107 = 1998 (1) LLJ 389 (SC) termed Settlements as live wires for securing industrial peace & prosperity. The law recognizes such agreement between the employer and the union and is termed as 'settlement'. Section 2 (p) of the Industrial Disputes Act define 'Settlement' as follows :
"Settlement" means a settlement arrived at in the course of Conciliation proceeding and includes a written agreement between the employer and workmen arrived at otherwise than in the course of conciliation proceeding where such agreement has been signed by the parties thereto in such manner as may be prescribed and a copy thereof has been sent to an officer authorized in this behalf by the appropriate Government and the Conciliation Officer.
An analysis of the definition would show that it contemplates two kinds of Settlements:
i. A written agreement between the employer and their workmen arrived at otherwise than in the course of the conciliation proceeding. In other words this kind of agreement is arrived between the employer and their workmen at a bipartite level without the aid of the conciliation process. However, for this kind of agreement to fall within the definition of settlement as defined in the Industrial Disputes Act must satisfy two conditions: (a) it must be signed by the parties as prescribed (b) a copy thereof must be sent to authorities as indicated in the definition.
ii. A settlement arrived at in the course of the conciliation proceeding with the assistance and concurrence of the Conciliation Officer.
It may be therefore interesting to note that all settlements are agreements but all agreements between the employer and the union are not settlements. For an agreement to become settlement it needs to comply with the basic requirement of law which is prescribed in section 2(p) of the Industrial Disputes Act 1947.
To whom Settlement is binding :
The effect of settlement under two categories is distinctly set out in section 18 of the Industrial Disputes Act 1947. A bare reading of the proviso makes it clear that settlement can be broadly classified into two categories - one at a bipartite level under section 18(1) of the Industrial Disputes Act and the other at a tripartite level during the course of the conciliation proceeding under section 18(3) of the said Act. A settlement arrived at a bipartite level under section 18 (1) of the Industrial Disputes Act shall be binding on the parties to the agreement but a settlement made under 18(3) of the said Act do not merely binds the parties to the agreement but binds all parties to the industrial dispute in an establishment including a minority union or any person joining an establishment on a later date. In connection with the question to whom a settlement is binding it may be note worthy to mention the case of Barauni Refinery Pragatisheel Shramik Parishad V. Indian Oil corporation ((1991) I LLJ 46 =(1991) 1 SCC 4 = Air 1990 SC 1801 = 1990 SCR (3) 282) wherein the Apex Court has observed the following :
"It may be seen on a plain reading of sub-sections (1) and (3) of section 18 that settlements are divided into two categories, namely, (i) those arrived at outside the conciliation proceedings and (ii) those arrived at in the course or conciliation proceedings. A settlement which belongs to the first category has limited application in that it merely binds the parties to the agreement but the settlement belonging to the second category has extended application since it is binding on all parties to the industrial dispute, to all others who were summoned to appear in the conciliation proceedings and to all persons employed in the establishment or part of the establishment, as the case may be, to which the dispute related on the date of the dispute and to all others who joined the establishment thereafter. Therefore, a settlement arrived at in the course of conciliation proceedings with a recognised majority union will be binding on all workmen of the establishment, even those who belong to the minority union which had objected to the same. To that extent it departs from the ordinary law of contract. The object obviously is to uphold the sanctity of settlements reached with the active assistance of the Conciliation Officer and to discourage an individual employee or a minority union from scuttling the settlement. There is an underlying assumption that a settlement reached with the help of the Conciliation Officer must be fair and reasonable and can, therefore, safely be made binding not only on the workmen belonging to the Union signing the settlement but also on others. That is why a settlement arrived at in the course of conciliation proceedings is put on par with an award made by an adjudicatory authority........"
Case Laws pertaining to 18 (3) :
Though there are large number of judgments available but few judgments relevant to the topic are discussed below.
In the case between P. Virudhachalam & Ors vs The Management of Lotus Mills & Anr. (supra) while terming settlements as live wires for securing industrial peace & prosperity it was opined by the Supreme Court that a settlement arrived during the course of conciliation proceeding shall not only cover the signatories to the settlement but also on all parties to the industrial dispute which would cover the entire body of workmen, not only existing workmen but also future workmen. On similar lines the Supreme Court again in National Engineering Industries Ltd. v. State of Rajasthan (AIR 2000 SC 469 = 2000 I LLJ 247 = 2000 (84) FLR 162 = 2000 (1) SCC 371) held that a settlement arrived at in the course of conciliation proceedings with a recognized majority union will be binding on all workmen of the establishment, even those who belong to the minority union which had objected to the same.
The Calcutta High Court in the case between Anthony Gomes vs State Of West Bengal And Ors. ((1975) II LLJ 84 (Cal) = 1975 (30) FLR 172) held that a settlement arrived in the conciliation proceeding will be binding on the workman even if he is not a member of the Union. In this case while distinguishing the binding effect of clause 18(1) and 18(3) of the Industrial Disputes Act the Court observed that a settlement arrived at by agreement between the employer and workman otherwise than in the course of conciliation proceeding under section 18 (1) shall be binding on the parties to the agreement. However, a settlement arrived under 18(3) in the course of conciliation proceedings become enforceable and shall be binding on all persons who were employed in the establishment, or part of the establishment, as the case may be, to which the dispute relates on the date of the dispute and all persons who subsequently become employed in that establishment or part.
It may be note worthy to mention that one of the case on which reliance was placed in the Anthony Gomes case (supra) was Ramnagar Cane And Sugar Co. Ltd vs Jatin Chakravorty And Others (1960 AIR 1012 SC = 1961 (1) LLJ 244). In this instant case of Ramnagar it was opined by the Supreme Court that in a public utility concern, where two rival unions of workmen carries on conciliation proceedings with the employer the other commences a strike, any settlement, arrived at in such conciliation proceedings must bind all the employees under S 18(3)(d) of the Industrial Disputes Act, 1947, and the strike must, on a reasonable construction of the provisions of S. 22(1)(d) of the Act, amount to a contravention of it and must be illegal under S. 24(1)(1) of the Act. Further, in order to bind the workmen to the settlement arrived at before the conciliator, it was not necessary to show that they belonged to the union which took part in the conciliation proceedings, since the policy underlying S. 18 of the Act is to give an extended operation to such a settlement. The binding effect of the Settlement under section 18 (3) was also discussed at length in Praga Tools Ltd. V. Mazdoor Sabha ((1975) I LLJ 218 = (1975) Lab IC 1109). In this instant case the Andhra Pradesh High Court had to determine whether the Settlement arrived at in the course of the conciliation proceeding under section 18 (3) of the Industrial Dispute Act is binding on the other Union who has not participated in the conciliation proceeding. The court relying upon the aforesaid the judgment of the Supreme Court in Ramnagar Cane and Sugar Co. Ltd v. Jatin Chakravarty (Supra) held that it is well settled that, a settlement reached in the course of conciliation proceedings should be valid and binding on all the employees and it is not a prerequisite that if there are several unions, all those unions should be represented. It is enough if the settlement reached is one which concerns all the employees of the employer or a dispute common to all the employees of the employer.
In Bansilal Kishorilal Sahu vs Akola Mazdoor Sangh ((2005) IILLJ 761 Bom) while upholding the sanctity of the tripartite settlement the Bombay High Court opined that any settlement arrived in a conciliation proceeding shall be binding on all the workers especially if they intend to derive benefits out of the settlement. In this case the settlement between the recognized union and the Company in the conciliation proceeding was impugned. The ground of challenge was that the settlement provided that under the voluntary retirement scheme the workers who avail of the benefit will be paid the amount after deduction of 5% to be contributed to the said recognised union.
Case Laws pertaining to 18(1) :
The Supreme Court in Tata Chemicals Ltd. V. Workmen of Tata Chemicals Ltd. represented by Chemical Kamdar Sangh (1978 AIR 828, 1978 SCR (3) 635 = 1978 II LLJ 22 = 1978 (36) FLR 339 = 1978 LIC 637 = 1978(3) SCC 42) held that a settlement arrived not in conciliation proceeding will not bind other unions and shall only be binding on the parties to the settlement. The Court observed: "A bare perusal of the above quoted section would show that whereas a settlement arrived at by agreement between the employer and the workmen otherwise than in the course of conciliation proceeding is binding only on the parties to the agreement a settlement arrived at in the course of conciliation proceeding under the Act is binding not only on the parties to the industrial dispute but also on other persons specified in clauses (b), (c) and (d) of sub-section (3) of section 18 of the Act."
In The Bata Shoe Co. (P) Ltd vs D. N. Ganguly & Others (1961 AIR 1158, 1961 SCR (3) 308) one of the issue before the Supreme Court was whether a reference will be incompetent as because the settlement was arrived at a bipartite level between the union and management. The Court dealt at length the meaning of the course of conciliation proceedings and held that a settlement which is arrived during the course of conciliation proceeding with the concurrence of the Conciliation Officer will have the binding effect or else it will not bar a reference by the appropriate Government.
The analysis of the aforesaid provisos on settlement and the case laws amply demonstrates that a settlement arrived at in the course of conciliation proceeding will be applicable to all workmen including the members of the union who are not a signatory to the agreement, any other minority union, workmen who are not member of the Union and any other persons who subsequently become employed in the establishment. In other words the sanctity of the settlement under section 18 (3) of the ID Act has been held in high pedestal by the Courts and is applicable to all workmen of the establishment. However, this is not the case in regard to settlement made under section 18 (1) of the ID Act. Under 18 (1) it applies only to the parties to the settlement. Hence, it is always recommended for establishment to have settlement under 18(3) even in cases where bipartite agreement can be arrived at in order to provide a proper protective shield to the settlement. Matters can always be settled amicably at a bipartite level but thereafter it will be prudent to raise a dispute before the conciliation officer and get the settlement signed in his presence. This will enhance the binding effect of the settlement and will act as a shield against any challenge present or future from any rival groups, union and parties in the establishment. Apart from protective shield, settlement under 18 (3) can aid the management where it finds difficult to arrive at a settlement in view divergent opinions of multiple unions. An agreement reached during conciliation, will be binding upon all parties to the dispute, if any of the Union agree to sign on the dotted lines of the agreement.
Before we conclude it may pertinent to mention that there has had been a proposal by the Central Government to replace the ID Act with a Labour Code on Industrial Relations and the draft to this effect has been already circulated in 2015. In the draft proposal of the code the present provisos of settlement and its binding effect has been retained almost in verbatim in the code. Hence, even if the code becomes the law and as a consequence the ID Act stand repealed the law pertaining to settlement shall remain unaltered.