Alternative Dispute Resolution in Labour and Industrial Disputes

Industrial relations law has used conciliation and arbitration since long before the phrase alternative dispute resolution entered Indian usage. The Industrial Disputes Act, 1947 built its entire machinery on conciliation first and adjudication afterwards, and that structure has been carried forward, with changes, into the Industrial Relations Code, 2020, which replaced the Act of 1947 with effect from 21 November 2025. The distinctive feature of this field is that settlement is collective: an agreement reached in conciliation binds workers who were never parties to it.

1. The Change of Statute

The Industrial Relations Code, 2020 consolidates the Trade Unions Act, 1926, the Industrial Employment (Standing Orders) Act, 1946 and the Industrial Disputes Act, 1947. All four labour codes were notified as enforceable on 21 November 2025, and the repeal of the three earlier Acts takes effect from that date. The older law retains importance for two reasons: pending proceedings and accrued rights continue to be governed by it in the manner provided by the Code, and the body of case law decided under the Act of 1947 continues to explain concepts, such as the meaning of industrial dispute and the effect of a settlement, which the Code reproduces in substance.

2. The Machinery under the Code

The sequence from the bipartite stage to the award

1. Works Committee, Section 3. Required in an industrial establishment employing one hundred or more workers, consisting of representatives of employers and workers, to promote good relations and to comment on matters of common interest.
2. Grievance Redressal Committee, Section 4. Required in establishments employing twenty or more workers, for the resolution of individual grievances, with equal representation of employers and workers and adequate representation of women.
3. Voluntary reference to arbitration, Section 42. Where an industrial dispute exists or is apprehended, the employer and the workers may by written agreement refer it to an arbitrator before it is referred to a Tribunal. A copy of the agreement is forwarded to the appropriate Government and to the conciliation officer, and where the Government is satisfied that the persons making the reference represent the majority of each party, it may publish a notification allowing others concerned to present their case. Section 42(8) provides that the Arbitration and Conciliation Act, 1996 does not apply to an arbitration under this section.
4. Conciliation officers, Section 43. Appointed by the appropriate Government by notification for a specified area or industry, permanently or for a limited period, charged with mediating in and promoting the settlement of industrial disputes.
5. Conciliation and adjudication, Section 53. The conciliation officer investigates the dispute and endeavours to bring about a settlement; where a settlement is reached he sends a report with a memorandum of settlement, and where it is not, he sends a report setting out the steps taken and the reasons for failure. On receipt of a report of failure a party may apply to the Tribunal within the prescribed period.
6. Industrial Tribunal and National Industrial Tribunal, Sections 44 to 47 and 54. Adjudication of the dispute, with the award made in writing and signed under Section 55.

3. The Special Character of a Settlement in Conciliation

A settlement in this field is not an ordinary contract. Under the Act of 1947 a settlement arrived at otherwise than in the course of conciliation proceedings bound only the parties to it, while a settlement arrived at in the course of conciliation bound all parties to the dispute, all other persons who were employed in the establishment on the date of the dispute, and all persons who subsequently became employed in it. The Code carries forward the same distinction. The consequence is that the conciliation officer, although he cannot impose terms, presides over a process whose outcome has an effect close to that of an award.

This explains several features of the law. The conciliation officer is a public officer rather than a neutral chosen by the parties. His proceedings are deemed judicial proceedings for specified purposes. The Government has a role in notifying the reference and in the operation of the settlement. And a strike or lock-out is prohibited while conciliation proceedings are pending, which is the pressure that makes the process work.

4. Arbitration in Industrial Disputes

Voluntary arbitration under Section 42 of the Code, which corresponds to Section 10A of the Act of 1947, is a distinct species. It is available only by agreement of both sides, it must be invoked before the dispute is referred to a Tribunal, and the award is published by the appropriate Government and operates like an award of the Tribunal. Because the Arbitration and Conciliation Act, 1996 is expressly excluded, the arbitrator's award is not challenged under Section 34 of that Act; the remedy against it is by writ petition under Article 226 or Article 32 of the Constitution, on the limited grounds available in judicial review.

The exclusion of the general arbitration statute also means that disputes governed by labour legislation are not arbitrable in the ordinary commercial sense. A dispute over which a statutory tribunal has been given exclusive jurisdiction cannot be referred to a private arbitral tribunal under the Arbitration and Conciliation Act, 1996, which follows from the fourth limb of the test in Vidya Drolia v. Durga Trading Corporation, (2021) 2 SCC 1.

5. Mediation and Lok Adalat in Labour Matters

Outside the statutory machinery, two general mechanisms are used. Lok Adalats organised under the Legal Services Authorities Act, 1987 take up claims by workmen; Section 12 of that Act expressly includes an industrial workman among the categories entitled to free legal services. Court-annexed mediation is used in writ petitions and appeals arising from labour adjudication, particularly in long-pending reinstatement and back-wages matters, where the practical outcome is a lump sum in lieu of reinstatement. The Mediation Act, 2023 does not displace the labour machinery, but its provisions on mediated settlement agreements apply where the parties resort to mediation in proceedings before a court.

6. Assessment

Industrial conciliation has two advantages that commercial settlement lacks: it is compulsory in the sense that the officer may intervene without being asked, and its outcome binds a whole workforce. It has two corresponding weaknesses. The conciliation officer is an officer of the Government, which is frequently also the employer or has an interest in industrial peace, so his neutrality is structural rather than chosen. And the machinery is slow at the adjudication stage, which reduces the incentive of the stronger party to settle. The Code addresses the second by consolidating the tribunals and prescribing timelines; whether it improves the first will depend on the rules and on practice.

7. Related Topics and Provisions