Business Legislature

8/8/2019 Business Legislature

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BUSINESS LEGISLATURE

Business Legislature ensure that every company is functioning as per the statutory framework of the

country. Every enterprise must take into account legal set up while framing the basic aims andobjectives of its company. This is because, it is necessary for efficient and healthy functioning of the

organisation and helps it to know about the rights, responsibilities as well as the challenges that it may

have to face.

MAIN ROLES OF BUSINESS LEGISLATION

y Regulate the rights and duties of people carrying out business in order to ensurefairness.

y Protect people dealing with business from harm caused by defective services.y Ensure the treatment of employees is fair and undiscriminatory.y Protect investors, creditors and consumers.y Regulate dealings between business and its suppliers.y Ensure a level playing field for competing business.

KEY AREAS INVOLVED

y EmploymentIt includes Individual Employment and Industry Relation

y ConsumersIt includes Distance Selling Regulations, The Sale of Goods Act, Supply of

Goods and Services Act, Trade Description Acts.

y Environmenty Competitiony Health and Safety

INDIAN LEGAL ASPECTS

In India there are several Acts and legislations enacted by the Government of India for

regulation of industries in the country. These enactments play a very important role in thecountry's overall progress and economic development. These legislations are amended from

time to time in accordance with the changing circumstances and environment.

The most important Act is the Companies Act,1956 which relates to setting up and operation

of companies in India. It empowers the Central Government to regulate the formation,

financing, functioning and winding up of companies. It contains the mechanism regarding

organisational, financial, and managerial and all the relevant aspects of a company.


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In order to provide the Central Government with the means to implement its industrial

policies, several legislations have been enacted. The most important being The Industries

Development and Regulation Act, 1951 (IDRA). The main objectives of the Act is to

empower the Government to take necessary steps for the development of industries; to

regulate the pattern and direction of industrial development; and to control the activities,

performance and results of industrial undertakings in the public interest.

The bulk of the transactions in trade, commerce and industry are based on contracts. In India,

the Indian Contract Act, 1872 is the governing legislation for contracts, which lays down

the general principles relating to formation, performance and enforceability of contracts and

the rules relating to certain special types of contracts like Indemnity and Guarantee; Bailment

and Pledge; as well as Agency.

Another important aspect of legislations is the industrial relations, which involves various

aspects of interactions between the employer and the employees; among the employees as

well as between the employers. In such relations whenever there is a clash of interest, it may

result in dissatisfaction for either of the parties involved and hence lead to industrial disputes

or conflicts. The Industrial Disputes Act, 1947 is the main legislation for investigation and

settlement of all industrial disputes. The Act enumerates the contingencies when a strike or

lock-out can be lawfully resorted to, when they can be declared illegal or unlawful,

conditions for laying off, retrenching, discharging or dismissing a workman, circumstances

under which an industrial unit can be closed down and several other matters related to

industrial employees and employers.

Trade unions are also an important part of an industrial set up. The legislation regulating

these trade unions is the Indian Trade Unions Act, 1926 . The Act deals with the

registration of trade unions, their rights, their liabilities and responsibilities as well as ensures

that their funds are utilised properly. It gives legal and corporate status to the registered trade

unions. It also seeks to protect them from civil or criminal prosecution so that they could

carry on their legitimate activities for the benefit of the working class.

Companies Act

A Company is defined as a voluntary association of persons formed for the purpose of doingbusiness, having a distinct name and limited liability. Companies, whether public or private,

are an indispensable part of an economy. They are the modes through which a country grows


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and expands world wide. Their performance is an important parameter of a countrieseconomic position.

In India, theCompanies Act, 1956, is the most important piece of legislation that empowers

the Central Government to regulate the formation, financing, functioning and winding up of

companies. The Act contains the mechanism regarding organisational, financial, managerial

and all the relevant aspects of a company. It provides for the powers and responsibilities ofthe directors and managers, raising of capital, holding of company meetings, maintenance

and audit of company accounts, powers of inspection, etc. The Act applies to whole of India

and to all types of companies, whether registered under this Act or an earlier Act. But it does

not apply to universities, co-operative societies, unincorporated trading, scientific and other

societies.

The Act empowers the Central Government to inspect the books of accounts of a company, to

direct special audit, to order investigation into the affairs of a company and to launch

prosecution for violation of the Act. These inspections are designed to find out whether the

companies conduct their affairs in accordance with the provisions of the Act, whether any

unfair practices prejudicial to the public interest are being resorted to by any company or a

group of companies and to examine whether there is any mismanagement which mayadversely affect any interest of the shareholders, creditors, employees and others. If an

inspection discloses a prima facie case of fraud or cheating, action is initiated underprovisions of the Companies Act or the same is referred to the Central Bureau of

Investigation.

The Companies Act is administered by the Central Government through the Ministry of

Corporate Affairs and the Offices of Registrar ofCompanies, Official Liquidators,

Public Trustee, Company Law Board, Director of Inspection, etc. The Registrar of

Companies (ROC) controls the task of incorporation of new companies and the

administration of running companies.

The Ministry ofCorporate Affairs, earlier known as Department of Corporate Affairs under

Ministry of Finance, is primarily concerned with administration of the Companies Act, 1956,other allied Acts and rules & regulations framed there-under mainly for regulating the

functioning of the corporate sector in accordance with law. The Ministry has a three-tierorganisational set-up:-

The Headquarters at New Delhi, The Regional Directorates at Mumbai, Kolkata, Chennai and Noida, and The Registrars of Companies (ROCs) in States and Union Territories.

The Official Liquidators who are attached to the various High Courts functioning in the

country are also under the overall administrative control of the Ministry. The set-up at theHeadquarters includes theCompany Law Board, a quasi-judicial body, having the principalBench at New Delhi, an additional principal bench for Southern Region at Chennai and four

Regional Benches located at New Delhi, Mumbai, Kolkata and Chennai. The organisation atthe Headquarters also includes two Directors of Inspection and Investigation with a

complement of staff, an Economic Adviser forResearch and Statistics and otherOfficialsproviding expertise on legal, accounting, economic and statistical matters.

The fourRegional Directors, who are in charge of the respective regions, comprising a


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number of States and Union Territories, interalia, supervise the working of the Offices ofRegistrars of Companies and the Official Liquidators working in their regions. They also

maintain liaison with the respective State Governments and the Central Government inmatters relating to the administration of the Companies Act, 1956.

Registrar of Companies (ROCs) appointed under Section 609 of the Companies Act, covering

various States and Union Territories, are vested with the primary duty of registeringcompanies floated in the respective States and the Union Territories and ensuring that such

companies comply with the statutory requirements under the Act. Their offices function as

registry of records relating to the companies registered with them. The powers vested with

the ROCs are:-

Registration of memorandum and articles. Registration of prospectus. Registration of reduction of capital. Call information or explanation. Seizure of documents. Investigation into affairs of a company. Inspection of books of accounts, etc of companies. To strike off defunct companies from register. Enforcement of duty of company to make returns, etc to Registrar. Non-disclosure of information in certain cases. Winding up petition by the Registrar.

Official Liquidators are the officers appointed by the Central Government under Section

448 of the Companies Act and are attached to the various High Courts. They are under the

administrative charge of the respective Regional Directors who supervise their functioning on

behalf of the Central Government.

According to the Act, a company means "a company formed and registered under the Act oran existing company i.e. a company formed or registered under any of the previous company

laws". The salient features of a company are:-

Artificial legal person:- a company is an artificial person in the sense that it iscreated by law and lacks the attributes possessed by natural persons. It is invisible,

intangible, immortal and exists only in the contemplation of law. Hence, it has tooperate through a board of directors consisting of individuals.

Separate legal entity:- a company is a distinct legal entity, different from itsmembers or shareholders. This implies that:- the property of the company belongs to

it and not to the members or shareholders; no member can either individually or

jointly claim any ownership rights in the assets of the company; an individual member

cannot be held liable for the wrongful acts of the company even if he/she holdsvirtually the entire share capital; the members of the company can enter into contractswith the company.

Perpetual succession:- a company enjoys continuous existence and its continuance isnot affected by the death, insolvency, mental or physical incapacity of its members. It

is created by law and law alone can dissolve it. Limited liability of members:- the liability of its members is limited to the amount

remaining unpaid on the shares subscribed by them. Thus, in case of fully paid-up

shares, the members cannot be asked to contribute any further, if the company goes


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into liquidation. Common seal:- a company has a common seal, which is the signature of that

company and signifies common consent of all the members. The company's seal isaffixed on all the documents executed for and on its behalf.

Transferability of shares:- the shares of a public company are freely transferablewithout the permission of the company but in a manner provided in the Articles. The

shareholders may transfer their shares to another person and this does not affect thefunds of the company. But, a private company imposes restrictions on transfer of its

shares.

Separate property:- all the property of the company vests in it. The company cancontrol, manage and hold the same in its own name. The members have no ownership

rights in the company's property, either individually or collectively. A shareholder

does not even have an insurable right in the property of the company. The creditors of

the company can have a claim only against the property of the company and not

against the property of the individual members.

Capacity to sue and being sued:- a company can enforce its rights through suits andcan also be sued for breach of its statutory rights.

The basic objectives underlying the Act are:-

A minimum standard of good behaviour and business honesty in company promotionand management;

To help in the development of companies on healthy lines; To protect the interests of the shareholders; To safeguard the interests of the creditors; To equip the Government with adequate powers to intervene in the affairs of a

company in public interest and as per the procedure prescribed by law;

A fair and true disclosure of the affairs of companies in their annual published balancesheet and profit and loss accounts;

Proper standard of accounting and auditing; A ceiling on the share of profits payable to managements as remuneration for services

rendered;

A check on their transactions where there was a possibility of conflict of duty andinterest;

A provision for investigation into the affairs of any company managed in a manneroppressive to minority of the shareholders or prejudicial to the interest of the

company as a whole;

Enforcement of the performance of their duties by those engaged in the managementof public companies or of private companies which are subsidiaries of public

companies by providing sanctions in the case of breach and subjecting the latter also

to the more restrictive provisions of law applicable to public companies;

To help in the attainment of the ultimate ends of the social and economic policy of theGovernment;

In response to the changing business environment, the Companies Act, 1956 has been

amended from time to time so as to provide more transparency in corporate governance and

protect the interests of small investors, depositors and debenture holders, etc. For

example, the Companies (Amendment) Act, 2006 introduced an important provision of

Director Identification Number (DIN), which is an unique Identification Number allotted to

an individual who is an existing director of a company or intends to be appointed as director


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of a company pursuant to section 266A & 266B of the Companies Act, 1956.

Industrial Disputes Act

Industrial disputes are the disputes which arise due to any disagreement in an industrial

relation. The term 'industrial relation' involves various aspects of interactions between the

employer and the employees; among the employees as well as between the employers. In

such relations whenever there is a clash of interest, it may result in dissatisfaction for either

of the parties involved and hence lead to industrial disputes or conflicts. These disputes may

take various forms such as protests, strikes, demonstrations, lock-outs, retrenchment,

dismissal of workers, etc.

Some of the important causes of an industrial dispute are:-

Demand for higher wages and allowances. Demand for payment of bonus and determination of its rate thereof. Demand for higher social security benefits. Demand for good and safer working conditions, including length of a working day,

the interval and frequency of leisure and physical work environment.

Demand for improved labour welfare and other benefits. For example, adequatecanteen, rest, recreation and accommodation facility, arrangements for travel to and

from distant places,etc. Besides, poor personnel management; conflicting legislative measure or government

policies; and psychological factors such as denial of opportunity to the worker for

satisfying his/ her basic urge for self-expression, personal achievement and betterment

may also result in labour problems.

In India, the Industrial Disputes Act, 1947 is the main legislation for investigation and

settlement of all industrial disputes. The Act enumerates the contingencies when a strike or

lock-out can be lawfully resorted to, when they can be declared illegal or unlawful,

conditions for laying off, retrenching, discharging or dismissing a workman, circumstancesunder which an industrial unit can be closed down and several other matters related to

industrial employees and employers.

The Act is administered by the Ministry of Labour through its Industrial RelationsDivision. The Division is concerned with improving the institutional framework for dispute

settlement and amending labour laws relating to industrial relations. It works in close co-

ordination with the Central Industrial Relations Machinery (CIRM) in an effort to ensure

that the country gets a stable, dignified and efficient workforce, free from exploitation and

capable of generating higher levels of output. The CIRM, which is an attached office of the

Ministry of Labour, is also known as the Chief Labour Commissioner (Central) [CLC(C)]

Organisation. The CIRM is headed by the Chief Labour Commissioner (Central). It has been

entrusted with the task of maintaining industrial relations, enforcement of labour laws and

verification of trade union membership in central sphere. It ensures harmonious industrial

relations through:-


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Monitoring of industrial relations in Central Sphere; Intervention, mediation and conciliation in industrial disputes in order to bring about

settlement of disputes; Intervention in situations of threatened strikes and lockouts with a view to avert the

strikes and lockouts;

Implementation of settlements and awards.According to the Act, the term 'industrial dispute' means "any dispute or difference between

employers and employers, or between employers and workmen, or between workmen and

workmen, which is connected with the employment or non-employment, or the terms of

employment or with the conditions of labour, of any person". The basic objectives of the Act

are:-

To provide a suitable machinery for the just, equitable and peaceful settlement ofindustrial disputes.

To promote measures for securing and preserving amity and good relations betweenemployers and employees.

To prevent illegal strikes and lockouts. To provide relief to workers against layoffs, retrenchment, wrongful dismissal and

victimisation.

To promote collective bargaining. To ameliorate the conditions of workers. To avoid unfair labour practices.

Under the Act, a statutory machinery has been constituted for conciliation and adjudication of

industrial disputes. It includes:-

The Act provides for appointment of 'Conciliation Officers', by appropriateGovernment, charged with the duty of mediating in and promoting the settlement of

industrial disputes. He/ she may be appointed for a specified area, or for specifiedindustries in a specified area, or for one or more specified industries, either

permanently or for a limited period. It is the duty of these officers to bring both theemployees and employers together and help them to resolve their differences. If the

dispute is settled, he/ she shall send a report, to that effect, to the appropriateGovernment.

The appropriate Government may, as occasion arises, constitute a 'Board ofConciliation', which shall consist of a chairman and two or four other members, as the

appropriate Government thinks fit. The Chairman shall be an independent person and

the other members shall be persons appointed in equal numbers to represent the

parties to the dispute. Where a dispute has been referred to a Board, it shall, without

delay, investigate the dispute and do all such things as it thinks fit for the purpose of

inducing the parties to come to a fair and amicable settlement of the dispute. The appropriate Government may, as occasion arises, also constitute a 'Court of

Inquiry' to inquire into any matter appearing to be connected with or relevant to an

industrial dispute. It shall, thereafter, report about it to the Government ordinarily

within a period of six months from the commencement of its inquiry. Such a court

may consist of one independent person or of such number of independent persons as

the appropriate Government may think fit and where it consists of two or more

members, one of them shall be appointed as the chairman.

The appropriate Government may constitute one or more 'Labour Courts' to adjudicate


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industrial disputes relating to any matter specified in the second schedule like issuesrelated to standing orders, discharge or dismissal of workers, illegality or otherwise of

strikes and lockouts, withdrawal of any customary benefit, etc. and to perform suchother functions as may be assigned to them under the Act. A labour court shall consist

of one person only to be appointed by the appropriate Government.

The appropriate Government may constitute one or more 'Industrial Tribunals' toadjudicate industrial disputes relating to any matter, whether specified in the secondschedule or third schedule, and to perform such other functions as may be assigned to

them under the Act. A tribunal shall consist of one person only to be appointed by the

appropriate Government. The third schedule covers the matters such as wages, bonus,

allowances and certain other benefits, certain working conditions, discipline,

rationalisation, retrenchment and closure of establishment.

The Central Government may, by notification in the Official Gazette, constitute oneor more 'National Industrial Tribunals' to adjudicate an industrial dispute which, in the

opinion of the Central Government, involve questions of national importance or are of

such a nature that industrial establishments situated in more than one State are likely

to be interested in, or affected by, such disputes. Such a tribunal shall consist of oneperson only to be appointed by the Central Government.

The Act also makes it obligatory for an employer to set up a 'Grievance SettlementAuthority (GSA)' in an industrial establishment in which fifty or more workers have

been employed in the preceding twelve months. This authority shall have theresponsibility to settle industrial disputes concerning an individual worker employed

in that establishment.

No reference can be made under the Act to Conciliation Boards, Labour Courts or Industrial

Tribunals, unless the dispute has first been the subject of a decision of a Grievance Settlement

Authority.

Underthe Industrial Disputes Act, 1947, the Central Government is the appropriate

Government for investigation and settlement of industrial disputes in regard to the

departmental undertakings of the Central Government, major ports, mines, oil fields,

cantonment boards, banking and Insurance Companies, Life Insurance Corporation of India

(LIC), Industrial Finance Corporation of India Limited, the Oil and Natural Gas Corporation

Limited, the Indian Airlines, Air India, the Airport Authority of India and all air transport

services.While in relation to other industrial establishments, the State Government is the

appropriate Government.

Accordingly, Central Government Industrial Tribunals (CGITs) -cum- Labour

Courts have been set up in different parts of the country. There are at present 17 CGITsto

whom industrial disputes could be referred for adjudication. These CGITs-cum-Labour

Courts are at New Delhi , Mumbai (2 CGITs ), Bangalore, Kolkata, Asansol, Dhanbad (2

CGITs ), Jabalpur, Chandigarh, Kanpur, Jaipur, Lucknow, Nagpur, Hyderabad, Chennai andBhubaneshwar.Out of these CGITs, 2 CGITs namely Mumbai-I and Kolkata have been

declared as National Industrial Tribunals.

Besides, the Organization of the Chief Labour Commissioner( Central) acts as the

primary conciliatory agency in the Central Government for industrial disputes. There are

the Regional Labour Commissioners (Central) and Assistant Labour Commissioners

(Central) who on behalf of the Chief Labour Commissioner (Central) act as Conciliatory

Officers in different parts of the country.


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Industries (Development and Regulation) Act 1951

Growth of the industrial sector at a higher rate and on a sustained basis is a major determinant

of a country's overall economic development. In this regard, the Government of India has

issued industrial policies, from time to time, to facilitate and foster the growth of Indian

industry and maintain its productivity and competitiveness in the world market.

In order to provide the Central Government with the means to implement its industrialpolicies, several legislations have been enacted and amended in response to the changing

environment. The most important being the Industries (Development and Regulation) Act,

1951 (IDRA) which was enacted in pursuance of the Industrial Policy Resolution, 1948. The

Act was formulated for the purpose of development and regulation of industries in India by

the Central Government.

The main objectives of the Act is to empower the Government:- (i) to take necessary steps forthe development of industries; (ii) to regulate the pattern and direction of industrial

development; (iii) to control the activities, performance and results of industrial undertakingsin the public interest. The Act applies to the 'Scheduled Industries' list ed in the First Schedule

of the Act. However, small scale industrial undertakings and ancillary units are exemptedfrom the provisions of this Act.

The Act is administered by the Ministry of Industries & Commerce through its Department

of Industrial Policy & Promotion (DIPP) . The DIPP is responsible for formulation and

implementation of promotional and developmental measures for growth of the industrialsector. It monitors the industrial growth and production, in general, and selected industrial

sectors, such as cement, paper and pulp, leather, tyre and rubber, light electrical industries,consumer goods, consumer durables, light machine tools, light industrial machinery, light

engineering industries etc., in particular. It is also responsible for facilitating and increasingthe foreign direct investment (FDI) inflow into the country as well as for encouraging

acquisition of technological capability in various sectors of the industry.

The various provisions of the Act are:-

Establishment of a 'Central Advisory Council' for the purpose of advising the CentralGovernment on matters concerning the development of the industries, making of any

rules and any other matter connected with the administration of the Act. Its members

shall consist of representatives of the owners of industrial undertaking, employees,consumers, primary suppliers, etc.

Establishment of a 'Development Council' for the purpose of development of anyscheduled industry or group of scheduled industries. This council shall consist of the

members representing the interests of the owners, employees, consumers, etc. and

persons having special knowledge of matters relating to the technical or other aspects

of the industries.

The development council shall perform the following functions assigned to it by theCentral Government:- (i) recommending targets for production, co-ordinating


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production programmes and reviewing progress from time to time. (ii) suggestingnorms of efficiency with a view to eliminating waste, obtaining maximum production,

improving quality and reducing costs. (iii) recommending measures for securing thefuller utilisation of the installed capacity and for improving the working of the

industry, particularly of the less efficient units. (iv) promoting arrangements for better

marketing and helping in the devising of a system of distribution and sale of the

produce of the industry which would be satisfactory to the consumer. (v) promotingthe training of persons engaged or proposing engagement in the industry and their

education in technical or artistic subjects relevant thereto, etc.

The development council shall prepare and transmit to the Central Government andthe advisory council a report (annually) setting out what has been done in the

discharge of its functions during the financial year last completed. The report shall

include a statement of the accounts of the development council for that year, together

with a copy of any report made by the auditors on the accounts.

The IDRA empowers the Central Government to regulate the development ofindustries by means of licensing with suitable exemptions as decided by the

Government. Accordingly, the entry into a business or the expansion of an existingbusiness may be regulated by licensing. A licence is a written permission from the

Government to an industrial undertaking to manufacture specified articles included inthe Schedule to the Act. It contains particulars of the industrial undertaking, its

location, the articles to be manufactured, its capacity on the basis of the maximumutilisation of plant and machinery, and other appropriate conditions which are

enforceable under the Act. If an application for licence is approved and further clearance ( such as that of foreign

collaboration and capital goods import) are not involved and no other prior conditions

have to be fulfilled, an industrial licence is issued to the applicant. In other cases, a

letter of intent is issued, which conveys the intention of the Government to grant a

licence subject to the fulfilment of certain conditions such as approval of foreign

investment proposal, import of capital goods, etc.

The Government may order for investigation before the grant of licence to anindustrial undertaking. It can make a full and complete investigation if it is of the

opinion that in the respect of any schedule industry or undertaking, there has been or

is likely to be:- (i) a substantial fall in the volume of output; or (ii) a marked

deterioration in the quality of output or an unjustifiable rise in the price of the output.

Also, if it is of the opinion that any industrial undertaking is being managed in a

manner highly detrimental to the scheduled industry concerned or to the publc

interest, it orders investigation. As a result of such investigations, the Government is empowered to issue directions to

the industrial undertaking for all or any of the following purposes:-

y Regulating the production of output by the industrial undertaking and fixingthe standards of production;

y Requiring the industrial undertaking to take such steps as the CentralGovernment may consider necessary to stimulate the development of theindustry to which the undertaking relate.

y Prohibiting the industrial undertaking from resorting to any act or practicewhich might reduce its production, capacity or economic value;

y Controlling the prices, or regulating the distribution, of an output for securingits equitable distribution and availability at fair prices.


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y The Act also provides that any such directions may be issued by the CentralGovernment at any time when a case relating to any industrial undertaking isunder investigation. These directions shall have effect until they are varied or

revoked by the Central Government.

The power of control entrusted to the Central Government under the Act extends tothat of the take over of the management of the whole or any part of an industrial

undertaking which fails to comply with any of the directions mentioned above. The

Government can also take over the management of an undertaking which is being

managed in a manner highly detrimental to the scheduled industry concerned or to the

public interest. Further, the Central government can take over the management of

industrial undertaking owned by a company under liquidation, with the permission of

the High Court, if the Government is of the opinion that the running or restarting the

operations of such an undertaking is necessary for the maintaining or increasing the

production, supply or distribution in the public interest.

Until liberalisation, the industrial licence was required for the establishment of a newindustrial undertaking, manufacturing of a new item by an existing undertaking, change of

location of an industry, substantial expansion of existing capacity and for all other purposes.But the new industrial policy s liberalised this and exempted many industries from obtaining

industrial licence. In today's scenario, only 6 categories of industries require industriallicensing under the Industries (Development and Regulation) Act, 1951 (IDRA). Such

industries file an Industrial Entrepreneur Memoranda (IEM) with the Secretariat ofIndustrial Assistance (SIA),Department of Industrial Policy and Promotion to obtain an

acknowledgement.

Trade Unions Act

Trade union is a voluntary organization of workers pertaining to a particular trade, industry or

a company and formed to promote and protect their interests and welfare by collective action.

They are the most suitable organisations for balancing and improving the relations between

the employer and the employees. They are formed not only to cater to the workers' demand,

but also for inculcating in them the sense of discipline and responsibility. They aim-

Secure fair wages for workers and improve their opportunities for promotion andtraining.

Safeguard security of tenure and improve their conditions of service. Improve working and living conditions of workers. Provide them educational, cultural and recreational facilities. Facilitate technological advancement by broadening the understanding of the workers. Help them in improving levels of production, productivity, discipline and high

standard of living.

Promote individual and collective welfare and thus correlate the workers' interests


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with that of their industry.

In India, the first organised trade union was formed in 1918 and since then they have spreadin almost all the industrial centres of the country. The legislation regulating these trade

unions is the Indian Trade Unions Act, 1926. The Act deals with the registration of trade

unions, their rights, their liabilities and responsibilities as well as ensures that their funds are

utilised properly. It gives legal and corporate status to the registered trade unions. It alsoseeks to protect them from civil or criminal prosecution so that they could carry on their

legitimate activities for the benefit of the working class. The Act is applicable not only to the

union of workers but also to the association of employers. It extends to whole of India. Also,

certain Acts, namely, the Societies Registration Act, 1860; the Co-operative Societies Act,

1912; and the Companies Act, 1956 shall not apply to any registered trade union, and that

the registration of any such trade union under any such Act shall be void.

The Act is administered by the Ministry of Labour through its Industrial Relations

Division. The Division is concerned with improving the institutional framework for dispute

settlement and amending labour laws relating to industrial relations. It works in close co-

ordination with the Central Industrial Relations Machinery (CIRM) in an effort to ensure

that the country gets a stable, dignified and efficient workforce, free from exploitation andcapable of generating higher levels of output. The CIRM, which is an attached office of the

Ministry of Labour, is also known as the Chief Labour Commissioner (Central) [CLC(C)]Organisation. The CIRM is headed by the Chief Labour Commissioner (Central). It has been

entrusted with the task of maintaining industrial relations, enforcement of labour laws andverification of trade union membership in central sphere. It ensures harmonious industrial

relations through:-

Monitoring of industrial relations in Central Sphere; Intervention, mediation and conciliation in industrial disputes in order to bring about

settlement of disputes;

Intervention in situations of threatened strikes and lockouts with a view to avert thestrikes and lockouts;

Implementation of settlements and awards.According to the Trade Unions Act,1926, 'trade union' means "any combination, whethertemporary or permanent, formed primarily for the purpose of regulating the relations between

workmen and employers or between workmen and workmen or between employers andemployers, or for imposing restrictive conditions on the conduct of any trade or business, and

includes any federation of two or more trade unions". The basic provisions of the Act are:-

The Act provides for the registration of the trade unions with the 'Registrars of TradeUnions' set up in different States, like the Office of Registrar (Trade Union) set up

by the Government of National Capital Territory of Delhi. For registration of a tradeunion, seven or more members of the union can submit their application in the

prescribed form to the Registrar of trade unions. The application shall be

accompanied by a copy of the 'rules of the trade union' and a statement giving thefollowing particulars:- (i) Names, occupations and addresses of the members making

the application; (ii)The name of the trade union and the address of its head office; (iii)The titles, names, ages, addresses and occupations of the office bearers of the trade

union as per the format given in the Trade Unions Act 1926. The Registrar, on being

satisfied that the Union has complied with all the requirements of this Act, shall


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register the trade union. Thereafter, it shall issue a certificate of registration in theprescribed form as a conclusive evidence of registration of that trade Union.

The registered trade unions (workers & employers) are required to submit annualstatutory returns to the Registrar regarding their membership, general funds, sources

of income and items of expenditure and details of their assets and liabilities, which in

turn submits a consolidated return of their state in the prescribed proformae

to Labour Bureau, Ministry of Labour and Employment. The Labour Bureau onreceiving the annual returns from different States/Union Territories, consolidates the

all India statistics and disseminates them through itspublication entitled the 'Trade

Unions in India ' and its other regular publications.

The general funds of a registered trade union shall not be spent on any other objectsthan those specified in the Act. Also, a registered trade union may constitute a

separate fund, from contributions separately levied for or made to that fund, for the

promotion of the civic and political interest of its members. No member shall be

compelled to contribute to such fund and a member who does not contribute to the

said fund shall not be excluded from any benefits of the trade union, or placed in any

respect either directly or indirectly under any disability or at any disadvantage ascompared with other members of the union by reason of his contribution to the said

fund. No office-bearer or member of a registered trade union shall be liable to punishment

under the Indian Penal Code in respect of any agreement made between the membersfor the purpose of furthering any such object of the trade union as specified in the Act,

unless the agreement is an agreement to commit an offence. No suit or other legal proceeding shall be maintainable in any civil court against any

registered trade union or any office-bearer or member thereof in respect of any act

done in contemplation or furtherance of a trade dispute to which a member of the

trade union is a party on the ground only that such an act induces some other person

to break a contract of employment, or that it is in interference with the trade, business

or employment of some other person or with the right of some other person to dispose

of his capital of his labour as he wills.

The account books of a registered trade union and the list of members thereof shall beopen to inspection by an office-bearer or member of the trade union at such times as

may be provided for in the rules of trade union.

A person shall be disqualified for being chosen as, and for being a member of, theexecutive or any other office-bearer or registered trade union if- (i) he has not attained

the age of eighteen years; (ii) he has been convicted by a court in India of any offence

involving moral turpitude and sentenced to imprisonment, unless a period of fiveyears has elapsed since his release.

Every office-bearer or other person bound by the rules of the trade union shall bepunishable with the payment of fine, if:-

yDefault is made on the part of any registered trade union in giving any noticeor sending any statement or other document as required by or under any

provision of this Act; ory Any person willfully makes, or causes to be made, any false entry in, or any

omission from, the general statement or in or from any copy of rules or of

alterations of rules sent to the Registrar; or

y Any person who, with intent to deceive, gives to any member of a registeredtrade union or to any person intending or applying to become a member of

such trade union any document purporting to be a copy of the rules of the


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trade union or of any alterations to the same which he/ she knows, or hasreason to believe, is not a correct copy of such rules or alterations as are for

the time being in force, or any person who, with the like intent, gives a copy ofany rules of an unregistered trade union to any person on the pretence that

such rules are the rules of a registered trade union.

Any registered trade union may, with the consent of not less than two-thirds of thetotal number of its members and subject to the provisions of of the Act, change its

name. The change in the name of a registered trade union shall not effect any of its

rights or obligation or render defective any legal proceeding by or against the union,

and any legal proceeding which might have been continued or commenced by or

against it by its former name may be continued by its new name.

Any two or more registered trade unions may become amalgamated together as onetrade union with or without the dissolution or division of the funds of such trade

unions or any of them, provided that the votes of at least one-half of the members of

each or every such trade union entitled to vote are recorded, and that at least sixty

percent of the votes recorded are in favour of the proposal. Such an amalgamation

shall not prejudice any right of any such unions or any right of a creditor or any of

them. When a registered trade union is dissolved, notice for the dissolution signed by seven

members and by the Secretary of the trade union shall, within fourteen days of the

dissolution, be sent to the Registrar and shall be registered by him if he is satisfiedthat the dissolution has been effected in accordance with the rules of the trade union,

and the dissolution shall have effect from the date of such registration.

However, the Trade Unions Act 1926 has been amended from time to time and the most

important being the Trade Unions (Amendment) Act, 2001. This Act has been enacted in

order to bring more transparency and to provide greater support to trade unionism in India.

Some of the salient features of the Trade Unions (Amendment) Act, 2001 are:-

No trade union of workmen shall be registered unless at least 10% or 100, whicheveris less, subject to a minimum of 7 workmen engaged or employed in the establishment

or industry with which it is connected are the members of such trade union on the date

of making of application for registration.

A registered trade union of workmen shall at all times continue to have not less than10% or 100 of the workmen, whichever is less, subject to a minimum of 7 persons

engaged or employed in the establishment or industry with which it is connected, as

its members.

A provision for filing an appeal before the Industrial Tribunal / Labour Court incase of non-registration or for restoration of registration has been provided.

All office bearers of a registered trade union, except not more than one-third of thetotal number of office bearers or five, whichever is less, shall be persons actuallyengaged or employed in the establishment or industry with which the trade union is

connected.

Minimum rate of subscription by members of the trade union is fixed at one rupee perannum for rural workers, three rupees per annum for workers in other unorganised

sectors and 12 rupees per annum in all other cases.

The employees who have been retired or have been retrenched shall not be construedas outsiders for the purpose of holding an office in the trade union concerned.

For the promotion of civic and political interest of its members, unions are authorized


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to set up separate political funds.

Hence, trade union legislation ensures their orderly growth, reduce their multiplicity andpromote internal democracy in the industrial organisation and the economy. The trade unions

have thus acquired an important place in the economic, political and social set up of the

country.

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