Can an industrial dispute covered under the Industrial Disputes Act be adjudicated by Arbitration?

In the matter of Kingfisher Airlines Limited V/s Capt. Prithvi Malhotra, Instructor, 2012, the Respondent pilots filed applications under Section 33(C) (2) of the Industrial Disputes Act read with Rule 62(2) of the Industrial Disputes (Central) Rules, 1957 in CGIT-cum-Labour Court for recovery of their earned wages along with interest at the rate of 18% p.a. from the date the wages become due. The petitioner Company filed applications under Section 8 of the Arbitration Act, 1996 in view of Clause-17 in the respective letters of appointment of the Respondents.

The Respondents contended that, as per Indian employment laws, the subject matter of the dispute had been exclusively reserved by the legislature, for adjudication by the special courts established under the Industrial Disputes Act and therefore, Section 8 of the Arbitration Act had no application. Further, the Respondents contended that, the powers exercised by the Courts constituted under the Industrial Disputes Act, cannot be exercised by a private forum of an arbitrator. Therefore the proceedings pending before the Labour and Industrial Court, as per Indian employment laws, cannot be referred to private arbitration outside the provisions of the Industrial Disputes Act. On the other hand, the Petitioners contended that Section 8 of the Arbitration Act provided for power to a judicial authority to refer parties to arbitration where there was an arbitration agreement. It was submitted that, the Court was obliged to refer the parties to arbitration where an arbitration agreement existed.

The Hon’ble Supreme Court held that, as per labour laws in India, adjudication of industrial disputes is reserved by the legislature exclusively for the authorities established under the Industrial Disputes Act, as a matter of public policy. Therefore, by necessary implication the same stands excluded from the purview of the private fora of the arbitrator. Consequently, the industrial dispute is rendered inarbitrable outside the Industrial Disputes Act. In such a case, the Court where the dispute is pending must refuse to refer the parties to arbitration, under Section 8 of the Arbitration Act, even if they have agreed upon arbitration as the forum for settlement of disputes between them.

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