Collective Bargaining is the process by which trade unions or a body of workmen negotiate with employers to determine wages, working conditions, benefits, and other terms of employment through bilateral agreement rather than unilateral imposition. Under Indian law, while no single statute formally defines the term, the framework for collective bargaining is established through the Trade Unions Act, 1926, the Industrial Disputes Act, 1947 (particularly the settlement provisions in Section 18), and the Industrial Relations Code, 2020.
Legal definition
Indian labour legislation does not provide a formal statutory definition of "collective bargaining." The concept is, however, operationalised through several statutory provisions:
Section 2(p) of the Industrial Disputes Act, 1947: "Settlement" means a settlement arrived at in the course of conciliation proceedings and includes a written agreement between the employer and workmen arrived at otherwise than in the course of conciliation proceedings.
The two types of settlements under the Act serve as the legal outcomes of collective bargaining:
- Section 18(1) settlements: Bipartite settlements reached directly between the employer and workmen without the intervention of a conciliation officer, binding only on the parties to the agreement
- Section 18(3) settlements: Settlements arrived at in the course of conciliation proceedings, binding on all parties to the dispute including all workmen in the establishment
New law equivalent: The Industrial Relations Code, 2020 introduces a formal mechanism for collective bargaining through the concept of a "negotiating union" (Section 14). A trade union with 51% or more membership is recognised as the sole negotiating union; where no union meets this threshold, a negotiating council comprising unions with 20% or more membership conducts negotiations.
How courts have interpreted this term
Karnal Leather Karamchari Sanghatan v. Liberty Footwear Co. [(1990) 1 SCC 31]
The Supreme Court defined collective bargaining as "a technique by which dispute as to conditions of employment is resolved amicably by agreement rather than coercion." The Court observed that collective bargaining is the cornerstone of industrial relations in a democratic society, enabling workmen to negotiate from a position of strength that individual workers could never achieve alone.
Hindustan Lever Ltd. v. Hindustan Lever Employees Union [(1995) Supp 1 SCC 499]
The Supreme Court emphasised the importance of collective bargaining in modern industrial relations, holding that settlements reached through genuine collective bargaining should be given sanctity and should not be lightly interfered with by courts or tribunals. The Court observed that collective bargaining serves the dual purpose of industrial peace and social justice.
Food Corporation of India Staff Union v. Food Corporation of India [(2000) 5 SCC 604]
The Supreme Court laid down norms for assessing the representative character of trade unions through the secret ballot system, recognising that effective collective bargaining requires identification of the most representative union. This decision addressed the practical challenge of multiple competing unions in the same establishment.
Why this matters
Collective bargaining is the primary mechanism through which workmen in India secure improvements in wages, working conditions, and benefits. Unlike individual negotiation, where the employer holds overwhelming bargaining power, collective bargaining allows workmen to leverage their numbers through a trade union to negotiate terms that reflect their collective interests.
For employers, engaging in genuine collective bargaining serves a strategic purpose: settlements reached through negotiation tend to produce more stable industrial relations than terms imposed through adjudication. A bipartite settlement under Section 18(1), while binding only on the signatories, carries moral authority and is often treated as establishing the prevailing standard in the establishment. A settlement under Section 18(3), reached during conciliation, is binding on all workmen and can preclude further agitation on the same issues during its currency.
The absence of a statutory right to collective bargaining (as distinct from the fundamental right to form unions under Article 19(1)(c)) has been a persistent challenge in Indian industrial relations. Multiple unions in the same establishment often compete for recognition, diluting collective strength. The Industrial Relations Code, 2020 attempts to address this fragmentation through the negotiating union and negotiating council framework, though its implementation remains pending.
Related terms
Broader concepts:
Related processes:
Frequently asked questions
Is collective bargaining a legal right in India?
The right to form trade unions is a fundamental right under Article 19(1)(c) of the Constitution, but the Supreme Court in All India Bank Employees Association v. NIT (1962) held that this does not include a guaranteed right to effective collective bargaining. However, refusal by an employer to bargain in good faith with a recognised union may constitute an unfair labour practice under the Fifth Schedule to the Industrial Disputes Act, 1947.
What is the difference between a bipartite and tripartite settlement?
A bipartite settlement is negotiated directly between the employer and the trade union or workmen, without government intervention. A tripartite settlement involves the intervention of a conciliation officer appointed by the government. Tripartite settlements under Section 18(3) of the Industrial Disputes Act are binding on all workmen in the establishment, while bipartite settlements under Section 18(1) bind only the signatories.
How long is a collective bargaining agreement valid?
A settlement under the Industrial Disputes Act remains in force for the period agreed upon by the parties, and if no period is specified, for a period of six months from the date it is signed. After expiry, its terms continue to be binding until replaced by a new settlement, unless either party gives two months' notice of intention to terminate.
This entry is part of the Veritect Indian Legal Glossary, a comprehensive reference of Indian legal terminology grounded in statutory text and judicial interpretation.
Last updated: 2026-03-27. Veritect provides this content for informational purposes and does not constitute legal advice.