The preamble of the Act professes settlement of “industrial disputes” and as such what is to be settled is the ‘industrial dispute’. Necessarily, therefore, if one of the parties does not come within the four corner of the Act, it cannot be said to be a settlement under the Act [Bipin Bihari Sinha v/s State of Punjab, 1983 LIC 74]. The definition originally enacted was thus : “Settlement means settlements arrived at in the course of conciliation proceedings.”Image result for settlement of industrial disputes
This definition did not take notice of any private settlements. As such, the present definition came to be substituted by the Amending Act of 1956. The present definition is thus more broad based and includes in its fold even the private settlements. The definition now envisages two categories of settlements.
1. “Settlements” arrived at in the course of conciliation and
2. Settlements” arrived at privately or otherwise than in the course of conciliation.
The “settlement” arrived at in the course of conciliation stand on a higher plane than the settlements arrived at otherwise than in course of conciliation. As is the scheme of the Act, when an “industrial dispute” is raised or comes in existence or it is apprehended, the conciliation machinery, as provided under the Act is activated. The “Conciliation officer” appointed under the Act, calls both the parties and endeavors to bring about fair and amicable settlements of an industrial dispute between the parties. The settlement so arrived at is called as the “settlement in the course of conciliation” and falls under the definition given in the Act. In Bata Shoe Co. (P) Ltd. vis D.N. Ganguly, 1961 I LLJ 303, the Supreme Court Pointed out that a “settlements in the course of conciliation” does not mean settlement which is reached between the parties during the period when conciliation proceedings are pending but is the one which is assisted and aided by the conciliation officer by his advice and concurrence on his being satisfied that the settlement is fair and reasonable for it is the duty of the conciliation officer to promote a right settlement and to do everything he can do to induce parties to come to a fair and amicable settlement of the dispute. It is only such a settlement that can be binding under Section 18. The legislature when it made a settlement binding, not only on the parties thereto but also to the present and future employers and workers, intended that such settlement is arrived at with the assistance, of the conciliation officer and is considered by him to be reasonable and therefore has his concurrence.

Settlement otherwise than in Due Course of Conciliation

The other category envisaged in the definition is the settlement arrived at otherwise than in the course of conciliation. In this case, the parties directly and on their own strength clinch the settlement undoubtedly without the help and assistance of the conciliation officer appointed under the Act.
The settlement of labour disputes by direct negotiation or settlement through collective bargaining is always to be preferred for it is the best guarantee of industrial peace which is the aim of all legislation for the settlement of all labour disputes [New Standard Engineering Co. v/s N.L. Abkyankar 1978 I LLJ 487 (SO)].
Such settlements include a written agreements arrived at in the prescribed manner and a copy of which has been sent to the appropriate Government and the conciliation officer. (Burtnah Sell Workers Union v/s State of Kerala, 1960 I LLJ 323). An Agreement by acquiescence and without being in writing signed by parties will not be settlements under the Act [Cooper Engineering Ltd. vis DM. Anoy, 1971 LIC 603 (Bombay)].
Similarly, mere nothings on the agreement without complying with the requirements of the relevant rules cannot be called as the settlements under the Act. Rule 58 of the Central Rule prescribes the procedure. It is the same for all types of settlements (Namely settlement in its course of and otherwise than in the course of settlement [Cement Worker Karmchari Sangh v/s I.T. 1971 LIC 147 (Rajasthan)].

Legal Effect

The legal effect of both these settlements is not identical. The Settlements arrived at in the course of conciliation binds, one and all. Section 18(3) makes the settlements arrived as in the course of conciliation binding not only on all the parties to the dispute but also upon the heirs, successors and assigns of the employer in respect of the establishment and also in certain cases upon all other parties summoned to appear in the proceedings, as parties to the dispute before the authority. It also makes such a settlement binding on all, the present and future workmen employed in the establishment. Section 12(3) postulates that it should be a settlement between the parties to the dispute, which would include not merely one Section but all the workmen who are before the conciliation officer in connection with the conciliation proceedings on an identical issue.
The settlement in the course of conciliation proceedings binds all, the object obviously is to uphold the sanctity of ‘settlement’ reached with the active assistance of the conciliation officer and to discourage individual employees or a minority union from Scuttling the settlement. [Baruni Refinery Pragatisil Parishad v/s Indian Oil Corporation, 1990 II CLR 217 (SC)J. Merely some of the employees do not agree to the terms of settlement under Section 2(p) in the course of conciliation, he/they cannot be permitted to contend that it is not binding on him/them [E.I.D. Parry (India) Ltd v/s L.C. 1992 LIC 278 CAP)].
When a settlement is reached with the Union which commands majority, it should be prima facie considered to be in the best interest of the employees in absence of attribution of any oblique motive behind it. Mere allegation does not suffice. As rightly said, it is easy to allege but difficult to prove. The oblique motive should be based on some concrete materials and not on vague allegations. [Gandhinagar Nagarpalika v/s R.C, Irani 1992 LIC 236 (Gujarat)] The settlements arrived at otherwise than in the course of conciliation binds only the parties to the settlement and none else. In any case it does not stand on higher plane than the settlements arrived at in the conciliation and that makes the two distinct and different from each other.
An Officer whose appointment was not made by a notification as required by Section 4(1) will not be a conciliation officer in the eyes of law [Jhagrakhand Collieries (p) Ltd. v/s CGIT, 1975
LIC 137 (SO)].
As settlements with the intervention or mediation of any person other than the conciliation officer even though during the pendancy of conciliation proceedings cannot be treated as settlement in the course of conciliation. Even if a Minister or Chief Minister in the conciliation proceedings intervened in the settlement of a dispute, it will not be a settlement in the course of conciliation, if it is shown that the conciliator had abandoned his function of superintendence and control [Calcutta Electric Supply Corpn. Ltd. u/s V.C. Sen 1977 LIC 1969, affirmed in appeal 1978 LIC 1395]