Rights, liabilities and immunities of registered trade unions

1. The general fund

Section 15(1) of the IR Code [s.15] provides that the general funds of a registered union shall not be spent on any objects other than such objects as may be prescribed. The Code leaves the list to rules. Section 7(c) also requires the union’s own rules to state every purpose for which the general fund may be used, and those purposes must be lawful under the Code.

The list in section 15 of the 1926 Act is still the one to learn. It allowed spending on:

• salaries, allowances and expenses of office-bearers, and administration expenses including audit;
• prosecuting or defending legal proceedings to protect the union’s rights or a member’s rights arising out of his employment;
• conducting trade disputes on behalf of the union or its members;
• compensating members for loss arising out of trade disputes;
• allowances to members or their dependants on death, old age, sickness, accident or unemployment, and insurance against these risks;
• educational, social or religious benefits for members and their families, including funeral expenses;
• a periodical published mainly on questions affecting workers; and
• contributions to any cause for the general benefit of workers, limited to one-fourth of the year’s gross income.

The list leaves out political spending. Election expenses of a candidate, or money for a political party, cannot come out of the general fund. Spending on an unlisted object is ultra vires; any member can sue to stop it, and it is a contravention that can lead to cancellation under section 9(5).

2. The separate political fund

Under section 15(2) [s.16] a registered union may set up a separate fund, from contributions levied separately for it, for the civic and political interests of its members, for the objects prescribed. Under the 1926 Act these included a candidate’s election expenses, holding meetings and distributing literature for a candidate, and maintaining a member of a legislature or local body.

Section 15(3) protects members who do not want to pay. No member can be compelled to contribute. A non-contributor cannot be excluded from any benefit or placed at any disadvantage, except in the control and management of the political fund itself, and contribution cannot be made a condition of admission. Section 15(4) leaves subscription rates to rules.

3. Immunity from criminal conspiracy

Section 17 [s.17] provides that no office-bearer or member of a registered union shall be punished under section 120B(2) of the Indian Penal Code (now read as section 61(2) of the Bharatiya Nyaya Sanhita, 2023) for any agreement between members to further an object of the union specified in section 15, unless the agreement is an agreement to commit an offence. A combination to strike for better wages is in restraint of trade and could have been called a conspiracy at common law. Section 17 takes that risk away. The protection ends where the agreement is to commit an offence: an agreement to assault non-strikers, damage property or wrongfully confine managers is not protected.

4. Immunity from civil suits

Section 16(1) [s.18(1)] bars any suit or legal proceeding in a civil court against a registered union, its office-bearers or members, for an act done in contemplation or furtherance of an industrial dispute to which a member of the union is a party, on the ground only that the act:

• induces some other person to break a contract of employment; or
• interferes with the trade, business or employment of some other person, or with his right to dispose of his capital or labour as he wills.

Section 16(2) [s.18(2)] protects the union, though not the agent personally, for a tort committed by an agent in furtherance of an industrial dispute, if it is proved that he acted without the knowledge of, or contrary to express instructions given by, the executive.

Four limits:

• There must be an industrial dispute in existence or contemplation, and a member must be a party to it.
• The words “on the ground only” matter. Acts that are independently tortious or criminal, such as violence, intimidation, trespass, defamation or wrongful restraint, are not covered. The section protects the strike and the persuasion behind it, not unlawful acts done during it. In Jay Engineering Works Ltd. v. State of West Bengal (Calcutta High Court, 1968) a gherao confining managers was held to be wrongful confinement, outside any protection.
• The immunity is only from civil suits. Disciplinary action under standing orders and wage deductions for an illegal strike remain available. An illegal strike is also an offence under section 86(13) to (16).
• It applies only to a registered union.

5. Enforceability of agreements

Section 18 [s.19] provides that an agreement between the members of a registered union is not void or voidable merely because any of its objects are in restraint of trade, notwithstanding section 27 of the Indian Contract Act. The proviso: no civil court will entertain a suit to enforce, or to recover damages for breach of, an agreement about the conditions on which members shall or shall not sell their goods, transact business, work, employ or be employed. So the agreement is valid, but the union cannot sue a member for working during a strike.

6. Other rights and duties

• Inspection of books and the members’ list by any office-bearer or member (section 19) [s.20].
• Minors: a person of 14 or more employed in a non-hazardous industry may be a member (section 20) [s.21, which said 15].
• Disqualification of office-bearers: under 18; conviction for an offence involving moral turpitude with imprisonment, until five years after release; or a Tribunal direction (section 21) [s.21A]. Ministers and holders of offices of profit cannot be office-bearers.
• Outsiders: in the organised sector all office-bearers except one-third or five, whichever is less, must be actually employed in the establishment or industry; in the unorganised sector at least half (section 23) [s.22]. Retired and retrenched employees are not outsiders.
• Union disputes (inter-union, member versus union over elections or management, refusal of admission) go to the Tribunal, and civil courts are barred (section 22). This is new.
• Annual returns to the Registrar, with audited accounts and changes of office-bearers (section 26) [s.28].

7. Change of name, amalgamation and dissolution

A change of name needs the consent of two-thirds of the members (section 24(1)) [s.23]. Two or more registered unions may amalgamate in the prescribed manner (section 24(2)) [s.24]. Notice signed by the secretary and seven members of each union goes to the Registrar, and the change or amalgamation takes effect on registration. A change of name does not affect rights or pending proceedings, and amalgamation does not prejudice creditors (section 24(7), (8)) [s.26].

On dissolution, notice signed by seven members and the secretary must reach the Registrar within fourteen days. The dissolution takes effect on registration, if done according to the rules. If the rules are silent on distribution, the Registrar divides the funds among members as prescribed (section 25) [s.27].

8. Penalties

• Default in giving a notice or sending a statement: fine of ₹1,000 to ₹10,000 on the responsible office-bearer, plus ₹50 a day for continuing default (section 86(7)) [s.31(1)].
• Wilful false entry in, or omission from, the annual statement or copy of rules: fine of ₹2,000 to ₹20,000 (section 86(8)) [s.31(2)].
• Giving a false copy of rules with intent to deceive, or passing off an unregistered union’s rules as a registered union’s: fine of ₹5,000 to ₹20,000 (section 86(9)) [s.32].

9. Problem

A member who has not contributed to the political fund asks the union to pay his election expenses out of the general fund. The union refuses. Decide. (Set in June 2012.)

Issue. Whether election expenses can come out of the general fund, and whether refusing them discriminates against a non-contributor.

Law. The general fund may be spent only on prescribed objects (section 15(1)); the traditional list contains no political purpose. Political spending, including a candidate’s expenses, belongs to the separate fund under section 15(2). Section 15(3) protects a non-contributor from disadvantage except in relation to the control or management of that fund.

Application. Paying election expenses from the general fund would be ultra vires and would expose the union to a member’s suit and to cancellation under section 9(5). Not getting money from the political fund is not a “disadvantage” forbidden by section 15(3), because that fund is built from voluntary contributions and he chose not to pay.

Conclusion. The refusal is lawful. He can contribute and seek help from the political fund under its rules, but he has no claim on the general fund.

How this is examined

The January 2026 paper had a 10-mark question on the immunities of a registered union and a short note on “General funds”. Immunities have come up repeatedly (June 2012, June 2013, June 2014). For the essay: why immunity was needed (the 1920 Madras injunction), section 17 criminal, section 16 civil, section 18 agreements, then the limits with the gherao case. For the short note: section 15(1), the list, the one-fourth cap, contrast with the political fund. The election-expenses problem is answered as above.