The Funds of a Trade Union, and the Political Fund

Some words this chapter uses

General fund is the union's ordinary fund, made up of the subscriptions and other receipts, out of which its ordinary work is paid for.

Prescribed, defined in section 2(zc), means prescribed by rules made under the Code. When a section says "as may be prescribed", the detail is in delegated legislation and not in the Act.

Separate fund is the second fund permitted by section 15(2), constituted from contributions separately levied for or made to it.

Civic and political interests is the expression section 15(2) uses for what the separate fund may promote. "Civic" is wider than "political": it reaches the members' interests as citizens, for example in a municipal matter, as well as in party politics.

Disability here means a legal disadvantage, something a member is barred from doing.

Levy means a contribution demanded from members, as distinct from the ordinary subscription.

Section 15(1): the general fund

The general funds of a registered Trade Union shall not be spent on any objects other than such objects as may be prescribed.

This is a prohibition, not a permission, and the drafting shows it: the fund "shall not be spent on any objects other than" the prescribed ones. Anything not prescribed is forbidden.

Where the permitted objects actually live. They are in the rules made under the Code, not in the section. This is a real change of technique from the repealed Trade Unions Act 1926, which printed a list of permitted objects in the section itself, and it has three consequences a student should be able to state.

First, the answer to "what may the general fund be spent on?" is "the objects prescribed by the rules made under the Code". That is the accurate answer, and it is the one to give. Reciting the old statutory list as though it were section 15 is the error this chapter exists to prevent.

Second, the union's own rules must reproduce those objects. Section 7(c) requires the rules of a Trade Union, as a condition of registration, to provide for the whole of the purposes for which the general funds shall be applicable, and adds that all of which purposes shall be purposes to which such funds are lawfully applicable under this Code. So the rules must state the purposes, and may not state a purpose the Code does not allow. The union cannot enlarge its own spending power by writing a wider rule.

Third, spending outside those objects is a contravention with a serious consequence. It is a contravention of the Code and of the union's own rules, and section 9(5)(ii) makes contravention of either a ground on which the Registrar may cancel the certificate of registration, after not less than sixty days' previous notice in writing specifying the grounds.

Three other provisions guard the same money. Section 7(f) requires the rules to provide for the payment of subscriptions. Section 7(g) requires them to provide the conditions under which a member is entitled to a benefit and under which a fine or forfeiture may be imposed. Section 7(j) requires them to provide for the safe custody of the funds, an annual audit in the prescribed manner and by the prescribed person, and adequate facilities for the inspection of the account books by office-bearers and members. Section 19 then gives the individual member the right to inspect the books of account and the list of members, at the times the rules provide, and section 26(1)(a) requires an audited annual general statement of receipts, expenditure, assets and liabilities to be sent to the Registrar.

Section 15(2): the separate fund

A registered Trade Union may constitute a separate fund, from contributions separately levied for or made to that fund, from which payments may be made, for the promotion of the civic and political interests of its members, in furtherance of such objects as may be prescribed.

Four features, and each of them is examinable.

It is permissive. "May constitute". No union is obliged to have a political fund.

It must be separate. Not a separate ledger entry in the general fund but a separate fund.

Its money must be separately raised. The words are "from contributions separately levied for or made to that fund". Two routes are contemplated: a levy demanded for the fund, and voluntary payments made to it. What is excluded is a transfer from the general fund, because that money came from subscriptions paid by members who may not support the object.

Its purpose is the promotion of the civic and political interests of its members, in furtherance of such objects as may be prescribed. Notice that even this fund is not at large: the objects are prescribed.

Section 15(3): the protection of the dissenting member

This is the sub-section to learn by heart, because it is a favourite short note and because every clause of it does separate work.

No member shall be compelled to contribute to the fund constituted under sub-section (2) 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 as compared with other members of the Trade Union (except in relation to the control or management of the said fund) by reason of his not contributing to the said fund; and contribution to the said fund shall not be made a condition for admission to the Trade Union.

Break it into its four rules.

The single exception is inside the parenthesis, and it is fair. A non-contributor may be excluded from the control or management of the said fund. He has not paid into it, so he does not vote on how it is spent. He loses nothing else.

The words "directly or indirectly" are the ones that make the sub-section effective. A union cannot achieve by practice what it may not do by rule. Quietly leaving non-contributors off the list of members the union will represent is an indirect disadvantage and is caught.

Section 15(4): subscriptions

The subscriptions payable by the members of the Trade Union shall be such as may be prescribed.

Short, and again the technique is prescription by rules rather than a figure in the Act. Section 7(f) separately requires the union's own rules to provide for the payment of a subscription by members "from such members and others, as may be prescribed".

The link to section 17 that most notes miss

Section 15 looks like a chapter about money. It is also, indirectly, a chapter about criminal liability, and the connection is worth making explicitly because it is the kind of link that turns a good answer into a very good one.

Section 17 provides that no office-bearer or member of a registered Trade Union shall be liable to punishment under section 120B(2) of the Indian Penal Code in respect of any agreement made between the members for the purpose of furthering "any such object of the Trade Union as is specified in section 15", unless the agreement is an agreement to commit an offence.

So the objects in section 15 are the measure of the immunity. An agreement to further one of them is protected from the charge of criminal conspiracy; an agreement to further something outside them is not. That is why the prescribed objects matter beyond bookkeeping, and it is why the immunity chapter, [Immunity from Criminal Conspiracy], has to send the reader back here.

A worked example

The facts. The Wada Packaging Workers' Union has 90 members paying a monthly subscription. Its general secretary proposes four things at the annual general body meeting.

Proposal one: pay the legal fees of a member whose dismissal the union is contesting before the Tribunal. This is the union's ordinary work. Whether it may be paid from the general fund depends on whether it falls within the objects prescribed under section 15(1) and reproduced in the union's rules under section 7(c). Contesting members' dismissals is the paradigm case of a union's purpose, and the rules should state it. If the rules do not, the answer is to amend the rules under section 7(k) and inform the Registrar under section 11(3), not to make the payment and hope.

Proposal two: lend two lakh rupees from the general fund to a member's brother to start a business. This is outside anything a union's general fund is for. It is a contravention of section 15(1) and of the union's own rules, and section 9(5)(ii) makes contravention of either a ground for cancelling the registration, subject to the sixty-day notice in the proviso. The proposal must be refused.

Proposal three: transfer fifty thousand rupees from the general fund to support a candidate at the municipal election. This fails for two separate reasons and a good answer gives both. It is not a permitted object of the general fund under section 15(1). And it defeats the separation section 15(2) requires, because the political fund must be constituted "from contributions separately levied for or made to that fund", not from a transfer of money subscribed for general purposes.

Proposal four: constitute a political fund by a levy of thirty rupees a month, and expel any member who refuses to pay it. The fund is lawful: section 15(2) permits a separate fund from contributions separately levied, for the promotion of the civic and political interests of members, in furtherance of prescribed objects. The expulsion is unlawful in every respect. Section 15(3) says no member shall be compelled to contribute; a non-contributor shall not be excluded from any benefits; and he shall not be placed directly or indirectly under any disability or at any disadvantage compared with other members.

A member, Meera, declines to pay the levy. She keeps her membership, her strike pay, her right to be represented, her vote at the general body meeting and her right under section 19 to inspect the books. The only thing she loses is any part in the control or management of the political fund, which is the exception in the parenthesis.

Six months later the union quietly stops putting non-contributors' grievances forward. That is an indirect disadvantage imposed by reason of not contributing, and section 15(3) forbids it in those very words. It is a contravention of the Code and so a ground under section 9(5)(ii).

A new worker is told he may join only if he agrees to the political levy. Section 15(3) closes with the words "and contribution to the said fund shall not be made a condition for admission to the Trade Union". The condition is void.

What this does NOT mean

It does not mean a union may not engage in politics. It may. Section 15(2) expressly contemplates the promotion of the civic and political interests of its members. What it may not do is fund that activity out of the general subscriptions or coerce members into paying for it.

It does not mean the general fund and the political fund are equally regulated. The general fund is limited to prescribed objects and is audited and reported under sections 7(j) and 26. The political fund is separately raised, and the protection attached to it is the protection of the member who refuses to pay, not a set of spending limits of the same kind.

It does not mean "political" only means party politics. The expression in section 15(2) is "civic and political interests", which reaches matters affecting members as citizens.

It does not mean the objects are printed in the section. They are prescribed by rules. A student who writes out the old list from the Trade Unions Act 1926 is describing a repealed Act.

It does not mean a non-contributor has a say in the political fund. He does not, and that is the one lawful consequence of not paying.

Limits, criticism and amendments

The move from a printed list to prescription by rules is the biggest change here, and it cuts both ways. It lets the permitted objects be updated without amending the Code, which is sensible. It also moves a matter that determines the reach of a criminal immunity, through section 17, out of the statute and into delegated legislation, which is a real objection.

Section 15(3) is often described as a complete protection and it is not quite. It protects the member from compulsion, from exclusion from benefits and from disability or disadvantage. It does not protect him from the ordinary social pressure of a small workplace, and enforcing it requires him to complain, which identifies him.

And the separation of funds depends on honest bookkeeping. The guards are the audit and inspection requirements in section 7(j), the member's right of inspection in section 19, and the annual audited statement to the Registrar under section 26(1)(a). Those are the provisions to cite when asked how the separation is enforced.

Quick revision

• Section 15(1): the general funds shall not be spent on any objects other than such objects as may be prescribed. The objects are in the rules, not in the section.
• Section 7(c): the union's rules must state the whole of the purposes for which the general funds are applicable, and every one must be lawfully applicable under the Code. The rules cannot enlarge the Code.
• Section 15(2): a union may constitute a separate fund, from contributions separately levied for or made to it, for the promotion of the civic and political interests of its members, in furtherance of prescribed objects.
• Section 15(3): no compulsion to contribute; a non-contributor is not excluded from any benefits; not placed directly or indirectly under any disability or disadvantage; and contribution is not a condition of admission. The one exception: he has no part in the control or management of that fund.
• Section 15(4): subscriptions are as prescribed.
• Guards on the money: 7(f) subscriptions, 7(g) benefits, fines and forfeitures, 7(j) safe custody, annual audit and inspection facilities, 19 the member's right of inspection, 26(1)(a) the audited annual statement to the Registrar.
• Sanction: spending outside the objects contravenes the Code and the rules, a ground for cancellation under section 9(5)(ii), subject to sixty days' notice.
• The link to section 17: the criminal immunity covers an agreement to further "any such object of the Trade Union as is specified in section 15", so these objects also measure that immunity.

Test yourself

1. On what may the general funds of a registered Trade Union be spent? Only on such objects as may be prescribed. Section 15(1) provides that the general funds shall not be spent on any objects other than those, and section 2(zc) defines "prescribed" as prescribed by rules made under the Code. The union's own rules must, under section 7(c), state the whole of the purposes for which the general funds are applicable, all of which must be purposes to which the funds are lawfully applicable under the Code, so the rules may reproduce but not enlarge the permitted objects.

2. What is the political fund, and how must it be raised? It is the separate fund a registered Trade Union may constitute under section 15(2) for the promotion of the civic and political interests of its members, in furtherance of prescribed objects. It must be constituted from contributions separately levied for or made to that fund, so it cannot be funded by a transfer out of the general fund, whose subscriptions were paid for general purposes.

3. A union's rules provide that a member who does not pay the political levy shall not receive strike pay. Is the rule valid? No. Section 15(3) provides that a member who does not contribute to the political fund shall not be excluded from any benefits of the Trade Union, nor placed in any respect directly or indirectly under any disability or at any disadvantage as compared with other members by reason of his not contributing. Withholding strike pay is exclusion from a benefit and the rule is bad.

4. What is the only disadvantage a non-contributing member may lawfully suffer? Exclusion in relation to the control or management of the political fund. That is the sole exception, stated in the parenthesis in section 15(3). He keeps every other right and benefit of membership.

5. May a union require a new member to join the political fund as a condition of admission? No. Section 15(3) ends with the express words that contribution to that fund shall not be made a condition for admission to the Trade Union.

6. Why does section 15 matter to the immunity from criminal conspiracy? Because section 17 measures that immunity by section 15. It protects an office-bearer or member from punishment under section 120B(2) of the penal law in respect of an agreement made between the members for the purpose of furthering "any such object of the Trade Union as is specified in section 15", unless the agreement is one to commit an offence. So the objects that define what the general fund may be spent on also define how far the protection from a conspiracy charge extends.