#Chapter 13: The Industrial Relations Code, 2020

CHAPTER XIII: OFFENCES AND PENALTIES

Section 85: Power of officers of appropriate Government to impose penalty in certain cases

This section details the mechanism for imposing fines for specific, less severe violations of the Code through a government-appointed officer (adjudicating officer), without necessarily going to court.

Sub-Section (1): Appointing the Adjudicating Officer

Legal Text: “for the purpose of imposing penalty under sub-sections (3), (5), (7), (8), (9), (10), (11) and (20) of section 86 and sub-section (7) of section 89, the appropriate Government may appoint any officer not below the rank of Under Secretary to the Government of India or an officer of equivalent rank in the State Government, as the case may be, for holding enquiry in such manner, as may be prescribed by the Central Government.”
Simple English: The government can assign a senior officer (at least an Under Secretary level) to investigate and issue penalties for certain specified violations of the Code. This allows the government to efficiently handle minor violations without overwhelming the regular court system.
Example: The State Government appoints the Joint Labour Commissioner (an equivalent rank) to act as the Adjudicating Officer for imposing fines related to Trade Union paperwork errors (Section 86(7)).

Sub-Section (2): Powers of the Officer

Legal Text: “While holding the enquiry, the officer referred to in sub-section (1) shall have the power to summon and enforce attendance of any person acquainted with the facts… or to produce any document… and if, on such enquiry, he is satisfied that the person has committed any offence… he may impose such penalty as he thinks fit in accordance with such provisions.”
Simple English: The appointed Adjudicating Officer has the power of a civil court to call people in for questioning, demand documents (like company ledgers), and then impose the appropriate fine if they confirm a violation occurred.
Example: The Adjudicating Officer investigating a dispute over a fine (Section 86(10)) summons the company HR manager to testify and demands the production of the company’s certified Standing Orders document.

Sub-Section (3): Failure to Pay Penalty

Legal Text: “Where a person fails to pay the penalty referred to in sub-section (2) within a period of ninety days from the date of receipt of the copy of the order, he shall be punishable with fine which shall not be less than fifty thousand rupees but may extend up to two lakh rupees.”
Simple English: If the company or person fined by the Adjudicating Officer refuses to pay that fine within three months, they face a second, much higher fine (between Rs. 50,000 and Rs. 2,00,000) enforced by a proper court.
Example: An employer is fined Rs. 20,000 by the Adjudicating Officer for failing to submit standing orders. If the employer ignores the order for 90 days, the government will file a case against them in court to recover the original fine and impose the secondary penalty of at least Rs. 50,000.

Section 86: Penalties

This extensive section lists the penalties (fines and/or imprisonment) for various contraventions of the Code.

Sub-Section (1): Major Contraventions (Chapter X)

Legal Text: An employer who violates the strict prior permission rules of Section 78 (Lay-off), Section 79 (Retrenchment), or Section 80 (Closure) for large establishments (300+ workers) faces a fine of not less than one lakh rupees and up to ten lakh rupees .
Simple English: Failure by a large company to seek and obtain government permission before laying off, firing, or closing down the business is a severe offense, punishable by a minimum fine of Rs. 1 lakh.
Example: A factory with 400 workers closes down without government approval. The court imposes a fine of .

Sub-Section (2): Repeated Major Contraventions (Chapter X)

Legal Text: An employer who commits a second or subsequent offense under Sections 78, 79, or 80 faces a fine of not less than five lakh rupees and up to twenty lakh rupees , or imprisonment up to six months, or both.
Simple English: Committing a major offense (like illegal closure) again after having been convicted the first time results in much higher penalties, including the risk of the employer going to jail.
Example: The same factory owner is convicted again for illegal retrenchment. This time, the penalty is a fine of and a three-month jail term.

Sub-Section (3): General Contraventions (Chapter IX and Transfer)

Legal Text: An employer who violates the compensation rules under Section 67 (Lay-off Compensation), Section 70 (Retrenchment Compensation), Section 73 (Transfer Compensation), or Section 75 (Closure Compensation) faces a fine of not less than fifty thousand rupees and up to two lakh rupees .
Simple English: Failing to pay the correct compensation amount, even in small businesses (covered by Chapter IX), is a serious offense punishable by a fine of at least Rs. 50,000.
Example: A small company (40 workers) retrenches 10 people but pays them only half the compensation due under Section 70. The court can impose a fine of 1,50,000.

Sub-Section (4): Repeated General Contraventions (Chapter IX and Transfer)

Legal Text: A repeat offender under Sections 67, 70, 73, or 75 faces a fine of not less than one lakh rupees and up to five lakh rupees, or imprisonment up to six months, or both.
Simple English: Repeat failure to pay compensation results in stiffer financial and potential jail penalties.
Example: An employer who was previously fined for underpaying lay-off compensation is now convicted again for underpaying retrenchment compensation. The minimum fine is now Rs. 1 lakh.

Sub-Section (5): Unfair Labour Practices (ULP)

Legal Text: Any person who commits any unfair labour practice (ULP) specified in the Second Schedule faces a fine of not less than ten thousand rupees and up to two lakh rupees .
Simple English: Both employers and workers/unions can be fined for committing unfair practices like victimization or illegal coercion, with a minimum fine of {Rs. } 10,000.
Example: A union official is found guilty of threatening non-striking workers (a ULP). The official is personally fined {Rs. } 50,000.

Sub-Section (6): Repeated Unfair Labour Practices (ULP)

Legal Text: A repeat offender for any ULP faces a fine of not less than fifty thousand rupees {Rs. } 50,000 and up to five lakh rupees {Rs. } 5,00,000, or imprisonment up to three months, or both.
Simple English: The penalties for habitually committing unfair labor practices escalate rapidly, including potential jail time.

Sub-Section (7): Trade Union Default (Paperwork)

Legal Text: If a registered Trade Union fails to submit required notices or documents, the executive and office-bearers face a fine of not less than one thousand rupees and up to ten thousand rupees . Any continuing default incurs an additional penalty of fifty rupees per day.
Simple English: Union leaders are personally liable for failing to file the union’s mandatory annual reports or notices on time. Small daily fines add up until the paperwork is submitted.
Example: A union fails to submit its annual return (Section 26). The Registrar fines the union secretary {Rs. } 5,000 and adds {Rs. } 50 for every day the report is late.

Sub-Section (8): False Entries in Trade Union Records

Legal Text: Any person who willfully makes false entries or omissions in the union’s annual statement (Section 26) faces a fine of not less than two thousand rupees {Rs. } 2,000 and up to twenty thousand rupees {Rs. } 20,000.
Simple English: Falsifying the union’s financial statements or membership lists is a punishable offense.
Example: A union office-bearer intentionally lists fictitious expenses to cover up misuse of funds. The court imposes a fine of {Rs. } 15,000.

Sub-Section (9): Deceiving the Public/Members (Trade Union)

Legal Text: Any person who, with intent to deceive, gives a false copy of the union’s rules or gives the rules of an unregistered union while claiming it is registered faces a fine of not less than five thousand rupees {Rs. } 5,000 and up to twenty thousand rupees .
Simple English: It is illegal to trick people into joining a union or dealing with a union by providing misleading rules or falsely claiming the union is officially registered.

Sub-Section (10): Standing Orders Default (Employer)

Legal Text: An employer who fails to submit draft standing orders (Section 30) or illegally modifies certified standing orders (Section 35) faces a fine of not less than fifty thousand rupees and up to two lakh rupee, with an additional fine of two thousand rupees per day for continuation.
Simple English: Companies are heavily penalized for failing to establish clear employment rules, with a minimum fine of{Rs. } 50,000 and a severe daily fine for ignoring the requirement.
Example: A large company fails to submit its draft Standing Orders for certification 100 days after the deadline. The cumulative penalty includes the initial fine plus {Rs. } 2,000 multiplied by 100 days.

Sub-Section (11): Contravention of Certified Standing Orders

Legal Text: An employer who does any act in contravention of the standing orders finally certified faces a fine of not less than one lakh rupees{Rs. } 1,00,000 and up to two lakh rupees .
Simple English: Once employment rules are certified, the employer must follow them. Breaking these certified rules (like ignoring the defined disciplinary procedure) results in a minimum fine of Rs. 1 lakh.

Sub-Section (12): Repeated Contravention of Standing Orders

Legal Text: A repeat offender for violating certified standing orders faces a fine of not less than two lakh rupees and up to four lakh rupees , or imprisonment up to three months, or both.
Simple English: The punishment for habitually disregarding the legally certified workplace rules is severe.

Sub-Section (13): Illegal Strike (Worker)

Legal Text: Any worker who starts or continues a strike that is illegal under this Code faces a fine of not less than one thousand rupees and up to ten thousand rupees , or imprisonment up to one month, or both.
Simple English: Workers participating in a strike that violates the Code’s notice or conciliation rules face a personal fine of at least {Rs. } 1,000.

Sub-Section (14): Illegal Lock-out (Employer)

Legal Text: Any employer who starts or continues a lock-out that is illegal under this Code faces a fine of not less than fifty thousand rupees and up to one lakh rupees , or imprisonment up to one month, or both.
Simple English: Employers who illegally shut down the workplace face a minimum fine of {Rs. } 50,000.

Sub-Section (15): Incitement/Instigation to Illegal Action

Legal Text: Any person who instigates or incites others to take part in an illegal strike or lock-out faces a fine of not less than ten thousand rupees and up to fifty thousand rupees , or imprisonment up to one month, or both.
Simple English: The leaders, union officials, or managers who encourage illegal action are fined more heavily than the workers who merely participate.

Sub-Section (16): Financial Aid to Illegal Action

Legal Text: Any person who knowingly spends or applies money to directly support an illegal strike or lock-out faces a fine of not less than ten thousand rupees and up to fifty thousand rupees , or imprisonment up to one month, or both.
Simple English: Funding an illegal strike or lock-out is a punishable offense.
Example: A small business owner who provides cash knowing it will be used to support an illegal strike by workers at a competitor’s factory can be fined.

Sub-Section (17): Breach of Settlement or Award

Legal Text: Any person who commits a breach of any term of any settlement or award (a final, binding decision) faces a fine of not less than twenty thousand rupees and up to two lakh rupee, or imprisonment up to three months, or both.
Simple English: Failing to follow the agreed terms of a formal settlement or a court’s final order is a major offense.
Example: A company fails to reinstate a worker as ordered by the Tribunal. The fine imposed will be between {Rs. } 20,000 and{Rs. } 2,00,000.

Sub-Section (18): Continuing Breach of Settlement/Award

Legal Text: Where a breach under sub-section (17) is a continuing one, the offender is liable for an additional fine up to one thousand rupees per day after the first conviction. The court may also direct that the fine collected be paid to the affected person as compensation.
Simple English: If the company continues to defy a final order (like refusing to pay back wages), the daily fine piles up, and the court can choose to use that fine money to compensate the worker.

Sub-Section (19): Disclosure of Confidential Information

Legal Text: Any person who willfully discloses confidential information (Section 61) faces a fine of up to twenty thousand rupees Rs. 20,000, or imprisonment up to one month, or both, based on a complaint from the affected union or business.
Simple English: Revealing confidential business or union data that was shared during conciliation or a Tribunal hearing is a crime.

Sub-Section (20): Residuary Penalties

Legal Text: Any person who violates any other provision of this Code (not covered above) or the rules/regulations made under it faces a fine of up to one lakh rupees .
Simple English: This is a catch-all penalty for minor or procedural violations not listed in the preceding 19 subsections.

Section 87: Cognizance of offences

This defines the rules for when and where a court can hear an offense under the Code.

Sub-Section (1): Government Authority Required

Legal Text: “No court shall take cognizance of any offence punishable under this Code, save on a complaint made by or under the authority of the appropriate Government.”
Simple English: Only the government can initiate a prosecution for an offense under this Code. A private employer or a private union cannot directly file a criminal case in court for a violation.
Example: A worker participates in an illegal strike. The employer cannot directly sue the worker; the employer must first complain to the government, and the government must decide whether to file a complaint in court.

Sub-Section (2): Competent Court

Legal Text: “…no court inferior to that of the Metropolitan Magistrate or Judicial Magistrate of the first class shall try the offences under this Code.”
Simple English: Only senior magistrates and judges have the legal power to hear and decide cases under this Code.

Section 88: Offences by companies

This section addresses criminal liability when a violation is committed by a company or a large association.

Sub-Section (1): Liability of Directors/Managers

Legal Text: If a company commits an offense, every person who was in charge of, and responsible to, the company for the conduct of business at that time, as well as the company itself, is deemed guilty and liable for punishment.
Simple English: When a company commits a crime (like illegal closure), the key managers and directors are held personally responsible along with the company itself.
Proviso (Defense for Directors): This person is not liable if they can prove the offense was committed without their knowledge and that they exercised all due diligence to prevent it.
Example: The CEO (in charge of business) is held liable for an illegal lay-off. However, a non-executive director can escape liability if they prove they had no knowledge of the decision and that they had previously instructed management to comply with all labor laws.

Sub-Section (2): Liability for Consent, Connivance, or Neglect

Legal Text: If an offense is proven to be committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, that officer is also deemed guilty and punishable.
Simple English: Any specific officer (like the HR head or General Manager) who actively helped commit the crime, or was merely negligent in preventing it, is also held personally liable.
Example: The Finance Manager advises the CEO on how to avoid paying retrenchment compensation. The Finance Manager is held personally guilty because they connived in the offense.

Explanation (Definition of Company and Director)

Simple English: For the purpose of this section, a “company” is defined very broadly to include firms, Limited Liability Partnerships (LLPs), and any other association of individuals. A “director” in relation to a firm means a partner.

Section 89: Composition of offences

This allows certain less serious offenses to be settled (compounded) by paying a fine, avoiding a full criminal trial.

Sub-Section (1): Compounding Authority and Amounts

Legal Text: Any offense not punishable with imprisonment only, or with imprisonment and also with fine, may be compounded by a Gazetted Officer appointed by the government.
- The fee is 50\% of the maximum fine for offenses punishable only by a fine.
- The fee is 75\% of the maximum fine for offenses punishable by imprisonment for up to one year or with a fine.
Simple English: For minor offenses, the person or company can settle the matter out of court by paying an official, predefined fee. This fee is calculated based on the maximum fine possible for that specific violation.
Example: The maximum fine for a Trade Union paperwork error (Section 86(7)) is {Rs. } 10,000. The union can compound the offense by paying{Rs. } 5,000 (50% of {Rs. } 10,000, thereby avoiding a court case.

Proviso (Destination of Funds):

Legal Text: The amount collected through compounding shall be credited to the Social Security Fund established under the Social Security Code, 2020.
Simple English: All funds collected from these out-of-court settlements go directly into the national Social Security Fund.

Sub-Section (2): Second Offence Cannot Be Compounded

Legal Text: Compounding is not allowed for a person who commits a similar offense a second time within three years of the first offense being compounded or convicted.
Simple English: Only first-time offenders can settle minor violations by paying a compounding fee. Habitual offenders must face a full criminal trial.

Sub-Section (5): Effect of Compounding (Before Prosecution)

Legal Text: If an offense is compounded before any prosecution is initiated, no prosecution shall be instituted against the offender.
Simple English: Paying the compounding fee successfully stops the government from filing a criminal charge in court.

Sub-Section (6): Effect of Compounding (After Prosecution)

Legal Text: If an offense is compounded after prosecution has already started, the Adjudicating Officer must notify the court, and the person against whom the offense is compounded shall be discharged.
Simple English: Even if the court case is underway, paying the compounding fee officially ends the case, and the accused is immediately acquitted.

Sub-Section (7): Failure to Comply with Compounding Order

Legal Text: Any person who fails to comply with an order to compound an offense is liable to pay a sum equivalent to $20\%$ of the maximum fine provided for the offense, in addition to such fine.
Simple English: If someone agrees to compound an offense but then fails to pay the fee, they face an automatic penalty equal to $20\%$ of the offense’s maximum fine, on top of the original fee.