Sections 136 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Sections 136 to 138 control how an offence under the Code moves from inspection to court. Section 136 says who may start a case, section 137 gives a first-time employer a chance to put things right before prosecution, and section 138 lets certain first offences be settled by paying a compounding amount.
A court takes cognizance only on a complaint by an aggrieved person or a notified officer (s.136(1)), and prosecution needs previous sanction (s.136(2)). Before prosecuting an employer, the Inspector-cum-Facilitator must give a written direction with a compliance period; if the employer complies, no proceeding is initiated, but not if the same kind of violation is repeated within three years (s.137). A first offence punishable with fine only can be compounded for half of the maximum fine; one punishable with imprisonment up to one year and fine for three-fourths of the maximum fine (s.138).
Why it matters
These three sections are the main safety valves for an employer who has slipped. A written direction under s.137 and compounding under s.138 can end a matter without a trial, but each can be used only in limited cases. Knowing the conditions helps you respond correctly to an inspection notice. Our legal dispute resolution team works on notices, directions and prosecution defence. For the penalties themselves see section 133 and for repeat offences sections 134 and 135.
Section 136: who can start a case
| Sub-section | What it says |
|---|---|
| 136(1) | No court takes cognizance of an offence except on a complaint by an aggrieved person or an officer notified by the Central Government (for offences relating to Chapters III and IV and their rules, regulations and schemes) or by the appropriate Government (for other provisions) |
| 136(2) | No prosecution is instituted except by or with the previous sanction of the authority notified by the Central Government (Chapters III and IV) or the appropriate Government (other provisions) |
| 136(3) | No court inferior to a Metropolitan Magistrate or Judicial Magistrate of the first class tries an offence under this Chapter |
| 136(4) | One complaint may be filed by more than one aggrieved person if aggrieved by the same or similar offence, at one place or different places, within the court's jurisdiction |
Chapter III is the provident fund chapter and Chapter IV the ESI chapter, so Central officers handle those; other matters (gratuity, maternity benefit, compensation and so on) go to the officer notified by the appropriate Government.
Section 137: the written direction before prosecution
Before starting prosecution against an employer for any offence under Chapter XII, the Inspector-cum-Facilitator or other notified officer must give the employer an opportunity to comply by a written direction, which lays down a time period for compliance. Officers for Chapters III and IV offences are notified by the Central Government; for other provisions by the appropriate Government.
- If the employer complies within the period, no proceeding is initiated.
- No such opportunity is given if a violation of the same nature is repeated within three years from the date of the first violation. Prosecution then proceeds under the Chapter.
Practical point: diarise the compliance date on any direction and keep proof of compliance (challan, payment advice, filing acknowledgement).
Section 138: compounding of offences
What can be compounded (s.138(1))
Any offence committed for the first time under Chapter XII that is either:
- punishable with fine only; or
- punishable with imprisonment of not more than one year and also fine.
The application may be made before or after prosecution is started. The compounding officer is authorised by the Central Government for Chapters III and IV offences and by the appropriate Government for other offences.
The amount payable
| Type of offence | Amount to pay the appropriate Government |
|---|---|
| Punishable with fine only | Half of the maximum fine for that offence |
| Punishable with imprisonment up to one year and also fine | Three-fourths of the maximum fine |
Under s.133, for example, the clause (iv) offences carry a fine which may extend to fifty thousand rupees; on this reading, compounding would cost half of that maximum. The exact amount for any offence depends on the maximum fine in s.133 for that clause.
Limits and effect
- Not available for a second offence within three years of a similar offence that was earlier compounded, or of a similar offence for which the person was earlier convicted (s.138(2)).
- Officers act under the direction, control and supervision of the Central Government (Chapters III and IV) or the appropriate Government (s.138(3)).
- The application is in the form and manner prescribed by the appropriate Government (s.138(4)).
- Compounding before prosecution bars prosecution for that offence (s.138(5)). After prosecution has started, the officer must tell the court in writing and the person is discharged (s.138(6)).
- Anyone who fails to comply with the order pays twenty per cent of the maximum fine for the offence, in addition to the fine (s.138(7)).
Rule 54 of the Central Rules, 2026
Rule 54 of the Code on Social Security (Central) Rules, 2026 sets the procedure where the Central Government's officer compounds:
- The compounding officer issues a compounding notice electronically in Form XXIV.
- The person may apply in Part III of Form XXIV and deposit the entire compounding amount within fifteen days of receipt of the notice.
- The officer issues a composition certificate in Part IV of Form XXIV within ten days of receiving the amount.
- If the amount is not deposited in time, prosecution may be instituted after one month from the last date given for deposit.
- For compounding after prosecution has started, s.138(6) applies.
Where the State Government is the appropriate Government, the State's own rules apply.
The Code refers to the Code of Criminal Procedure, 1973; from 1 July 2024 it was replaced by the BNSS.
A worked example
An employer fails to send a statement to the competent authority under Chapter VII. The Inspector-cum-Facilitator issues a written direction with a deadline. The employer files the statement in time, so no proceeding is started (s.137). Two years later the employer commits the same default. No opportunity is given this time because the violation of the same nature is repeated within three years, and prosecution can begin. (Illustrative.)
Need help with a notice or compounding application?
If you have received a direction, a compounding notice or a summons, our legal dispute resolution team can help you check deadlines, compute the amount and prepare the response. Acting within the period given is what keeps the s.137 and s.138 routes open.
Key takeaways
- Cognizance needs a complaint; prosecution needs previous sanction.
- Trial lies with a Metropolitan Magistrate or Judicial Magistrate of the first class or higher.
- A written direction with a compliance period comes before prosecution; no second chance for the same violation within three years.
- First offences only can be compounded: half of the maximum fine (fine only) or three-fourths (imprisonment up to one year plus fine).
- Under Rule 54: notice in Form XXIV, pay within 15 days, certificate within 10 days.
- Non-compliance with the compounding order adds twenty per cent of the maximum fine.
Read next
- Sections 134 and 135: Enhanced punishment and offences by companies
- Section 133: Penalties for offences
- Prosecution under the EPF Act, Section 14
- Penalties under the ESI Act for non-registration and default
Disclaimer: Based on the Code on Social Security, 2020 (as enacted) and, where noted, the Code on Social Security (Central) Rules, 2026 (G.S.R. 344(E), 8 May 2026), as on 30 September 2026. The Code is in force from 21 November 2025; some provisions may be notified later, and State Governments make their own rules for establishments where the State is the appropriate Government. Verify the current position before acting.