Sections 145 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.
These four short sections cover what happens to dues when a business changes hands (s.145), who counts as a public servant under the Code (s.146), who is protected for acts done in good faith (s.147) and how the Government can withdraw benefits from those who misuse them (s.148).
On transfer of an establishment, the transferor and transferee are jointly and severally liable for dues up to the date of transfer, but the transferee's liability is limited to the value of the assets obtained (s.145). Members and officers of Social Security Organisations, Inspector-cum-Facilitators, competent authorities and others discharging functions are deemed public servants (s.146). No suit, prosecution or proceeding lies for acts done in good faith (s.147). Misuse of a benefit can lead to deprivation of that benefit by notification, after a hearing (s.148; rule 69).
Why it matters
Buyers of a business, lessees and acquirers inherit a compliance history. Sales, gifts, leases, licences and "any other manner" of transfer all trigger s.145. Due diligence should therefore cover PF, ESI, gratuity, compensation, cess and other dues. For deal advice, our legal consultation team can help you structure checks and indemnities. The related rule that dues are a charge on the establishment's assets appears in section 151.
Section 145: liability when an establishment is transferred
Where an employer transfers his establishment, in whole or in part, by sale, gift, lease or licence or in any other manner whatsoever:
- the employer and the person to whom it is transferred are jointly and severally liable;
- for any liabilities, cess or other amount payable under the Code in respect of periods up to the date of transfer;
- Proviso: the transferee's liability is limited to the value of the assets obtained by the transfer.
| Point | Effect |
|---|---|
| Who can be asked to pay | Either the transferor or the transferee, for the whole amount |
| Periods covered | Only up to the date of transfer |
| Cap for the transferee | Value of the assets obtained |
| Modes of transfer | Sale, gift, lease, licence or any other manner, in whole or in part |
The section does not say that the transferee can recover from the transferor; that would depend on the transfer agreement. The text is silent on the other's right of recovery.
Section 146: public servants
Every member of a Social Security Organisation, the officers and staff of it, any Inspector-cum-Facilitator, competent authority, Authorised Officer, Recovery Officer and any other person discharging any function under the Code is deemed a public servant within the meaning of section 21 of the Indian Penal Code. From 1 July 2024 the Indian Penal Code was replaced by the BNS; the Code's text is quoted as enacted, and we give no new section number.
Section 147: protection of action taken in good faith
No suit, prosecution or other legal proceeding lies against:
- the Central Government;
- a State Government;
- a Social Security Organisation;
- a competent authority;
- any officer or staff of a Social Security Organisation; or
- any other person or authority,
discharging functions or exercising powers under the Code, for anything done, or intended to be done, in good faith under the Code or rules, regulations or schemes made under it. The protection is tied to good faith; it does not cover acts done otherwise.
Section 148: misuse of benefits
If the appropriate Government is satisfied, in the manner it prescribes, that an establishment or any other person has misused any benefit under the Code or its rules, regulations or schemes, it may by notification deprive that establishment or person of the benefit for the time specified in the notification.
- First proviso: no order without an opportunity of being heard.
- Second proviso: for Chapter III (provident fund), the manner of ascertaining misuse is to be specified in the Provident Fund, Pension or Insurance Scheme.
Rule 69 of the Central Rules, 2026
On the recommendation of the authority, the competent authority or the Social Security Organisation, if the Central Government is satisfied that an establishment or person has misused a benefit under the Code or the rules, it may by notification deprive them of the benefit for the time specified, and no order is passed without an opportunity of being heard. Where the State Government is the appropriate Government, the State's own rules apply.
The Code and Rules do not list examples of misuse, so what counts as misuse is decided case by case on the facts.
A worked example
A trader sells his shop business with 12 employees to a buyer for a consideration, including stock and fittings worth a known amount. Later, unpaid contributions for periods before the sale are found. Under s.145 the authorities can demand the full amount from either the seller or the buyer, but the buyer's liability cannot exceed the value of the assets he took over. If the seller had also misused a benefit, say by claiming a scheme benefit he was not entitled to, the Government could, after hearing him, deprive him of that benefit under s.148. (Illustrative.)
Need help with a transfer or a misuse notice?
A purchase, lease or restructuring should come with a review of statutory dues, and any notice proposing to withdraw a benefit needs a timely reply. Our legal consultation team can help with diligence on past contributions and with a response to a hearing notice.
Key takeaways
- Transferor and transferee are jointly and severally liable for dues up to the transfer date.
- The transferee's liability is capped at the value of assets obtained.
- Officers and members under the Code are deemed public servants.
- Good faith acts are protected from suits and prosecution.
- Misuse of benefits can lead to deprivation by notification after a hearing (s.148, rule 69).
Read next
- Sections 149 to 152: Directions, schemes, protection against attachment and amending Schedules
- Sections 143 and 144: Power to exempt and defer
- Attachment and recovery of EPF dues, Section 8B
- 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.