Section 55 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.
Section 55 decides who is liable when the offender is a company. Both the company and every person who was in charge of, and responsible to, the company for the conduct of its business at the time are deemed guilty, unless the person proves lack of knowledge or due diligence. Directors, managers and other officers can also be liable if the offence was committed with their consent or connivance or is attributable to their neglect. Officers who want a view on personal exposure can take legal dispute resolution advice before a notice becomes a complaint.
Where the offender is a company, the company and every person in charge of and responsible to it for the conduct of its business when the offence was committed are deemed guilty and can be proceeded against and punished (s.55(1)). A person escapes if he proves the offence was without his knowledge or that he exercised all due diligence to prevent it. Separately, a director, manager, secretary or other officer is also guilty if the offence was committed with consent or connivance, or is attributable to neglect, on his part (s.55(2)). "Company" includes a firm, an LLP and other associations of individuals (Explanation).
Sub-section (1): persons in charge
"If the person committing an offence under this Code is a company, every person who, at the time the offence was committed was in charge of, and was responsible to the company for the conduct of business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly."
Two tests must both be met: the person was in charge of the business and responsible to the company for its conduct, at the time of the offence. The text does not name designations. A person who is merely a director with no role in running the business may not meet the "in charge" test, but the text leaves that to the facts.
The proviso: how a person escapes
"Nothing contained in this sub-section shall render any such person liable to any punishment if he proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence." The burden is on the person to prove one of the two. Both are alternatives.
What counts as due diligence is not defined. Documents that help in practice: board or management minutes assigning payroll compliance, written instructions to the payroll team, internal audit reports, and corrective action on past findings.
Sub-section (2): consent, connivance or neglect
"Notwithstanding anything contained in sub-section (1)", where an offence has been committed by a company and "it is proved that the offence has been 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 person is also deemed guilty and liable to be proceeded against and punished.
The contrast with sub-section (1) matters:
| Point | s.55(1) | s.55(2) |
|---|---|---|
| Who | Persons in charge of, and responsible to the company for, the conduct of business | Director, manager, secretary or other officer |
| What must be shown | The person held the role at the time of the offence | It is proved that the offence was with consent or connivance, or attributable to neglect |
| Who carries the burden | The person must prove lack of knowledge or due diligence | The prosecution must prove consent, connivance or neglect |
| Defence | Without knowledge, or due diligence | Disproving the consent, connivance or neglect |
The text of sub-section (2) says "it is proved", not who proves it; the usual understanding is that the complainant must. Treat that as a reading of the words, not as a statement in the text.
Explanation: what "company" and "director" mean
For this section:
- "Company" means any body corporate and includes (i) a firm, (ii) a limited liability partnership registered under the Limited Liability Partnership Act, 2008, or (iii) other association of individuals.
- "Director", in relation to a firm, means a partner in the firm.
So a partner in a partnership firm is treated like a director. The definition is for this section only; for the Code's wider definitions of employer and establishment, see our article on the definitions.
Hypothetical example. A private company underpays a group of workers. The company's HR head, who ran payroll and signed the wage sheets, and the managing director, who knew of the shortfall and approved holding it back, are named in the complaint. The HR head proves she acted on written instructions and reported the shortfall to the board; she relies on the proviso. The managing director is proceeded against under sub-section (2) if consent or connivance is shown. The facts are invented only to show the two routes.
Where this fits in the Code
- Section 55 only identifies who can be punished; the penalty amounts come from section 54.
- Another person can be substituted as the offender in the employer's own prosecution under section 63, which lets an employer charge the actual offender.
- The recovery of the unpaid wages is a separate matter from penalty: section 43 makes the proprietor responsible for payment.
A note on imprisonment: the repeat-offence tiers in section 54 carry imprisonment. Section 55 says officers are "punished accordingly", so a repeat conviction could reach an individual. The text does not say anything more specific about individuals.
What the Central Rules add
The Code on Wages (Central) Rules, 2026 (G.S.R. 343(E), 8 May 2026) apply only where the Central Government is the appropriate Government. Where the State Government is the appropriate Government, the State's own wage rules apply. In the Rules text read for this article, no rule adds to section 55; the Rules' enquiry procedure in rule 53 applies to the enquiry, not to the question of who is liable.
Need help managing personal exposure?
Directors and partners are most at risk when payroll is delegated without a record of oversight. Our legal dispute resolution team can help you document compliance responsibility, reply to notices that name individuals and defend a complaint.
Key takeaways
- A company and the persons in charge of and responsible for its business are deemed guilty of an offence under the Code.
- A person can escape by proving no knowledge or all due diligence.
- Directors, managers, secretaries and other officers are also liable on proof of consent, connivance or neglect.
- "Company" includes firms, LLPs and other associations of individuals; for a firm, "director" means a partner.
- Penalty amounts are in section 54.
Read next
- Section 54: penalties for offences
- Section 56: composition of offences
- Sections 63 and 64: exemption of employer and protection against attachment
- Labour law compliance guide for employers
Disclaimer: Based on the Code on Wages, 2019 (as enacted) and, where noted, the Code on Wages (Central) Rules, 2026 (G.S.R. 343(E), 8 May 2026), as on 1 October 2026. The Code is in force from 21 November 2025; State Governments make their own rules for establishments where the State is the appropriate Government, and wage rates are notified separately. Verify the current position before acting.