Section 86 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.
Sub-sections (1) to (6) of section 86 set the fines for the most serious employer defaults in Chapters IX, X and XII: lay-off, retrenchment or closure without permission, non-payment of compensation, and unfair labour practice. Each has a first-offence fine and a higher second-offence penalty that can include imprisonment.
Contravening s.78, 79 or 80 (Chapter X permission): fine of one lakh to ten lakh rupees; repeat offence: five lakh to twenty lakh rupees, or imprisonment up to six months, or both. Contravening s.67, 70, 73 or 75 (lay-off, retrenchment and closure compensation and conditions): fifty thousand to two lakh rupees; repeat: one lakh to five lakh rupees, or up to six months, or both. An unfair labour practice: ten thousand to two lakh rupees; repeat: fifty thousand to five lakh rupees, or up to three months, or both. The repeat scale applies to a second or subsequent offence after conviction.
The penalties at a glance
Section 86 has twenty sub-sections. This article covers (1) to (6); the rest are in section 86(7) to (20).
| Sub-section | Offence | Penalty |
|---|---|---|
| 86(1) | Employer contravenes s.78, 79 or 80 | Fine not less than Rs 1,00,000, may extend to Rs 10,00,000 |
| 86(2) | Same offence again after conviction | Fine Rs 5,00,000 to Rs 20,00,000, or imprisonment up to six months, or both |
| 86(3) | Employer contravenes s.67, 70, 73 or 75 | Fine Rs 50,000 to Rs 2,00,000 |
| 86(4) | Same offence again after conviction | Fine Rs 1,00,000 to Rs 5,00,000, or imprisonment up to six months, or both |
| 86(5) | Any person commits an unfair labour practice in the Second Schedule | Fine Rs 10,000 to Rs 2,00,000 |
| 86(6) | Same offence again after conviction | Fine Rs 50,000 to Rs 5,00,000, or imprisonment up to three months, or both |
Which section triggers which sub-section
| Section | Subject | First offence |
|---|---|---|
| 78 | Lay-off without prior permission | 86(1) |
| 79 | Retrenchment without notice or permission | 86(1) |
| 80 | Closure without permission | 86(1) |
| 67 | Lay-off compensation not paid | 86(3) |
| 70 | Retrenchment conditions (notice, compensation, notice to Government) not met | 86(3) |
| 73 | Transfer compensation not paid | 86(3) |
| 75 | Closure compensation not paid | 86(3) |
| Second Schedule | Unfair labour practice | 86(5) |
Section 74 (closure notice) and section 83 (re-skilling fund) are not named in s.86(1) to (4); they would fall under the residual s.86(20). Section 71 and 72 (retrenchment order and re-employment) are also not named and would fall under s.86(20); see section 86(7) to (20).
Reading the text closely
"Fine" is the first-offence penalty
For a first offence under s.86(1), (3) and (5) the penalty is a fine only. Imprisonment enters only in the repeat-offence sub-sections (2), (4) and (6), and then as an option, "or with imprisonment ... or with both".
The repeat offence needs a prior conviction
Sub-sections (2), (4) and (6) apply to a person who "after conviction for an offence" again commits the same offence. The text of (2) and (4) says the same offence under the listed sections. Note that in (2) the offence can be under any of ss.78, 79 or 80 "again commits the same offence under section 78 or section 79 or section 80"; the grouping is by the set of sections. Sub-section (6) says the "same offence" for unfair labour practice. The text does not define "same" further, so a dispute on whether two defaults are the same offence would turn on the facts.
Who is liable
Sub-sections (1) to (4) name "an employer". Sub-section (5) names "any person" who commits an unfair labour practice, so it reaches workers and Trade Unions as well. For companies, section 88 makes persons in charge also liable unless they prove lack of knowledge and due diligence.
Who imposes the penalty
For s.86(3) and (5), the appropriate Government may appoint an officer not below the rank of Under Secretary to hold an enquiry and impose the penalty under s.85; see sections 84 and 85. Sub-sections (1), (2), (4) and (6) are not in the s.85(1) list. Offences punishable under the Code are cognizable by a court only on a complaint by or under the authority of the appropriate Government, and the court must be that of a Metropolitan Magistrate or Judicial Magistrate of the first class (s.87). The Code cites the Code of Criminal Procedure, 1973 there; from 1 July 2024 that Code was replaced by the Bharatiya Nagarik Suraksha Sanhita, 2023.
Compounding
Offences not punishable with imprisonment only, or with imprisonment and also fine, can be compounded under s.89 for a percentage of the maximum fine; see section 89. Sub-sections (2), (4) and (6) offer imprisonment as an alternative to a fine, so the text of s.89(1) should be read carefully against each case.
Central Rules, 2026
For Central-sphere establishments, rule 44 of the Industrial Relations (Central) Rules, 2026 (G.S.R. 342(E), 8 May 2026) prescribes the enquiry for s.86(3) and (5) offences, and rule 38 prescribes compounding; see rule 44 and rule 38. Where the State Government is the appropriate Government, the State's own rules apply.
Example. An employer with 500 workers in a factory retrenches 30 workers without seeking permission. That is a contravention of s.79 and a first offence under s.86(1): a fine of Rs 1,00,000 to Rs 10,00,000. Separately, the workers may claim that the retrenchment is illegal under s.79(7). If the employer is convicted and later retrenches again without permission, the repeat scale in s.86(2) applies: Rs 5,00,000 to Rs 20,00,000, or up to six months' imprisonment, or both.
Our legal dispute resolution team can help when a complaint or notice under these provisions arrives.
Need help with a penalty notice?
A notice under s.85 or a complaint under s.87 needs a reply that deals with the section, the facts and the penalty band. Our legal dispute resolution team can review the notice, map it to the right sub-section and prepare your response and, where available, a compounding application. Bring the notice and the underlying records.
Key takeaways
- s.86(1): Rs 1 lakh to Rs 10 lakh for contravening s.78, 79 or 80.
- s.86(3): Rs 50,000 to Rs 2 lakh for breaches of ss.67, 70, 73, 75.
- s.86(5): Rs 10,000 to Rs 2 lakh for an unfair labour practice, by any person.
- Repeat offences after conviction carry a higher fine or imprisonment (up to six months, or three months for unfair labour practice).
- Penalties under s.86(3) and (5) may be imposed by the s.85 officer after enquiry.
Read next
- Section 86(7) to (20): penalties for strikes, notices and other contraventions
- Sections 87 and 88: cognizance of offences and offences by companies
- Section 89: composition of offences
- Rule 44: enquiry into offences
Disclaimer: Based on the Industrial Relations Code, 2020 (as enacted) and, where noted, the Industrial Relations (Central) Rules, 2026 (G.S.R. 342(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.