Section 89 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 89 lets an accused person apply to have an offence under the Code compounded by a Gazetted Officer, before or after a prosecution begins, by paying fifty or seventy-five per cent of the maximum fine. Repeat offences within three years are excluded, and the amount is credited to the Social Security Fund.
An offence under the Code, other than one punishable with imprisonment only, or with imprisonment and also with fine, may be compounded on the accused's application, before or after prosecution, by a Gazetted Officer specified by notification. The sum is 50 per cent of the maximum fine for an offence punishable with fine only, and 75 per cent for an offence punishable with imprisonment of not more than one year or with fine. There is no composition for a second offence within three years of an earlier compounded or convicted similar offence. The amount is credited to the Social Security Fund under section 141 of the Social Security Code, 2020. Under rule 38 of the Central Rules, 2026, the notice is in Form XV and the accused has fifteen days to respond and pay.
What section 89 says
| Sub-section | Rule |
|---|---|
| 89(1) | Notwithstanding the Code of Criminal Procedure, 1973, any offence punishable under the Code, not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, on the application of the accused, either before or after the institution of any prosecution, be compounded by a Gazetted Officer specified by the appropriate Government by notification, for 50 per cent of the maximum fine (offence punishable with fine only) or 75 per cent (offence punishable with imprisonment of not more than one year or with fine), in the prescribed manner. Proviso: the amount is credited to the Social Security Fund under section 141 of the Social Security Code, 2020. |
| 89(2) | Not available for an offence committed for the second time or thereafter within three years from the date (a) of commission of a similar offence earlier compounded, or (b) of commission of a similar offence for which the person was earlier convicted. |
| 89(3) | The compounding officer acts under the direction, control and supervision of the appropriate Government. |
| 89(4) | The application is made in the prescribed manner. |
| 89(5) | Compounded before prosecution: no prosecution shall be instituted against that offender for that offence. |
| 89(6) | Compounded after prosecution begins: the officer brings it in writing to the notice of the adjudicating officer appointed under s.85(1) before whom the prosecution is pending, and the person is discharged. |
| 89(7) | A person who fails to comply with an order of the compounding officer must pay 20 per cent of the maximum fine for the offence, in addition to such fine. |
| 89(8) | No offence under the Code is compounded except under and in accordance with this section. |
Working out the amount
The base is the maximum fine provided for the offence. Two bands apply.
| Offence type | Amount |
|---|---|
| Punishable with fine only | 50 per cent of the maximum fine |
| Punishable with imprisonment of not more than one year or with fine | 75 per cent of the maximum fine |
Illustrations from section 86:
- Section 86(20) (any other contravention) is punishable with fine only, up to Rs 1,00,000: 50 per cent is Rs 50,000.
- Section 86(13) (illegal strike by a worker) is punishable with a fine up to Rs 10,000 or imprisonment up to one month, or both: the 75 per cent band would, on the text, give Rs 7,500 if the offence is compoundable.
- Section 86(1) (Chapter X permission breach) is fine only, up to Rs 10,00,000: 50 per cent is Rs 5,00,000.
Is an offence "compoundable"? Read the carve-out
Section 89(1) excludes an offence "punishable with imprisonment only, or with imprisonment and also with fine". Offences that carry fine or imprisonment or both are not plainly in either exclusion, and the 75 per cent band speaks of "imprisonment ... or with fine". The text does not go further. Whether a particular offence, such as a repeat offence carrying "fine ... or imprisonment ... or both", is compoundable is a question to settle against the notified officer's practice and the case facts before relying on it. The repeat offences also meet the three-year bar in s.89(2).
The three-year bar
Under s.89(2), a second or later offence within three years of (a) a similar offence earlier compounded or (b) a similar offence for which the person was earlier convicted, cannot be compounded. The three years run from the date of commission of the earlier similar offence, as the text words it.
Effect on prosecution
| Stage | Effect |
|---|---|
| Before prosecution | No prosecution may be instituted for that offence against that offender (s.89(5)). |
| After prosecution begins | The officer informs the adjudicating officer under s.85(1) before whom it is pending, in writing; the accused is discharged (s.89(6)). |
| Non-compliance with the compounding order | Additional 20 per cent of the maximum fine (s.89(7)); this default can itself be penalised through the s.85 enquiry (s.85(1) lists s.89(7)). |
See sections 84 and 85 for the enquiry officer and sections 87 and 88 for prosecution. The Code cites the Code of Criminal Procedure, 1973 here; from 1 July 2024 it was replaced by the Bharatiya Nagarik Suraksha Sanhita, 2023.
Central Rules, 2026: rule 38 and Form XV
These rules apply to Central-sphere establishments. Where the State Government is the appropriate Government, the State's own rules apply and may differ.
Rule 38 of the Industrial Relations (Central) Rules, 2026 (G.S.R. 342(E), 8 May 2026):
| Rule | Requirement |
|---|---|
| 38(1) | The compounding officer notified by the Central Government sends a notice to the accused in Form XV through the designated portal of the Ministry of Labour and Employment. |
| 38(2) | The accused may send the filled-in Part III of Form XV to the compounding officer electronically and deposit the compounding amount electronically within fifteen days of receiving the notice. |
| 38(3) | If prosecution has already been instituted, the accused may apply to the court, which may allow composition by the compounding officer under s.89 and the rule. |
| 38(4) | On compounding: (a) before prosecution, no complaint shall be instituted; (b) pending a s.85 proceeding, the compounding officer informs the s.85 officer, who closes the proceeding; (c) after prosecution with the court's permission, the officer treats the case as closed, informs the court, and the court discharges the accused. |
See rule 38 and Form XV. The text of the rule does not name the officer; it refers to the officer notified by the Central Government. Check the notification.
Example. An employer with a Central-sphere establishment receives a notice for failing to keep a record required under the Code, a contravention punished under s.86(20) with a fine up to Rs 1,00,000. It has no earlier similar offence in three years. It submits Part III of Form XV and deposits Rs 50,000, which is 50 per cent of the maximum fine, within fifteen days. The compounding officer closes the matter, and no prosecution can follow for that offence. The Rs 50,000 is credited to the Social Security Fund.
Our legal dispute resolution team can advise on whether compounding is open and prepare the application.
Need help with a compounding application?
Compounding is quick only if the facts fit: eligible offence, no similar offence in three years, correct amount and payment within the window. Our legal dispute resolution team can check eligibility, compute the amount and prepare the Form XV response. Bring the notice and any earlier orders against the establishment.
Key takeaways
- The accused applies; a notified Gazetted Officer compounds, before or after prosecution.
- Amount: 50 per cent of the maximum fine (fine-only offences) or 75 per cent (imprisonment up to one year or fine).
- No composition for a repeat offence within three years of a compounded or convicted similar offence.
- Compounding before prosecution bars prosecution; after prosecution it leads to discharge.
- Central-sphere process: Form XV on the portal, fifteen days to apply and pay.
Read next
- Section 86(7) to (20): penalties
- Sections 87 and 88: cognizance of offences and offences by companies
- Rule 38: manner of composition of offence
- Sections 84 and 85: unfair labour practices and power to impose penalty
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.