Business Laws and Ethics · Employees State Insurance Act, 1948

ESI Penalties, Offences and Transitional Provisions

Updated 10 October 2026 · Fact-checked

Penalties are the punishments for an employer who defaults, such as not paying contributions, or for anyone who makes a false statement. Under the Code on Social Security, 2020, Section 133 sets the punishment by clause. Section 153 lets the old ESI Corporation continue until the Code's corporation is constituted. Learn the clause-to-punishment map.

Understand Penalties, Offences and Transitional Provisions

Every social security law needs teeth. If employers could skip contributions or give false returns without punishment, insured persons would lose their benefits. So the law lists offences and fixes a punishment for each.

There are two sets of law to know. The Employees' State Insurance Act, 1948 has a short offence for false statements (Section 84). The Code on Social Security, 2020 has a wider penalty section (Section 133) that covers contributions, gratuity, compensation, maternity benefit, returns, obstruction and more.

Under Section 84 of the ESI Act, a person who knowingly makes a false statement or representation commits an offence. The purpose must be one of these: to increase a payment or benefit, to get a payment where none is authorised, or to avoid a payment due from himself or help another avoid it. The punishment is imprisonment up to six months, or fine up to two thousand rupees, or both. An insured person who is convicted also loses cash benefit for a period the Central Government prescribes.

Section 133 of the Code works by clauses (a) to (q) that describe the default, and then four punishment bands (i) to (iv). The worst band is for not paying the employee's contribution that the employer has already deducted from wages. That is treated as the most serious because the employer has held the worker's money.

Section 153 deals with transition. The Corporation established under Section 3 of the ESI Act, 1948, its Medical Benefit Council and its Standing Committee continue to exercise powers and functions of the corresponding bodies under the Code (the Employees State Insurance Corporation, Medical Benefit Committee and Standing Committee). This continues until the corresponding bodies are constituted under the Code, or until their term under the old enactment expires, whichever is earlier.

Key rules to remember

Section 133(i)(a): deducted employee contribution not paid: Offence under clause (a), employee's contribution deducted but not paid: imprisonment at least 1 year, up to 3 years, plus fine of ₹1,00,000; The court may impose a lesser term for adequate and special reasons recorded in the judgment.
Section 133(i)(b): any other failure to pay contribution: Clause (a), any other case: imprisonment at least 2 months, extendable to 6 months, plus fine of ₹50,000; Same proviso allows a lesser term for special reasons recorded.
Section 133(ii): gratuity not paid: Clause (g): imprisonment up to 1 year, or fine up to ₹50,000, or both; Applies to failure to pay gratuity due under the Code.
Section 133(iii): imprisonment or fine band: Clauses (d), (f), (i), (k), (l), (o): imprisonment up to 6 months, or fine up to ₹50,000, or both; Covers penalising a woman employee, obstructing officers, no maternity benefit, not producing records, unpaid building workers' cess, dishonest false return.
Section 133(iv): fine only band: Clauses (b), (c), (e), (h), (j), (m), (n), (p), (q): fine up to ₹50,000; Includes deducting employer's contribution from wages, reducing wages, not filing returns, not paying compensation, residuary contraventions.
ESI Act Section 84: false statement: Imprisonment up to 6 months, or fine up to ₹2,000, or both; Knowingly false statement for the purposes stated in the section. A convicted insured person loses cash benefit for a prescribed period.
Code Section 104: cess arrears: Penalty not exceeding the amount of cess in arrears; Imposed only after a reasonable opportunity of being heard. No penalty if default was for good and sufficient reason.
Code Section 153: transition: Old bodies continue until the Code's bodies are constituted or the old term expires, whichever is earlier; Covers the ESI Corporation, Medical Benefit Council and Standing Committee, among others.

How to solve Penalties, Offences and Transitional Provisions questions

For any penalty question, identify the default, find its clause in Section 133, then read off the punishment band. Keep the Act and the Code separate.

1Read the facts and name the default in one phrase, for example non-payment of contribution, false return, or obstructing an inspector.
2Decide which law applies: Section 84 of the ESI Act for a knowingly false statement, or Section 133 of the Code for the wider list of defaults.
3Match the default to its clause (a) to (q) of Section 133.
4Check the facts for any deduction. If the employer deducted the employee's contribution and did not pay it, use the one-year minimum band.
5State the punishment band: imprisonment, fine, or both, with the exact limits.
6Mention the court's power to impose a lesser term for special reasons, where the band has a minimum.
7For transition questions, name the old body, its Code counterpart and the end point: whichever is earlier.
8Conclude with a one-line answer applying the rule to the facts.

Quickest way: Four-band memory map for Section 133

When to use it: Use for MCQs and for the first line of any written answer on punishments.

Band 1 is the heaviest: unpaid deducted employee contribution means at least 1 year, up to 3 years, and ₹1,00,000 fine.
Band 2: other contribution default means 2 to 6 months and ₹50,000 fine.
Band 3: gratuity gets up to 1 year or fine or both; a six-month group (women, obstruction, maternity, records, building cess, dishonest return) gets up to 6 months or fine or both.
Band 4: fine only, up to ₹50,000, for returns, compensation, wage reduction and residuary breaches.
For transition, remember the phrase: continue until replaced or expired, whichever is earlier.

Common mistakes in Penalties, Offences and Transitional Provisions

Treating all contribution defaults as having a one-year minimum.
Students remember only the heaviest band.
Fix: The one-year minimum applies only to employee's contribution that was deducted from wages. Other defaults carry two to six months.
Mixing up the fine for the false statement under the ESI Act with Section 133 fines.
Both involve false information and imprisonment up to six months.
Fix: Section 84 of the ESI Act: fine up to ₹2,000. In Section 133, a dishonest false return falls in the clause (o) band with fine up to ₹50,000.
Saying the court must always impose the minimum imprisonment.
The word 'shall not be less than' is read as absolute.
Fix: The proviso lets the court impose a lesser term for adequate and special reasons recorded in the judgment.
Saying the ESI Corporation ended on the day the Code started.
Students assume repeal ends all bodies at once.
Fix: Section 153 says the old bodies continue to exercise powers until the corresponding Code bodies are constituted or their old term expires, whichever is earlier.
Placing non-payment of compensation or non-filing of returns in the imprisonment band.
These sound serious, so students assume jail.
Fix: Clauses (e) and (h) fall in the fine-only band, up to ₹50,000.
Confusing the cess penalty in Section 104 with a fixed fine.
Other penalties have fixed amounts.
Fix: Section 104 is a penalty not exceeding the cess amount, imposed after a hearing, and not imposed if the default had good reason.

Worked examples

Example 1

Sunrise Textiles Ltd, Surat, deducted the employees' share of contribution from wages for four months but did not deposit it. State the punishment under the Code on Social Security, 2020.

Show the solution

Default: employer failed to pay a contribution it is liable to pay. This is clause (a) of Section 133.
The employee's contribution was deducted from wages and not paid, so the first sub-band applies.
Imprisonment is at least one year and may extend to three years.
The employer is also liable to a fine of ₹1,00,000.
The court may impose a shorter term only for adequate and special reasons recorded in the judgment.

Answer: Imprisonment of one to three years and fine of ₹1,00,000, with a lesser term possible only for recorded special reasons.

Example 2

Mr Rao, an insured person, knowingly gives a false statement to obtain a larger cash benefit under the ESI Act, 1948. What is the consequence? Also, what happens to the ESI Corporation after the Code on Social Security, 2020 begins?

Show the solution

Mr Rao knowingly made a false statement to increase a benefit. Section 84 of the ESI Act applies.
Punishment: imprisonment up to six months, or fine up to ₹2,000, or both.
As an insured person who is convicted, he is not entitled to any cash benefit for a period the Central Government prescribes.
For transition, Section 153 of the Code says the Corporation established under Section 3 of the ESI Act continues to exercise the powers and functions of the Employees State Insurance Corporation under the Code.
This continues until the Code's corresponding body is constituted or the old term expires, whichever is earlier.

Answer: Mr Rao faces up to six months' imprisonment or a fine up to ₹2,000 or both, and loses cash benefit for a prescribed period. The old Corporation continues under Section 153 until the Code's body is constituted or its old term expires, whichever is earlier.

Exam tips

Write the section number and clause letter before the punishment. It shows the examiner you know the source.
In MCQs, look for the words 'deducted from wages'. They point to the one-year minimum and ₹1,00,000 fine.
Learn the four bands as groups of clause letters, not as one long list.
For transition questions, name all three ESI bodies: Corporation, Medical Benefit Council and Standing Committee, and use the phrase 'whichever is earlier'.
In a case study, apply the rule in one closing sentence naming the employer and the penalty.

Practice questions from Employees State Insurance Act, 1948

Penalties, Offences and Transitional Provisions in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Penalties, Offences and Transitional Provisions: frequently asked questions

What is the penalty for non-payment of ESI contribution?

Under Section 133 of the Code on Social Security, 2020, failure to pay contribution is punishable with imprisonment up to three years. If the employee's share was deducted but not paid, the minimum is one year and the fine is ₹1,00,000. In other cases the term is two to six months with a fine of ₹50,000.

What is the punishment for a false statement under the ESI Act?

Section 84 punishes a knowingly false statement made to increase or obtain a benefit, or to avoid a payment. The punishment is imprisonment up to six months, or fine up to ₹2,000, or both. A convicted insured person also loses cash benefit for a period prescribed by the Central Government.

Can a court give less than the minimum jail term?

Yes, for contribution defaults. The proviso to Section 133 allows the court to impose a lesser term for adequate and special reasons recorded in the judgment. The reasons must be written down.

What do the transitional provisions say about the ESI Corporation?

Section 153 of the Code says the ESI Corporation, Medical Benefit Council and Standing Committee continue to exercise the powers and functions of the corresponding Code bodies. This lasts until those Code bodies are constituted or the old term ends, whichever is earlier.