IndiaWhat happens if my employer closes down without paying dues?
If your employer closes down without paying dues, you can claim unpaid wages, gratuity, and other statutory benefits from the employer’s assets or through labour courts under Indian labour laws.
What the Law Says
Indian labour laws protect workers when an establishment closes without settling dues. Key statutes mandate timely payment of wages, gratuity, provident fund, and other entitlements — even during closure.
Under the Payment of Wages Act, 1936, employers must pay all wages due within two working days of termination — including closure. Delay attracts penalties and recovery mechanisms.
The Payment of Gratuity Act, 1972 requires employers to pay gratuity within 30 days of eligibility. If not paid, interest at 10% per annum applies, and the controlling authority may recover it as arrears of land revenue.
The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 mandates that PF dues be settled within 45 days of exit. Employers failing to remit contributions face fines up to ₹20,000 and imprisonment up to 3 years.
The Industrial Disputes Act, 1947 treats non-payment of dues on closure as an 'industrial dispute', allowing workmen to approach conciliation officers or labour courts for recovery.
Statutory TextWhere any wages remain unpaid after the expiry of the prescribed period, the employee shall be entitled to claim such wages with interest at such rate not exceeding ten per cent per annum as may be prescribed.
— Payment of Wages Act, 1936, s. 15 — Claims
Statutory TextThe employer shall pay the gratuity within thirty days from the date it becomes payable.
— Payment of Gratuity Act, 1972, s. 4(3) — Payment of gratuity
Statutory TextAny employer who fails to pay the contribution payable by him… shall be punishable with imprisonment for a term which may extend to three years and with fine which may extend to one lakh rupees.
— Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, s. 14 — Penalty for default
What Courts Have Said
Indian courts have consistently held that closure does not extinguish employer liability for statutory dues — workers retain enforceable rights against assets or directors in certain cases.
Held that closure does not absolve employer of liability for gratuity and unpaid wages; dues rank pari passu with secured creditors.
Affirmed that non-payment of wages on closure is an industrial dispute under Section 2(k) of the Industrial Disputes Act, 1947, justiciable before labour courts.
What to Do
Immediately file a claim for unpaid wages with the Assistant Labour Commissioner under the Payment of Wages Act, 1936 (within 3 years).
Apply to the Controlling Authority under the Payment of Gratuity Act, 1972 for recovery — no court fee required.
Lodge a complaint with the Regional PF Commissioner for delayed or unpaid PF dues — use EPFO’s online portal (epfindia.gov.in).
If 20+ workers are affected, file an industrial dispute with the Conciliation Officer under the Industrial Disputes Act, 1947 within 6 months.
Approach civil court or NCLT (if company is solvent) to attach assets or proceed against directors personally where fraud or wilful default is proven.
Sources
Not legal advice. This article is general information based on publicly available sources, written for educational purposes. Laws change and individual situations vary. Consult a licensed attorney in your jurisdiction before acting on anything you read here. Last reviewed: 2026-06-08.