One thing that is significant for every organisation in India: the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, which is more commonly known as the “POSH Act”.
If your company has 10 or more employees, this law is not just a suggestion; it is a clear, non-negotiable requirement that you set up an Internal Complaints Committee (ICC). This is not just about ticking a box; it is about creating a safe and respectful workplace for everyone.
This article focuses on the serious consequences of not taking the POSH Act seriously. We are not just talking about fines or losing your business license, though those are definitely on the table. The risks go much further, impacting your finances, your reputation, and even the very heart of your company culture.
Imagine facing hefty lawsuits and paying out significant compensation because you did not have a proper ICC in place. Beyond the financial hit, your brand image can suffer immensely, making it incredibly tough to attract and keep talented individuals. When employees do not feel safe or heard, morale plummets, productivity drops, and people start looking for opportunities elsewhere. It creates a truly toxic environment.
Recent rulings from the Supreme Court of India (which are discussed below in this article) have made it crystal clear: regulators are watching more closely than ever. It is not enough to just have an ICC on paper; it needs to function effectively, impartially, and transparently. This is not just about formal compliance; it is about genuine commitment.
And here is the critical point: even if you do not have an ICC, your responsibilities do not disappear. Individuals who experience harassment still have clear legal avenues for justice, whether through Local Complaints Committees (LCCs) or by going directly to the courts and police. So, simply avoiding the ICC requirement shall not protect you.
Ultimately, the POSH compliance goes beyond just forming a committee. It means implementing comprehensive policies, continuously raising awareness, and managing grievances effectively. It is about building a safe, inclusive, and productive workplace that protects your organization’s long-term viability and reputation.
The POSH Act and the Imperative of an ICC
The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, which came into effect on December 9, 2013, was a landmark moment for women’s safety in India. Its main goal is simple yet profound: to protect women from sexual harassment in all workplaces, whether they are in the public or private sector. This law is designed to uphold fundamental constitutional rights, like the Right to Equality and the Right to Life and Live with Dignity, ensuring every woman can work without fear.
The roots of the POSH Act can be traced back to a pivotal Supreme Court case in 1997, Vishaka v. State of Rajasthan (1997) 6 SCC 241. The guidelines issued in that case, which were legally binding until specific legislation was passed, laid the essential groundwork for what eventually became the comprehensive framework of the POSH Act. This Act broadly defines sexual harassment, covering a wide range of unwelcome actions and behaviours. This includes physical contact and advances, requests for sexual favours, sexually suggestive remarks, showing pornography, and any other unwelcome physical, verbal, or non-verbal conduct of a sexual nature. It also covers situations where such conduct, directly or indirectly, involves promises or threats related to employment, interferes with work, or creates an intimidating, offensive, or hostile work environment that could impact someone’s health or safety.
What’s particularly important is how widely the POSH Act applies. It covers almost any department, organisation, establishment, or office, regardless of whether it is government-funded or not. It even extends to homes where domestic workers are employed. In a significant development reflecting how we work today, courts have interpreted the definition of “workplace” to include digital platforms and even conduct that happens after traditional work hours if it is connected to employment.
An “aggrieved woman” is broadly defined as any woman, regardless of age or employment status, who claims to have been subjected to sexual harassment by the respondent. The success of this Act truly depends on the widespread establishment of Internal Complaints Committees (ICCs) within workplaces and Local Complaints Committees (LCCs) at the district level.
The Non-Negotiable Requirement: ICC for Organisations with 10+ Employees
One of the significant pillars of the POSH Act is Section 4, which mandates that every organisation with 10 or more employees establish an Internal Complaints Committee (ICC). This is not just for big corporations; it applies to both public and private sector organisations across all of India, no matter their location or industry.
When we talk about “employee” under this Act, it is a broad term that includes full-time staff, part-time workers, interns, freelancers, and even consultants.
It is pertinent to note that if your organization has multiple offices, branches, or separate units, each one needs its own ICC if it meets the employee threshold. On the other hand, if you have fewer than 10 employees, you are not required to form an ICC, but you are legally obligated to send any sexual harassment complaints to the Local Complaints Committee (LCC) in your district.
The ICC’s Role
Establishing an ICC serves a dual purpose: it provides a structured and fair way to resolve sexual harassment complaints internally, and it helps build an environment of trust and safety within the workplace.
The ICC’s responsibilities fall into two main categories: preventing harassment and addressing it when it occurs:
- Preventive Functions: ICCs are tasked with actively working to create and maintain a workplace free from sexual harassment. This means fostering a culture that raises awareness about the various forms of sexual harassment and regularly conducting gender sensitisation workshops for all employees. It is about proactive education and building a respectful environment.
- Remedial Functions: The primary responsibility of the ICC is to receive and handle sexual harassment complaints. This involves conducting thorough, fair, and unbiased inquiries into allegations, always sticking to the principles of natural justice. The complaint process itself must be safe, easy to access, and sensitive to the needs of the person who has been harassed.
The ICC holds significant power, with authority similar to a Civil Court. This means the committee can summon witnesses and parties for testimony and demand the production of relevant documents during an inquiry. A critical duty of the ICC is to keep all complaint and inquiry proceedings strictly confidential to protect the dignity and privacy of everyone involved. There are even legal penalties for breaching this confidentiality. However, the Act also clearly states that the complainant has the right to publicly disclose the complaint if she chooses, striking a balance between privacy and the right to seek justice.
The composition of the ICC is as below:
- Presiding Officer: The committee must be led by a woman who holds a senior position within the organisation. If a senior female employee is not available, a female employee from another office or even a different employer can be nominated for this role.
- Employee Members: At least two (02) members must be chosen from the organisation’s employees who are dedicated to women’s causes, have experience in social work, or possess legal knowledge relevant to sexual harassment cases.
- External Member: To ensure independence and prevent any internal biases, one member must come from a non-governmental organisation (NGO), be a legal expert, or have proven expertise in handling sexual harassment issues.
- Gender Representation: A significant requirement is that at least 50% of the total ICC members must be women.
- Tenure and Disqualification: ICC members can serve for a maximum of three (03) years from their appointment date. The employer is responsible for replacing members when their term ends. Members can be removed from the committee for reasons like misconduct (including sexual harassment or fraud), violating confidentiality rules, or being convicted of a criminal offense. Any vacancy that comes up must be filled quickly, ideally within one week.
The Act also sets clear timelines for the complaint and inquiry process, which is described as below:
- Complaint Submission: An aggrieved woman needs to submit a written complaint within three months from the date of the incident, or from the date of the last incident if there were a series of events. The ICC has the discretion to extend this period for an additional three months, as long as there are reasonable grounds recorded in writing.
- Notice to Respondent: Once a complaint is received, the ICC must send a copy to the respondent within seven working days. The respondent then has up to 10 working days to file a reply, along with the names and addresses of any witnesses.
- Inquiry Completion: The entire inquiry process must be finished within a strict 90-day timeline from the date the complaint was filed.
- Report Submission: After the inquiry is complete, the ICC is required to submit its findings report to the employer or the District Officer within 10 days.
Summary: ICC Composition Requirements
| Role | Qualification/Criteria | Specific Requirements |
| Presiding Officer | Woman employed at a senior level in the workplace. | Must be a woman. If no senior female employee is available, a female employee from another office or employer may be nominated. |
| Employee Members | At least two members from the organization’s employees. | Must be committed to women’s causes, or have experience in social work, or possess legal knowledge. |
| External Member | One member from a Non-Governmental Organisation (NGO), a legal expert, or an individual well-versed in sexual harassment issues. | Important for ensuring independence and mitigating potential biases. Entitled to fees/ allowances. |
| Overall Composition | At least 50% of the total ICC members must be women. | Ensures adequate gender representation and sensitivity within the committee. |
| Tenure | All members, including the Presiding Officer, hold office for a maximum period of three years from the date of their appointment. | Employer is responsible for replacing members upon completion of their tenure. |
| Disqualification | Members can be removed for misconduct (including sexual harassment, fraud), violation of confidentiality, or conviction of a criminal offense. | Vacancies must be filled by fresh nomination, ideally within one week. |
Penalties for Non-Constitution of the ICC
It is pertinent to note that if you do not set up an Internal Complaints Committee (ICC) as required by the POSH Act, there are immediate and increasingly severe legal consequences. These penalties are not just minor inconveniences; they are designed to ensure compliance and reflect how seriously the law takes the protection of women in the workplace.
Initial and Repeat Offenses
If you are caught not having an ICC for the first time, you could face a fine of up to INR 50,000 (you can refer to the FAQs on Sexual Harassment at Workplace, published by the Government of NCT Delhi). This fine can also apply if you do not act on the ICC’s recommendations or try to go against the Act’s provisions.
The law gets much tougher on repeat offenders. If an employer has already been penalised for an offense under the Act and then commits the same offense again, they could face double the punishment. This escalating severity is not accidental; it is designed to push for consistent, long-term compliance, not just a one-time payment to get out of trouble.
Losing Your Business License
Beyond just bigger fines, continuously ignoring the POSH Act can actually threaten your business’s very existence. For repeat offenses, the Act explicitly allows for the cancellation or withdrawal of your business license or registration. This means that if you keep disregarding the POSH Act’s requirements, your business could legally be shut down. The fact that penalties can go from a fine to losing your license shows that the law sees persistent non-compliance not as a small slip-up, but as a fundamental failure to ensure a safe workplace. It implies a systematic disregard for employee well-being, which the law aims to address with increasingly strong deterrents. The threat of losing your license directly impacts your ability to operate, making it a powerful tool to enforce the POSH Act’s core mission of a safe workplace. This isn’t just about financial deterrence anymore; it is a direct threat to your business’s continuity, highlighting the seriousness of the offense in the eyes of the law.
Penalties for Non-Filing of Annual Reports
Your responsibilities under the POSH Act do not end with just setting up an ICC. Employers are also legally required to submit an annual report to the District Officer. This report needs to include details like how many sexual harassment complaints were received and addressed by the ICC during the year, any cases that have been pending for more than 90 days, and information about awareness programs you’ve conducted. Failing to file this mandatory annual report on time is considered non-compliance and can result in another fine of up to INR 50,000.
Furthermore, recent changes, like the Companies (Accounts) Second Amendment Rules 2025, have made reporting even stricter. These amendments now demand detailed disclosures about POSH Act compliance in Board Reports, including specific complaint statistics and the gender breakdown of your workforce. If you don’t comply with these enhanced disclosure requirements, you could face significant penalties under Section 134(8) of the Companies Act, potentially reaching up to INR 3,00,000 for the company and INR 50,000 for its officers.
Before, a quick confirmation that an ICC was in place might have been enough. Now, detailed reporting on complaints, resolutions, and pending cases is required in Board Reports, with penalties under the Companies Act for not disclosing this information. This shifts POSH compliance from a purely operational legal risk to a critical business risk that can affect your company’s valuation and investor confidence.
Even government bodies are stepping up enforcement. For example, as per the article published by the Times of India, the Deputy Chief Minister of Odisha announced that the salaries of the college authorities would be withheld if they failed to establish ICCs within a month.
Summary: Key Penalties for POSH Act Non-Compliance
| Type of Non-Compliance | Penalty for First Offense | Penalty for Repeat Offenses | Relevant Act/Section |
| Failure to Constitute ICC | Fine up to INR 50,000 | Twice the initial penalty AND Cancellation/Withdrawal of Business License/ Registration | POSH Act, Section 26 |
| Failure to File Annual Report | Fine up to INR 50,000 | Increased penalties AND Cancellation of Business License | POSH Act, Section 26 |
| Failure to Meet Disclosure Obligations in Board Reports | Penalties up to INR 3,00,000 for company, INR 50,000 for officers | (Not specified as escalating in snippets, but implies ongoing liability) | Companies Act, Section 134(8) |
| Not Acting on ICC Recommendations / Contravention of other provisions | Fine up to INR 50,000 | Twice the initial penalty AND Cancellation/Withdrawal of Business License/ Registration | POSH Act, Section 26 |
Financial Repercussions
It is not just about the hefty fines you might face. When companies do not play by the rules, especially concerning workplace conduct, they open themselves up to a whole world of financial pain. Think civil lawsuits, massive compensation payouts, and legal bills that can make your eyes water.
Take the Infosys Phaneesh Murthy case, for instance. A sexual harassment allegation led to a staggering $3 million settlement. That is a powerful, and expensive, lesson in accountability. More recently, as per the article published by Mondaq, Medanta Hospital learned this the hard way. Not only were they slapped with a fine of INR 50,000 for not having a proper internal complaints committee (ICC), but they also had to fork over INR 25 lakhs in compensation to the person who complained. This clearly shows that if you don’t have the right mechanisms in place, you are directly on the hook financially.
And let us not forget the hidden costs: the endless legal fees for defending lawsuits, the resources poured into investigations, and the damage control needed for your reputation. It all adds up, making compliance not just a legal necessity, but a financial imperative.
Responsibilities of the Employer
Here are the employer responsibilities beyond just constituting an Internal Complaints Committee (ICC) under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (POSH Act):
- Formulating and Disseminating a POSH Policy: Employers must draft and widely circulate an anti-sexual harassment policy within the organisation, clearly outlining the zero-tolerance stance, complaint mechanism, and consequences of harassment.
- Awareness and Sensitisation Programs: Regularly organise workshops, seminars, and training sessions for all employees (including contractual staff and interns) to educate them about what constitutes sexual harassment, their rights, and the POSH policy. This also includes sensitising ICC members to ensure they are well-equipped to handle complaints.
- Providing a Safe Working Environment: Take all necessary steps to ensure a workplace free from sexual harassment. This includes physical safety, but also fostering a culture of respect and dignity.
- Timely and Fair Inquiry Process: Ensure that the ICC conducts inquiries into complaints within the stipulated timeframes (usually 90 days) and in a fair, impartial, and confidential manner.
- Implementing ICC Recommendations: Act promptly on the recommendations made by the ICC following an inquiry, which may include taking disciplinary action against the perpetrator, providing compensation to the aggrieved woman, or other remedial measures.
- Maintaining Confidentiality: Ensure strict confidentiality throughout the complaint and inquiry process to protect the identities of the aggrieved woman, the respondent, and witnesses.
- Filing Annual Reports: Prepare and submit an annual report to the District Officer detailing the number of sexual harassment complaints received and the actions taken. This is a mandatory compliance requirement.
- Monitoring ICC Functioning: Periodically review the effectiveness and proper functioning of the ICC to ensure it is adequately resourced and capable of fulfilling its duties.
- Providing Necessary Facilities to ICC: Ensure the ICC has the necessary infrastructure, resources, and administrative support to carry out its functions effectively.
- Taking Action Against False Complaints: While protecting genuine complainants, the Act also provides for action against individuals found to have made false or malicious complaints.
Conclusion
In conclusion, non-compliance with the POSH Act, particularly the failure to constitute and effectively operate an Internal Complaints Committee (ICC), is not merely a regulatory lapse but a serious legal, financial, and cultural risk for any organisation. The penalties extend far beyond fines, threatening business continuity, investor confidence, and overall reputation, while also exposing employers to costly lawsuits and compensation claims. More importantly, neglecting this responsibility erodes employee trust, undermines workplace morale, and damages organisational culture at its core. Establishing a functional ICC, therefore, is not just about legal compliance, it is a strategic imperative to safeguard your people, protect your business, and demonstrate a genuine commitment to building a safe, inclusive, and dignified workplace.
YLCC would like to thank Nikunj Arora for his valuable insights into this article.
