The judgments discussed in this article pertain to the law under the Employees' Provident Funds and Miscellaneous Provisions Act 1952 (EPF Act) and the schemes framed thereunder. The judgments discuss the Supreme Court’s decision on several contentious issues under the EPF Act and the amendments to ‘determination of pensionable salary’ under the Employees’ Pension Scheme (EPS) of 1995 brought by way of the 2014 amendment, which sought to cap the maximum pensionable salary to INR 15,000/- (Rupees Fifteen Thousand) per month and introduce supplementary contribution/payment obligations on salary exceeding such limit. The Supreme Court judgments detail the law in this regard and examine the provisions of the EPF Act and the EPS to determine the validity of the 2014 amendments in light of the judgments passed by the various high courts in this regard.
The primary issues being discussed in the Supreme Court judgments discussed in this article pertain to the correctness and validity of the changes sought to be introduced in the EPS by way of the 2014 amendment. The most contentious issue which formed the basis of the litigation across multiple High Courts was the amendment to the ‘determination of pensionable salary’ under the EPS. Prior to the Amendment of 2014, benefits under the EPS were available to all such employees who opted to become members of the EPS on or after 16.11.1995. Additionally, under the unamended scheme, the pensionable salary was determined by calculating the average monthly salary across a period of 12 months prior to an employee’s exit from the pension fund. Although the scheme placed a ceiling of INR 6500/- (Rupees Six Thousand Five Hundred) on the maximum pensionable salary, it did however permit the employer and employees to opt to contribute on the basis of actual salaries above such ceiling. The 2014 amendment however, not only amended the method of determination of pensionable salary but now only permitted contribution beyond the new ceiling of INR 15,000 (Rupees Fifteen Thousand) upon the employer and employees making a fresh option within a period of 6 months from 01.09.2014 and the employees agreeing to make additional contributions on salary in excess of the ceiling. The Supreme Court in the judgments discussed below were tasked with the adjudicating the challenge to these amendments at the behest of disgruntled employees.
In the judgement titled ‘R. C. Gupta & Ors. V. Regional Provident Fund Commissioner, Employees’ Provident Fund Organisation & Ors.’ (SLP (C) Nos. 33032-33033/2015), the Employees Provident Fund Organisation (EPFO) through its Regional Provident Fund Commissioner challenged an order passed by a division bench of the High Court of Himachal Pradesh before the Supreme Court. Through the impugned order, the High Court had set aside an order of the single judge which held that employees would be entitled to the benefits of the EPS based on their actual salaries irrespective of the cap provided therein. Upon hearing the arguments advanced by both sides, the Supreme Court found merit in the appeal and held that the date provided under the para 11 (3) of the EPS Amendment to avail benefits of the scheme was in fact not a cut-off date and had no bearing on the eligibility of parties to choose EPS contribution on actual salaries beyond the ceiling. The Supreme Court held that the EPS and EPF being beneficial legislations, could not be defeated by way of a cut-off date, especially when employers were in fact making contributions on actual salaries and not on the ceiling limits provided under the EPS. The Supreme Court further stated that parties exercising similar option with regard to EPF under para 26 (6) of the EPF Act could not be stopped from exercising the same option with regard to EPS. Therefore, the Supreme Court allowed the appeal and set aside the offending order of the High Court.
The Supreme Court by way of the judgment titled ‘Employees Provident Fund Organisation v. Sunil Kumar & Ors.’ (SLP(c) No.8658-8659/2019) passed on 01.04.2019, rendered its decision on the EPFO’s challenge to the order of the High Court of Kerala setting aside the 2014 Amendment to the EPS. The Supreme Court found favour with the arguments advanced by the Respondents who contended that the 2014 EPS amendment was inconsistent with the provisions of the EPF Act especially para 26 (6) of the Act, which being a similar provision with respect to contribution to the provident fund, did not provide any cut-off date for availing benefits, as was introduced under the Amendment to the EPS. Further, The Supreme Court also accepted the High Court’s finding that under the EPF Act, no additional burden was envisaged upon the employees to avail benefits of the Act for making contributions based upon actual salaries above the ceiling provided therein. Therefore, the Supreme Court agreeing with the High Court rejected the special leave petition filed by the EPFO and upheld the impugned judgment.
The Supreme Court in its judgment titled, ‘The Employees Provident Fund Organization & Ors. v. Sunil Kumar B & Ors.’, (SLP(c) No.8658-8659/2019) was again tasked with the issue regarding the cut-off date envisaged under para 11 (3) of the EPS 2014 Amendment. In this appeal filed by the EPFO challenging numerous judgments passed on similar issues by the High Courts of Rajasthan, Kerala and Delhi, the Supreme Court was called upon to settle the dispute regarding the cut-off date to avail benefits of the EPS on uncapped actual salaries under the 2014 amendment and to ascertain the applicability of its earlier judgment of R. C. Gupta. The Supreme Court saw merit in the arguments advanced by the Appellant, supported by precedents, to state that employees under EPF and EPF did not form a homogenous class of individuals and were subject to different rules. In light of this distinction, the Appellant contended that the judgment of R. C. Gupta required further consideration and did not correctly decide the subsisting issues under the EPF Act and the EPS Amendment. The Supreme Court noting that the judgment in R. C. Gupta was also passed by a division bench of the same strength, referred the issue to a larger bench to finally adjudicate whether para 11 (3) of the EPS provided for a cut-off date or not.
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(S).10013-10014 OF 2016
(Arising out of SLP(C) Nos.33032-33033 of 2015)
R.C. GUPTA & ORS. ETC. ETC.
VERSUS
REGIONAL PROVIDENT FUND
COMMISSIONER EMPLOYEES PROVIDENT
FUND ORGANISATION & ORS ETC.
ORDE R
...APPELLANT(S)
...RESPONDENT(S)
1. Leave granted.
2. The challenge in these appeals is to an order passed by the Division Bench of the Himachal Pradesh High Court reversing the order of the learned Single Judge by which the learned Single Judge had directed that the appellant-employees would be entitled to the benefit of deposit of 8.33% of their actual salary in the Pension Fund irrespective of the ceiling limit. The aforesaid percentage i.e. 8.33% is out of the total of 12%, which constitutes the employer's share under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as “the 1952 Act”).
3. The facts lie within a short compass. Under the 1952 Act, 10% or 12% of the basic wages including dearness allowance etc. is required to be deposited in the Provident Fund Account of an employee being the employer's share. The Act as enacted in the year 1952 did not contain any provision for pension. Sub-section 6A with which we are concerned, was inserted by an amendment w.e.f. 16.11.1995 providing for the Employees' Pension Scheme to be framed for payment of pension to retiring employees. The corpus of the pension fund was to be inter alia constituted by deposit of 8.33% of the employer's contribution under Section 6 of the Act. The Pension Scheme which was framed to give effect to the provisions of Section 6A contains inter alia Clause 11, which deals with determination of pensionable salary. Under Clause 11(3) of the Pension Scheme, the maximum pensionable salary was limited to Rs.5,000/-, which was subsequently enhanced to Rs.6,500/- per month w.e.f. 08.10.2001. A couple of months after the Pension Scheme was framed w.e.f. 16.11.1995, a proviso was added to Clause 11(3) w.e.f. 16.03.1996 permitting an option to the employer and an employee for contribution on salary exceeding Rs.5,000/- or Rs.6,500/- (w.e.f. 08.10.2001) per month. 8.33% of such contribution on full salary was required to be remitted to the Pension Fund….
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The judgements covered in this article discuss the provision of law under the EPF Act and the schemes framed thereunder, in particular the changes brought about by way of the 2014 amendment to the EPS. The judgments seek to ascertain the validity and correctness of the changes introduced by the 2014 amendment in light of the provision of the EPF Act, which has been a contention issue between the EPFO/Government and employees affected by these schemes under the EPF Act.
The law concerning beneficial arrangements such as provident fund and pension are technical fields of study encapsulated under the EPF Act and various schemes framed thereunder. These laws fall under the category of beneficial legislations and primarily seek to provide financial benefits to a vast majority of persons across numerous fields of employment. Therefore, it is imperative to gain a better understanding of these laws which can only be attained through the expertise of a labour and service lawyer. A lawyer can help you understand your rights and obligations under these laws to ensure that every intended beneficiary of such legislations is actually benefited by their proper implementation. Therefore, it is important to engage the services of a lawyer to make sure you get to reap the benefits of the EPF Act and the various schemes under it and gain the true rewards of your employment as per the systems set in place by the legislature.
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