The Supreme Court ruled that the employees who have retired before 1st September 2014 upon exercising option under paragraph 11(3) of the 1995 scheme shall be covered by the provisions of paragraph 11(3) of the pension scheme as it stood prior to the amendment of 2014.
In the judgment, the Court dealt with the legality of certain amendments and modifications made by the Central Government to the Employees’ Pension Scheme, 1995.
Such scheme has been made in pursuance of Section 6A of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.
Such changes are sought to be effected in paragraphs 3, 6, 11, 12 and 14 of the 1995 scheme.
The Act originally did not provide for any pension scheme and Section 6A was introduced to the said Act by way of an amendment made in 1995.
The amendment of 1995 contemplated formulation of a scheme for employees’ pension and the pension fund was to comprise a deposit of 8.33 percent of the employers’ contribution made towards provident fund corpus as per the prevailing Statue.
The appellants while assailing the judgments contended that the membership of the pension scheme may have become a vested right for those opting under paragraph 26(6) of the EPFS before amendment to paragraph 6 of the pension scheme. Those who were yet to exercise options under paragraph 26(6) could not claim such vested right of membership to pension schemes.
They submitted that all the employees of an establishment do not constitute a homogeneous class. It is within the power and authority of the Central Government to differentiate between employees earning lower wages and those earning higher salary and offer improved social benefits for those in the lower wage bracket.
The three judges bench of The Chief Justice of India Uday Umesh Lalit, Justice Aniruddha Bose and Justice Sudhanshu Dhulia found that the amendment was made in exercise of power otherwise vested in the authority making such amendment and the amendments were made on the basis of certain relevant materials and not whimsically.
The court said that in its view classification of the employees made by the authorities on the basis of the salary drawn in the 2014 amendment meets the test of reasonable classification contemplated in Article 14 of the Constitution of India.
“The newspaper report quoted in the Kerala High Court judgment, in our opinion, would not give an effective guidance as regards position of the pension fund and it would be prudent for the Court leave such decisions to be made by the scheme framing body. This approach would be in line with the reasoning of the Constitution Bench in the case of Krishena Kumar” the court added.
It was observed that the requirement in the scheme for employee’s contribution to the extent of 1.16 per cent for option members is illegal.
It was further observed that there is nothing in the 1952 Act which requires payment to the pension fund by an employee. Section 6A of the Act also does not have any such stipulation.
The bench opined that a legislative amendment of the Act would have been necessary, providing for contribution to be made by an employee. To that extent, the provision of the scheme requiring contribution by an individual employee is ultra vires the parent act.
The court said that it cannot mandate the Central Government to contribute to a pension scheme, in absence of a legislative provision to that effect. It would be for the administrators to readjust the contribution pattern within the scope of the statute and one possible solution could be to raise the level of the employer’s contribution in the scheme.
The court suspended a part of its judgment and said that till such time, if no such legislative exercise is undertaken, the duty to contribute 1.16 per cent of the salary shall apply on option members as well. This contribution shall be adjusted depending on any amendment that may be brought.
It was directed that for the period of six months, however, the opting employees shall make payment of 1.16 per cent contribution as stop gap measure.
“In the event no amendment to the statute or the scheme is made within such extended time, then the administrators of the fund will have to operate the pension fund for the option members from out of the existing corpus” the bench ordered.
It was further observed by the court that the dual option, as is contemplated in paragraph 11(4) of the pension scheme (post 2014 amendment), has to be merged into one. In the event the employer and employee jointly opt for coverage beyond the salary limit of Rs. 15000/, without giving an earlier option under the unamended Clause 11(3) of the pension scheme, they would not be automatically excluded from their right to exercise option under paragraph 11(4) of the scheme, post amendment.
The court held that the provisions contained in the notification of August 2014 are legal and valid.
The court ordered that the amendment to the pension scheme brought about by the notification shall apply to the employees of the exempted establishments in the same manner as the employees of the regular establishments.
The court agreed with the view taken by the Division Bench in the case of R.C. Gupta so far as interpretation of the proviso to paragraph 11(3) (preamendment) pension scheme is concerned and directed that the fund authorities shall implement the directives contained in the said judgment within a period of eight weeks, subject to its directions contained.
Case title: The Employees Provident Fund Organisation & Anr. Etc. v/s Sunil Kumar B. & Ors. Etc.
Citation: Special Leave Petition (C) Nos. 86588659 of 2019