EPF Pension Case : Supreme Court Asks Centre, EPFO To Show Materials On Cross Subsidy & Financial Burden [Day 2 Hearing Report]

On the second day of hearing in the EPF pension case, the Supreme Court posed queries to the Union Government and sought materials to show the financial burden which will be created on the implementation of the High Court judgments allowing pension in proportion to the salary above the threshold limit.The bench also asked the Union and the Employees Provident Fund Organization to show materials regarding the difference between the Employees Provident Fund and the Employees Pension Scheme and also detailed reports of accounting experts relating to cross-subsidization between both the funds. The bench observed that the Centre's financial experts must have taken into account the issue of cross-subsidization when the pension fund was introduced. The EPFO agreed to produce the reports in that regard.A 3-judge bench comprising Justices UU Lalit, Aniruddha Bose and Sudhanshu Dhulia was hearing the appeals filed by the Employees Provident Fund Organization challenging the High Court judgments which quashed the Employee's Pension (Amendment) Scheme, 2014 [2014 Amendment Scheme]."No material has been placed before us showing the problem if the Kerala High Court judgment is permitted...What is the glaring error in applying it retrospectively? Tell us that", the bench asked Additional Solicitor General Vikramjit Banerjee, who was appearing for the Union of India.The High Court had set aside the cap of monthly salary of Rs 15,000 for getting the pension scheme benefits and held that no cut-off date was applicable for it.The ASG said that it has the effect of retrospectively applying the benefits of the Employee Pension Scheme which is contrary to the statutory scheme. "The scheme says that there must be time to time contribution, at very specific intervals. It cannot be at different points of time, whenever you want to contribute. That's not the intention. That cannot be the intention. As your Lordships have seen, a number of times, it's a definite scheme. You cannot have unlimited amounts of payouts, which we don't even have a control of…..Here, the fund is limited, it has to be definite.", the ASG explained. Further, he added that the Kerala High Court had struck down the entire notification, even portions which had not been challenged. The judgement also showcased lack of application of mind and sufficient reasoning, he added. "….the entire notification is struck down, everything goes out including what was not challenged. There's non application of mind and no reasoning given in the judgement. Your Lordships have seen what the Kerala HC judgement has done, it struck down the entire notification, which means increasing of Rs 6,500 to Rs 15,000, the contribution of 1.16, also gets struck down in the entire process." Here are the other key issues highlighted today: Cut off Date Issue During the hearing, Justice Lalit said that the cutoff date is one issue here and another issue would be analyzing the Kerala High Court's take in the matter. "…..There are certain judgements which grants them the benefit, certain judgements have refrained from granting the benefit. So, what line do we adopt here?" The ASG said that the High Court's judgment to make the scheme retrospective after taking away the cut-off date was totally unanticipated. "According to us, the statute is very clear, that there must be a cutoff date", Banerjee stated. Difference Between Provident Fund Scheme and Pension Fund Scheme As the hearing progressed, the Court questioned the ASG on the authority which specifies the difference in structure and treatment of EPFS and EPS. "What is the infirmity, if at all, in the analysis made by the High Court?.. Secondly, what difference does it make? You are actually making transfer of money from one account to the other? Theoretically, tell us that the Provident Fund and Pension Fund are managed on the same principles or there are different principles?", the Bench asked. "Different principles", the ASG said. "Where do we get that a provident fund needs to be managed in a particular fashion and maximize the return on the investment to the extent possible, so that the time of retirement of the man, he will earn his original contribution and interest, whereas when it comes to pension, what kind of analysis is made? Whether the longevity of a person, their life span is taken into account?" "I can give a comparative table on the difference", ASG said. "Another question now, the increase in wage structure limits the burden on provident fund scheme, it has been well absorbed by Provident Fund. Whereas it is becoming extremely difficult to absorb or sustain the Pension Scheme. Do we have that kind of comparison?", the court queried. Banerjee read from the both the Provident Fund Scheme and Pension Scheme to explain the differences. Further, in an attempt to satisfy the bench, Senior Advocate Aryama Sundaram appearing for EPFO...

EPF Pension Case : Supreme Court Asks Centre, EPFO To Show Materials On Cross Subsidy & Financial Burden [Day 2 Hearing Report]

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