EPF Pension Case : Supreme Court Refers EPFO Appeals to 3-Judge Bench

The question of referral came up before the 2-judge bench in consideration of submissions made by Senior Advocate C Aryama Sundaram on behalf of the EPFO, doubting the correctness of Supreme Court's 2016 judgment in the case R.C. Gupta and Ors. v Regional Provident Fund Commissioner, Employees' Provident Fund Organisation and Ors.

The bench had on 18th August observed that it will consider if the matter needs to be heard by a three-judge Bench, as it cannot go into correctness of RC Gupta which was delivered by coordinate bench of 2 Judges

In R.C. Gupta and Ors. v Regional Provident Fund Commissioner, Employees' Provident Fund Organisation and Ors, which was decided by a 2-judge bench in October 2016, the Supreme Court had struck down the six-month opt-in window from 1 September 2014, for employees to continue making uncapped pension contributions.

The present bench hearing the EPF appeals had wondered if it will be proper on its part to consider the issue in variance with the decision in RC Gupta. If any doubt is raised regarding the said decision, the bench had said the proper course might be to refer it to a larger bench.

After the bench pronounced the referral order today, some of the lawyers appearing for party respondents, Senior Advocates Kapil Sibal, Gopal Shankaranarayanan, R Basant etc., requested the bench to make the reference without any observation regarding RC Gupta case. They submitted that the bench has not heard the respondents' arguments regarding the validity of RC Gupta judgment and that it has head only the arguments of EPFO about RC Gupta case.

But the bench said that it could not have made a simple reference, as it would have looked the bench shirking its responsibility of hearing the case.

"Simplicitor reference is not a proper idea, it will be like we are not willing to hear the matter and shirking our responsibility. We are not deciding merits or demerits of the (RC Gupta) judgement", Justice Lalit replied. The judge added that the entire batch has been referred.

The Kerala High Court, while setting aside the 2014 amendments by its 2018 judgment, had declared that all the employees shall be entitled to exercise the option stipulated by paragraph 26 of the EPF Scheme without being restricted in doing so by the insistence on a date. Further, the High Court had also set aside the orders issued by the EPFO declining to grant opportunities to the employees to exercise a joint option to remit contributions to the Employees Pension Scheme on the basis of the actual salaries drawn by them.

In April 2019, the Supreme Court had dismissed the special leave petition filed by the EPFO against the Kerala High Court's judgment, through a summary order. Later, in January 2021, a three-judge bench recalled the dismissal order in the review petitions filed by the EPFO, and posted the matters for hearing in open court.

On February 25, 2021, the division bench of Justice UU Lalit and Justice KM Joseph restrained the High Court of Kerala, Delhi and Rajasthan from initiating contempt proceedings against the Central Government and the EPFO over the non-implementation of the HC verdicts. The bench also posted the matters for final hearing.

Schemes Relevant to the Case:

The EPF Act 1952 did not contain any provision for pension. Later in 1995, Sub-section 6A was inserted by an amendment providing for the Employees' Pension Scheme 1995 to be framed for payment of pension to retiring employees.

The corpus of the pension fund was to be constituted by deposit of 8.33% of the employer's contribution under Section 6 of the Act. Clause 11 of the Pension scheme deals with determination of pensionable salary and 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.

Subsequently, a proviso was added to paragraph 11(3) of the Pension Scheme with effect from 16.03.1996 granting an option to the employer and the employee to contribute amounts towards the pension fund at the rate of 8.33% of the actual salary drawn by the employee, where the salary exceeded Rs.5,000/- or Rs.6,500/- (w.e.f. 08.10.2001). 8.33% of such contribution on full salary was required to be remitted to the Pension Fund.

Amendment to the scheme in 2014:

The following amendments were made under EPS, with effect from 1 September 2014:

• Wage ceiling for the purpose of contribution and maximum pensionable salary for the purpose of calculating monthly pension was increased from 6,500 to 15,000 per month.
• The proviso to clause 11(3) for uncapped contributions towards higher salary was deleted.

• Short window of 6 months to members: While new members who joined after September 2014 and were drawing salary exceeding limit had no option to contribute at all, those who were the members had to exercise the option to contribute to pension on higher wages within six months from 1 September 2014.

The Government's share of contribution i.e. 1.16 per cent per month was to be paid by the employee now on the salary exceeding the statutory limit if member employee opted to contribute towards pension fund over and above the wage ceiling.

The amendment therefore resulted in exclusion of new members who earned above 15000 from the pension completely and the 8.33% of employer's contribution in their case was to go to EPF fund instead. Even the existing members only had a 6 month window to opt for making uncapped contributions.

Case Details

Case Title : The Employees Provident Fund Organization and others v.Sunil Kumar B and others - SLP(c) No.8658-8659/2019 and connected cases.