'Unconstitutional': Karnataka High Court Strikes Down Amendment Extending EPF Scheme To 'International Workers' Without Salary Ceiling Limit

A single judge bench of Justice K S Hemalekha noted that the Employees Provident Fund and Miscellaneous Provisions Act prescribes a ceiling amount of Rs.15,000/- per month salary as a threshold for an employee to be a member to the scheme. However, the Scheme had unlimited threshold for international workers while denying the same benefit to Indian workers.

It said, "Para 83 of the EPF Scheme is in the nature of subordinate legislation and therefore, the subordinate legislation cannot travel beyond the scope of the mother Act...There being no commonality of interest of the aims and objectives of EPF & MP Act, 1952 and para 83 of EPF Scheme, para 43A of EP Scheme to be struck down as incompatible, arbitrary, unconstitutional and ultra vires."

Court said the object of para 83 of the EPF Scheme was to protect Indian employees working abroad from being subjected to prejudicial social security and retirement clause, and to motivate these countries to enter into reciprocal agreements with India. However, it pointed,

"An Indian employee working in a foreign country with SSA who is a member of EPF & MP Act, 1952 continues to contribute on meager sum of Rs.15,000/- whereas, a foreign worker from SSA country, without a certificate of coverage, is made to contribute PF on his entire salary although both are by definition of international workers. The Government of India is unable to substantiate any nexus with the object sought to be achieved, para 83 is clearly discriminatory in treating the international workers of Indian origin and foreign origin differently and thus violative of Article 14 of the Constitution of India."

The Union of India, vide notification dated 01.10.2008, introduced para 83 in the EPF Scheme and further para 43A under the Pension Scheme covering international workers with effect from 01.10.2008.

The petitioners Stone Hill education Foundation and others sought to declare the provisions as unconstitutional and hit by Article 14 of the Constitution, and also as illegal opposed to the very object of the Employees Provident Fund and Miscellaneous Provisions Act, 1952.

It was argued that the Scheme now covers “international workers” irrespective of the salary drawn by them whereas other employees who draw exceeding Rs.15,000 per month are outside the purview of the Scheme. The international workers do not work till retirement, they work only for a limited period and thus, requiring them to pay PF contribution on their entire global salary would cause irreparable injury, it was further argued.

The Union of India opposed the plea contending that the Government finalised a bilateral Social Security Agreement (“SSA”) with Belgium, Germany, Switzerland, Denmark, Luxemburg, France, South Korea, and the Netherlands effective on several dates respectively. As a result of the said reciprocal agreements, the Government had extended the provisions of the EPF & MP Act, 1952, and the Scheme to the international workers.

Further, it said the intention of the Parliament to amend the Scheme is to ensure that no person can be deprived of social security benefits and also no Indian deputed to work outside the country should be deprived of the benefits. To protect the rights of the Indian workers on their posting in the overseas countries for a limited period were required to make mandatory social security contributions in accordance with the laws of those countries.

The Union also said that International workers being a special class, and in order to fulfil international obligations, the Government has made special provisions for international workers, which is distinct from employees covered under the Act and that the classification made is intelligible differentia which has rational relations to the object sought to be achieved.

The bench noted that the distinction in the amount of contribution between an employee going to a non SSA country and an employee from a non-SSA country coming to India is clearly discriminatory and violative of Article 14. "The demand for contribution on global salary i.e., salary earned by an international worker or remuneration received by an international worker from some other country or in home country should also be computed for the purpose of the contribution is on the face of it, arbitrary and hit by Article 14 of the Constitution of India.”

It also said that government neither stated whether Indian employees working in non SSA countries are required to contribute their entire pay without statutory limit towards PF of that country. "In the absence of parity and also in the absence of reciprocity, there is no justification to demand a contribution on the entire pay of a foreign employee from a non-SSA country.”

Appearance: Senior Counsels S.N.Murthy, Udaya Holla, Dhyan Chinnappa, Lakshmi Iyengar, for Advocates Somashekar, Rajendra M.S, M.V. Sundararaman, Krishar Somaiah, Revathy Adinath Narde, K.S.Mahadevan, H.Srinivasa Rao, Deepthi C.R, K.N.Vasuki, C.K.Subrahmanya, B.C.Prabhakar, Anand K.R, Santosh Narayan S, Adithya Vikram Bhat, for the petitioners.

CGC M.N. Kumar, For R1.

Advocate Nandita Haldipur, For R2, R3.

Advocate Shwetha Anand, For R2.

Citation No: 2024 LiveLaw (Kar) 215.

Case Title: Stone Hill Education Foundation AND Union of India & Others

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