EPF Pension Case: Employees Argue They Can't Be Asked To Contribute 1.16% Of Salaries Above Rs 15,000 [Supreme Court Hearing Day 4]

The submission was made by Senior Advocate R Basant appearing for pensioners from Kerala before a 3-judge bench comprising Justices UU Lalit, Aniruddha Bose and Sudhanshu Dhulia.  The senior counsel was briefed by Advocate- on-Record Ragendh Basant.

The Bench was hearing the appeals filed by the Employees Provident Fund Organization challenging the Kerala, Rajasthan and Delhi High Court judgments which had quashed the 2014 Amendment Scheme.

In 2018, the Kerala High Court, while setting aside the Employee's Pension (Amendment) Scheme, 2014 [2014 Amendment Scheme], allowed paying pension in proportion to the salary above the threshold limit of Rs 15,000 per month. 

During the hearing on Friday, Basant submitted that according to the 2014 Amendment, if an employee wants to contribute on more than Rs 15,000, then 1.16% will have to be contributed by him.

"Section 6A (2) of the (1952) Act clearly envisages the funds that come under the Pension Fund is 8.33% of the employer and 1.16% by the Central government. An employee putting in money for pension, is unheard of…. Unless the Act provides for it, a subordinate legislation (2014 Amendment Scheme) cannot go beyond the Act. For the first time, an imposition is placed on the employee to contribute 1.16", he submitted.

As the hearing progressed, the court remarked, "See, so long as the 1.16% was getting contributed from the coffers of the government and 8.33% is coming from the employer's contribution, the employee had nothing substantial to do in the matter to the regime of 11 (3) and proviso. Correct?"

Basant agreed.

"So, his option, whether he gives or doesn't give is immaterial. I can go to that length and say that. According to your understanding and your submission, the moment something is getting deducted in excess of the salary level, which is the minimum level of Rs 6,500 and I am going by my normal salary for PF deduction. That is your base figure. Your base figure will tell you 12% of that. Once you get that into your kitty, the 8.33% must actually seep its way into the other portal. And going by normal ideology, 1.16% of Rs 6,500, that means government's contribution per employee is numbering the employees…..the government is also making contribution. In that scenario employee has nothing to do", the Court continued.

Coming to the present scenario, the Court said,

"….Anything in excess of 15,000, you (the employee) must contribute 1.16. Whether they are right or wrong in their assessment is a different thing. We are only saying that, where is the issue of option arising here? Because you are going to contribute that, 1.16%. So, theoretically, 1.16 must come from your pocket. Correct? In order to say Employees Pension Fund will always be replenished by this of monthly contributions from month to month. Therefore, you are accepting a liability on your shoulders or on your head and therefore, the option."

"Milord, if 1.16% levy is legally impermissible, then option is relevant. I'll explain why…", Basant responded.

"Your argument is basically that 1.16 has never been insisted upon", the court reiterated.

"As your Lordships rightly noted, my contribution can only be x% of my salary. It can only be that. It can never exceed that, going by the statute. To the Pension Fund, I am not expected to contribute. That's why I want your Lordships to see section 6A (2). The government must contribute but I cannot be asked to contribute. If you ask the employee also to contribute then, the Act has to be amended."

At this juncture, the court asked,

"Earlier, if the salary was 6,500, who was contributing 1.16?"

"The government", Basant replied.

"Only for 6,500 the government was contributing. Any slab above 6,500 was left without any contribution, correct? The minimum level is 6,500", the court said.

Option Aspect Is Irrelevant 

Basant also made pertinent submissions relating to the Cut-off date and option aspect relating to the 2014 Amendment Scheme. On the latter, he submitted that if you exercise an option under 26 (6) of the EPF Scheme,1952, then there is no requirement to exercise any further option under proviso to 11 (3) of the 2014 Amendment Scheme. The option under 11(3) is subsumed under the option one exercises under 26 (6), the counsel submitted.

"Milord, what happened after RC Gupta decision is very important. This, they also accept. It says you cannot deny on the basis of any cut off date. And therefore, everyone has a right to opt……Non exercise of the option I submitted is of no consequence considering 26 (6). Therefore, non-exercise of the insignificant option, if I may call it milords, cannot in anyway deny us the benefits under the legislation."

There cannot be a Cut Off Date

Earlier, the EPF had a cutoff date of 1.12.2004 by which one had to exercise the option, Basant submitted

"The Single Judge of the Kerala High Court said there cannot be any cutoff date. The Division Bench also affirmed this. When the matter reached the Supreme Court, it had dismissed the matter on March 31, 2016. Thereafter, in the case of RC Gupta, the Supreme Court on October 4, 2016, categorically said that there can't be any cutoff date. So, even if, exercising option under 11 (3) was required, the EPF Department was bound to accept the option after RC Gupta."

"Vested rights are created by the provision, option without any limitation regarding time under the proviso to 11 (3). One fine morning if you drop it, it amounts to upsetting vested rights. Excluding such people suffers from the vice of under-inclusion and defeats the vested rights of such people.", Basant argued.

Court asks EPFO if relevant documents have been submitted

As the hearing drew to a close, the Bench queried the counsel appearing for EPFO if the documents showing financial burden have been placed on record. In a previous hearing, the Supreme Court had 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 allotted time to the remaining respondents and the petitioners for completion of arguments.

Apart from Basant, Senior Advocates Meenakshi Arora, Vikas Singh, Gopal Shankarnarayan also placed their arguments yesterday.

Arora placed arguments on how the data submitted by the Employee Pension Fund Organisation and Union government showing financial burden is false. And that the Pension Corpus Fund remains untouched while paying the pension. It paid based on the interest that the Fund accrues; she apprised the Bench. In order to strengthen her arguments, she relied on government data as well.

The matter will be next heard on August 10.

Case Title: EPFO vs Sunil Kumar and Ors

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

EPF Pension Case : 'No Deficit In Pension Fund', Pensioners Tell Supreme Court Countering EPFO Argument Of Financial Burden [Hearing Day 3]