EPF Pension Case : Supreme Court Larger Bench To Decide If There Is Cut-Off Date For Option Under Para 11(3) Of EPS

The Supreme Court on Monday referred to a larger bench the appeals filed by the Employees Provident Fund Organization (EPFO) and the Union of India challenging the judgments of Kerala, Delhi and Rajasthan High Courts which quashed the Employee's Pension (Amendment) Scheme, 2014.

A division bench comprising Justices UU Lalit and Ajay Rastogi said that the principal questions that arise for consideration are :

While stressing on the difference between Provident Fund schemes and Pension schemes, the Employees Provident Fund Organisation argued before Supreme Court that if no cut off date is made applicable under clause 11(3) of the Employees Pension Scheme for making uncapped pension contributions, it would create a great imbalance.

According to EPFO, if the option under paragraph 11(3) of the Pension Scheme was to be afforded well after the cut- off date, it would amount to cross- subsidisation by those who were regularly contributing to the Pension Scheme in favour of those who come at a later point in time and walk away with all the advantages.

The submissions were advanced by EPFO through Senior Advocate C Aryama Sundaram.

Senior Advocate Sundaram submitted before the Court that the emphasis on investment of the amount in both the funds would qualitatively be of different dimension.

He also relied on Supreme Court's judgement in Krishena Kumar Vs.Union of India(1990) where it was observed that the Rules governing the Provident Fund Scheme were entirely different from the Rules governing Pension Scheme. Therefore, Pension Retirees and Provident Fund Retirees did not form a homogeneous class.

The Employees Provident Fund Organization argued that the difference between two schemes which was fulcrum of the decision in Krishena Kumar was not so noted in the subsequent decision given in 2016 in the case of R.C. Gupta and Ors. v Regional Provident Fund Commissioner, Employees' Provident Fund Organization and Ors. It would not be a mere adjustment of amount to transfer from one fund to another as stated in R.C. Gupta and the decision in R.C. Gupta is required to be re-visited, the EPFO urged.

The Kerala High Court's 2018 judgment which quashed the 2014 amendments to EPS Scheme had relied on the RC Gupta verdict. In R.C. Gupta, 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.

Difference Between Provident Fund Scheme & Pension Scheme Is Well Recognized:

According to EPFO, under the Provident Fund scheme, the contributions made by the employer and the employees during the employment of the employee would be made over to the employee along with interest accrued thereon at the time of his retirement. Thus, the obligation on the part of the operators of the Provident Fund Scheme would come to an end, after the retirement of the employee. However, the obligation under the Pension Scheme would begin when the employee retired.

Under the Provident fund scheme, the liability was only to pay interest on the amount deposited and to make over the entire amount at the time of his retirement. On the contrary, in the pension scheme, it would be for the operators of the Pension Scheme to invest amount deposited in such a way that after the retirement the invested amount would keep on giving sufficient returns so that the pension would be paid to the employee not only during his life time but even to his family members after his death.

2-judge bench refers the EPFO appeals to larger bench

The EPFO argued that the RC Gupta case needs to be revisited as it was decided without taking note of the judgment in Krishenakumar.

A division bench comprising Justices UU Lalit and Ajay Rastogi said that since RC Gupta was decided by a coordinate bench of two-judges, the proper course would be to refer the matter to a larger bench.

"These, and the other submissions touching upon the applicability of the principle laid down in the decision in R.C. Gupta1 go to the very root of the matter. Sitting in a Bench of two Judges it would not be appropriate for us to deal with said submissions. The logical course wouldbe to refer all these matters to a Bench of at least three Judges so that appropriate decision can be arrived at".

A three-Judge Bench comprising the then CJI Ranjan Gogoi, Justice Deepak Gupta and Justice Sanjiv Khanna had in 2019 dismissed the Special Leave Petition filed against a Kerala High Court Judgment setting aside Employee's Pension (Amendment) Scheme, 2014 that capped maximum pensionable salary to Rs.15, 000 per month.

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.

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

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Reports about the hearing :

EPF Pension Case : High Courts Assumed Exercise Of Option Wasn't Necessary For Pension Above Upper Limit, EPFO Argues In Supreme Court

EPF Pension Case: Supreme Court To Consider If Reference To Larger Bench Is Needed In View Of 'RC Gupta' Decision