SC Bars Contempt Actions Against EPFO For Implementation Of Employees Pension Proportional To Salary

The Supreme Court has barred all courts from taking up contempt petitions against the Employees Provident Fund Organization(EPFO) and the Central Government seeking the implementation of judgments which held that employees pension cannot be capped at Rs 15,000 and that the same should be proportional to the last drawn salary.

A bench comprising Justices UU Lalit and KM Joseph passed this order while deciding to hear the review petitions on the pensions case from March 23 on a day-to-day basis. The bench also categorically said that no adjournments will be given.

"Pending further consideration, no contempt application seeking implementation of any of the orders passed in the aforesaid four categories of matters, shall be taken up by any Court", the order said.

Among the four categories of cases mentioned in the order are the judgments of the High Courts of Kerala, Rajasthan and Delhi which had set aside Employee's Pension (Amendment) Scheme, 2014 that capped maximum pensionable salary to Rs.15, 000 per month.  It also includes the apex court's April 2019 judgment, which ordered that subscribers of the Employee Pension Scheme or EPS be given the full pension as calculated by their last drawn salaries, irrespective of the ceiling.

In April 2019, the Supreme Court had upheld the Kerala High Court judgment by dismissing the special leave petition filed by EPFO in limine. Recently, on January 29, 2021, while considering a review petition filed by the EPFO, the Supreme Court recalled its April 2019 order which had dismissed the SLP against the Kerala High Court judgment.

When these review petitions were taken up last week, the Centre brought to the notice of the Court an order dated 21.12.2020 passed by another Division Bench of the High Court of Kerala by which the correctness of the earlier decision dated 12.10.2018 was doubted and the matter was referred to Full Bench of the High Court. It was submitted that the effect of impugned order of the High Court is that the benefit would get conferred upon employees retrospectively which, in turn, would create great imbalance.

The 2014 amendment had brought these changes in the pension scheme :

(i) Limits the maximum pensionable salary to Rs.15,000 per month. Prior to the amendment, though the maximum pensionable salary was only Rs.6,500 per month, the proviso to the said paragraph permitted an employee to be paid pension on the basis of the actual salary drawn by him provided, contribution was remitted by him on the basis of the actual salary drawn by him preceded by a joint request made for such purpose jointly with his employer. The said proviso has been omitted by the amendment thereby capping the maximum pensionable salary at Rs.15,000. The Scheme has been amended further by a subsequent notification, the Employee's Pension (Fifth Amendment) Scheme, 2016 to provide that the pensionable salary for the existing members who prefer a fresh option, shall be based on the higher salary.

(ii) Confers an option on the existing members as on 1.9.2014 to submit a fresh option jointly with their employer to continue to contribute on salary exceeding Rs.15,000 per month. Upon such an option, the employee would have to make a further contribution at the rate of 1.16% on the salary exceeding Rs.15,000/-, additionally. Such a fresh option would have to be exercised within a period of six months from 1.9.2014. A power to condone the omission to exercise the fresh option within the said period of six months by a further period of six months is conferred on the Regional Provident Fund Commissioner. If no such option is made, the contribution already made in excess of the wage ceiling limit would be diverted to the Provident Fund Account, along with interest.

(iii) Provides that monthly pension shall be determined on pro-rata basis for pensionable service up to 1st of September, 2014 at the maximum pensionable salary of Rs.6,500 and for the period thereafter at the maximum pensionable salary of Rs.15,000 per month.

(iv) Provides for withdrawal of the benefits where a member has not rendered the eligible service as required.

Defending these amendments, the EPFO had contended before the Kerala High Court that, payment of pension computed on the basis of the contributions made on their actual salaries by the employees would deplete the Pension Fund and would make the Scheme unworkable. The High Court rejected this contention and also found that the provision capping the maximum pensionable salary at Rs.15,000/- thereby disentitling the persons who have contributed on the basis of their actual salaries to any benefits on the basis of the excess contributions made by them, is arbitrary and unsustainable.

Click here to read/download the order