As per the case facts, appeals were filed concerning the interpretation and implementation of the Employees Provident Fund pension scheme, particularly regarding the computation of pensionable salary. The matter involved ...
No Acts & Articles mentioned in this case
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE/ORIGINAL/INHERENT JURISDICTION
Civil Appeal Nos………………. of 2022
(Arising out of the Special Leave Petition (C) Nos. 86588659
of 2019)
THE EMPLOYEES PROVIDENT FUND
ORGANISATION & ANR. ETC. ….APPELLANT(S)
VERSUS
SUNIL KUMAR B. & ORS. ETC. ….RESPONDENT(S)
WITH
Civil Appeal Nos……………….. of 2022
(Arising out of Special Leave Petition (C) Nos. 1672116722 of
2019)
Civil Appeal No……………….. of 2022
(Arising out of Special Leave Petition (C) No. 3289 of 2021)
Civil Appeal No……………….. of 2022
(Arising out of Special Leave Petition (C) No. 3287 of 2021)
Civil Appeal No……………….. of 2022
(Arising out of Special Leave Petition (C) No. 1701 of 2021)
Civil Appeal No……………….. of 2022
(Arising out of Special Leave Petition (C) No. 8547 of 2021)
Civil Appeal Nos……………….. of 2022
(Arising out of Special Leave Petition (C) Nos.1506315064 of
2022 @ Diary No.46219 of 2019)
Civil Appeal No……………….. of 2022
(Arising out of Special Leave Petition (C) No. 1366 of 2021)
Civil Appeal No……………….. of 2022
(Arising out of Special Leave Petition (C) No. 2465 of 2021)
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Civil Appeal No……………….. of 2022
(Arising out of Special Leave Petition (C) No. 3290 of 2021)
Civil Appeal No……………….. of 2022
(Arising out of Special Leave Petition (C) No. 1738 of 2021)
Writ Petition (C) No.318 of 2022, Writ Petition (C) No.1218 of
2020, Writ Petition (C) No.1332 of 2020, Writ Petition (C)
No.1312 of 2019, Writ Petition (C) No.875 of 2019, Writ Petition
(C) No.832 of 2019, Writ Petition (C) No.601 of 2019, Writ
Petition (C) No.500 of 2019, Writ Petition (C) No.512 of 2019,
Writ Petition (C) No.466 of 2019, Writ Petition (C) No.86 of 2021,
Writ Petition (C) No.1356 of 2021, Writ Petition (C) No.1379 of
2021, Writ Petition (C) No.767 of 2021, Writ Petition (C) No.477
of 2021, Writ Petition (C) No.414 of 2021, Writ Petition (C)
No.1134 of 2018, Writ Petition (C) No.390 of 2019, Writ Petition
(C) No.511 of 2019, Writ Petition (C) No.1459 of 2020, Writ
Petition (C) No.349 of 2019, Writ Petition (C) No.372 of 2018,
Writ Petition (C) No.360 of 2018, Writ Petition (C) No.233 of
2018, Writ Petition (C) No.141 of 2018, Writ Petition (C) No.118
of 2018, Writ Petition (C) No.250 of 2018, Writ Petition (C)
No.406 of 2018, Writ Petition (C) No.368 of 2018, Writ Petition
(C) No.393 of 2018, Writ Petition (C) No.395 of 2018, Writ
Petition (C) No.371 of 2018, Writ Petition (C) No.374 of 2018,
Writ Petition (C) No.385 of 2018, Writ Petition (C) No.367 of
2018, Writ Petition (C) No.369 of 2018, Writ Petition (C) No.411
of 2018, Writ Petition (C) No.466 of 2018, Writ Petition (C)
No.269 of 2019, Writ Petition (C) No.327 of 2019, Writ Petition
(C) No.352 of 2019, Writ Petition (C) No.69 of 2018, Writ Petition
(C) No.804 of 2018, Writ Petition (C) No.594 of 2018, Writ
Petition (C) No.884 of 2018, Writ Petition (C) No.778 of 2018,
Writ Petition (C) No.874 of 2018, Writ Petition (C) No.1149 of
2018, Writ Petition (C) No.1167 of 2018, Writ Petition (C)
No.1430 of 2018, Writ Petition (C) No.1433 of 2018, Writ Petition
(C) No.1428 of 2018, Writ Petition (C) No.380 of 2018, Writ
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Petition (C) No.498 of 2022, Contempt Petition (C) Nos.1917
1918 of 2018 in Civil Appeal Nos.1001310014 of 2016 and
Contempt Petition (C) Nos.619620 of 2019 in Civil Appeal
Nos.1001310014 of 2016
J U D G M E N T
ANIRUDDHA BOSE, J.
Leave granted.
2.In this judgment, we shall deal with the legality of certain
amendments and modifications made by the Central Government to
the Employees’ Pension Scheme, 1995 (“1995 Scheme”). Such
scheme has been made in pursuance of, interalia, Section 6A of the
Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
(“the Act”). Such changes, interalia, are sought be effected in
paragraphs 3, 6, 11, 12 and 14 of the 1995 scheme. The Act
originally did not provide for any pension scheme and Section 6A
was introduced to the said Act by way of an amendment made in
1995. The amendment of 1995 contemplated formulation of a
scheme for employees’ pension and the pension fund was to
comprise of deposit of 8.33 per cent of the employers’ contribution
made towards provident fund corpus as per the prevailing Statue.
Paragraph 11 of the scheme dealt with determination of pensionable
salary. At that point of time, maximum pensionable salary was
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Rs.5000/ and this sum had been enhanced subsequently to
Rs.6500/. Pensionable salary was raised to Rs.15000/ by a
notification dated 22
nd
August 2014 [numbered G.S.R. 609 (E)],
which was to be effective from 1
st
September 2014. This notification
brought certain other modifications in the scheme mainly restricting
its coverage and we shall discuss these modifications later in this
judgment.
3.In the appeals before us, judgments of the High Courts of
Kerala, Rajasthan and Delhi are assailed. In the case of P.
Sasikumar & Others vs. Union of India (UOI) Represented by the
Secretary to Govt. of India Ministry of Labour & Department of
Employment and Others [in Writ Petition (C) No. 13120 of 2015], a
Division Bench of the Kerala High Court in its judgment delivered on
12
th
October 2018 set aside the Employees’ Pension Amendment
(Scheme), 2014 conceived in G.S.R. 609 (E). The Delhi High Court in
its judgment delivered on 22
nd
May 2019 in the case of Bhartiya
Khadya Nigam Karamchari Sangh and Anr. vs. Union of India
and Ors. [in Writ Petition (C) No. 5678 of 2018] followed the view
expressed by the Kerala High Court and quashed a circular issued
by the provident fund authorities on 31
st
May 2017 precluding
exempted establishments from the benefits of higher pension. In a
decision delivered on 28
th
August 2019 in the case of Union of India
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and Others vs. Jale Singh and Others [in D.B. Special Appeal Writ
No. 436 of 2019] a Division Bench of the Rajasthan High Court also
expressed the same opinion. Appeals arising out of SLP (C) No. 3289
of 2021, SLP (C) No. 3290 of 2021, SLP (C) No. 2465 of 2021 and SLP
(C) No. 3287 of 2021 are directed against the aforesaid judgment of
the Rajasthan High Court and a subsequent decision of a Bench of
equal strength delivered on 24
th
September 2019 in the same line.
The appeals originating from SLP (C) Nos. 1506315064 of 2022 are
against the judgment of the Delhi High Court delivered on 22
nd
May
2019, whereas in appeals having their roots in SLP (C) No. 1366 of
2021, SLP (C) No. 1738 of 2021, judgments of the Delhi High Court
delivered following the case of Bhartiya Khadya Nigam Karamchari
Sangh (supra) have been assailed. In another judgment delivered by
the same Bench of the Kerala High Court in the case of Sunil Kumar
and Ors. vs. Union of India & Ors. [in Writ Petition (C) No. 602 of
2015] on the same day, i.e. 12
th
October 2018, the aforesaid
notification of 22
nd
August 2014 was invalidated. That judgment is
under challenge in the appeals in connection with SLP (C) Nos.
1672116722 of 2019. In a contempt action brought before the
Kerala High Court by aspiring beneficiaries of the pension scheme for
implementation of the directions issued in the judgment dated 12
th
October 2018, certain directions have been issued by the Kerala High
5 | P a g e
Court. The judgment to that effect delivered on 6
th
November 2020 is
impugned in SLP (C) No. 8547 of 2021.
4.Fiftyfour writ petitions have been filed by the employees
themselves or on their behalf under Article 32 of the Constitution of
India seeking invalidation of the notification dated 22
nd
August 2014.
The writ petitioners are members of both exempted and unexempted
establishments. We shall address these writ petitions as well in this
judgment, as they involve the same questions of law. We find that
notices are yet to be issued in W.P. (C) No. 1356 of 2021, W.P. (C) No.
1379 of 2021, W.P. (C) No. 767 of 2021 and W.P. (C) No. 477 of 2021
but these petitions also involve the same questions of law and the
main respondents have participated in addressing us on these
points. As such, these writ petitions shall also be dealt with in this
judgment. We have also heard the intervenors, most of whom
support the employees. In addition, there are contempt petitions
(Contempt Petition (C) Nos. 19171918 of 2018 and Contempt
Petition (C) No. 619620 of 2019) in which implementation of a
judgment of this Court in the case of R.C. Gupta and Others vs.
Regional Provident Fund Commissioner, Employees Provident
Fund Organisation and Other [(2018) 14 SCC 809] delivered on 4
th
October 2016 has been asked for. This judgment dealt with the
question of entitlement of members of the pension scheme, whose
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pensionable salary exceeded Rs.6500/ per month to exercise option
in terms of proviso to paragraph 11 (3) of the scheme. In this
judgment, a Division Bench of this Court repelled the contention of
the provident fund authorities that the said proviso contemplated
exercise of option within a specified time. The said proviso has been
omitted by the amendment of 2014. Rs.6500/ was the maximum
pensionable salary prior to 1
st
September 2014. We shall discuss
this judgment in greater detail later.
5.With effect from 16
th
March 1996, the proviso was added to
paragraph 11(3) of the scheme giving an option to the employer and
employee for contribution on salary exceeding the aforesaid ceiling of
Rs.6500/, (which was Rs.5000/ per month prior to 8
th
October
2001) to retain the right to pension as per the scheme. 8.33 per cent
of employer’s contribution of salary of an employee out of the
deductible amount towards provident fund had to be remitted to the
pension fund. Stand of the authorities was that there were certain
restrictions as regards the time for exercising such option. A set of
employees had approached the provident fund authorities much
beyond such perceived specified date, mostly on the eve of their
retirement, seeking to be included in the pension scheme. The point
urged by them was that the amendment of 1996 was not within their
knowledge, the same not having been widely publicised. The
7 | P a g e
provident fund authorities had rejected their plea. One set of
employees successfully brought action before a Single Judge of the
High Court of Himachal Pradesh. Their right to exercise such option
beyond the time of their salary exceeding the pensionable limit was
in question. According to the authorities, that was the cutoff limit.
The Division Bench of the High Court, however, accepted the stand
of the provident fund authorities holding that paragraph 11(3) of the
pension scheme, as it prevailed then, stipulated a cutoff limit. The
matter ultimately came to this Court and in the case of R.C. Gupta
(supra), a Division Bench of this Court accepted the employees’
stand and, interalia, held:
“7. Reading the proviso, we find that the reference to
the date of commencement of the Scheme or the date
on which the salary exceeds the ceiling limit are dates
from which the option exercised are to be reckoned
with for calculation of pensionable salary. The said
dates are not cutoff dates to determine the eligibility
of the employeremployee to indicate their option
under the proviso to Clause 11(3) of the Pension
Scheme. A somewhat similar view that has been
taken by this Court in a matter coming from the
Kerala High Court [Union of India v. A. Majeed Kunju,
Writ Appeal No. 1135 of 2012, order dated 532013
(Ker)] , wherein Special Leave Petition (C) No. 7074 of
2014 filed by the Regional Provident Fund
Commissioner was rejected by this Court by order
dated 3132016 [Regl. Provident Fund Commr. v. A.
Majeed Kunju, 2016 SCC OnLine SC 1744, wherein it
was directed: “SLPs (C) Nos. 707476, 7107108,
7224 of 2014 and 697 of 2016 Heard the learned
counsel for the parties and perused the relevant
material. We do not find any legal and valid ground
8 | P a g e
for interference. The special leave petitions are
dismissed SLPs (C) Nos. 19954 and 3303233 of 2015
List these special leave petitions on 2642016. As
prayed for, liberty is granted to file additional
documents.”]. A beneficial scheme, in our considered
view, ought not to be allowed to be defeated by
reference to a cutoff date, particularly, in a situation
where (as in the present case) the employer had
deposited 12% of the actual salary and not 12% of the
ceiling limit of Rs 5000 or Rs 6500 per month, as the
case may be.
8. xxx xxx xxx
9. We do not see how exercise of option under Para
26 of the Provident Fund Scheme can be construed to
estop the employees from exercising a similar option
under Para 11(3). If both the employer and the
employee opt for deposit against the actual salary
and not the ceiling amount, exercise of option under
Para 26 of the Provident Scheme is inevitable.
Exercise of the option under Para 26(6) is a necessary
precursor to the exercise of option under Clause 11(3).
Exercise of such option, therefore, would not foreclose
the exercise of a further option under Clause 11(3) of
the Pension Scheme unless the circumstances
warranting such foreclosure are clearly indicated.
10. The above apart in a situation where the deposit
of the employer's share at 12% has been on the actual
salary and not the ceiling amount, we do not see how
the Provident Fund Commissioner could have been
aggrieved to file the LPA before the Division Bench of
the High Court. All that the Provident Fund
Commissioner is required to do in the case is an
adjustment of accounts which in turn would have
benefited some of the employees. At best what the
Provident Commissioner could do and which we
permit him to do under the present order is to seek a
return of all such amounts that the employees
concerned may have taken or withdrawn from their
provident fund account before granting them the
benefit of the proviso to Clause 11(3) of the Pension
Scheme. Once such a return is made in whichever
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cases such return is due, consequential benefits in
terms of this order will be granted to the said
employees.”
6.Further modification to the scheme, as we have already indicated,
came on 22
nd
August 2014 to be effective from 1
st
September 2014.
Paragraph 11 of the scheme, before such modification by G.S.R. No.
609 (E) of 22
nd
August 2014 was introduced, and subsequent to the
said G.S.R. becoming operational, read:
Before Modification After Modification
11.Determination of
Pensionable Salary. (1)
The pensionable
salary shall be the average
monthly pay drawn in any
manner including on piece
rate basis during
contributory period of
service in the span of 12
months preceding the date
of exit from the membership
of the Employees’ Pension
Fund.
Provided that if a member
was not in receipt of full
pay during the period of
twelve months preceding
the day he ceased to be the
member of the Pension
Fund, the average of
previous 12 months full pay
drawn by him during the
period for which
contribution to the pension
fund was recovered, shall
be taken into account as
pensionable salary for
11. Determination of
Pensionable Salary. (1)
The pensionable salary
shall be the average
monthly pay drawn in any
manner including on piece
rate basis during
contributory period of
service in the span of sixty
months preceding the date
of exit from the membership
of the Pension Fund and
the pensionable salary
shall be determined on pro
rata ∙basis for the
pensionable service up to
the 1st day of September,
2014, subject to a
maximum of six thousand
and five hundred rupees
per month, and for the
period thereafter at the
maximum of fifteen
thousand rupees per month
:
Provided that if a member
was not in receipt of full
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calculating pension.
(2) If during the said span
of 12 months there are non
contributory periods of
service including cases
where the member has
drawn salary for a part of
the month, the total wages
during the 12 months span
shall be divided by the
actual number of days for
which salary has been
drawn and the amount so
derived shall be multiplied
by 30 to work out the
average monthly pay.
(3) The maximum
pensionable salary shall be
limited to Rupees Six
thousand five hundred per
month.
Provided that if at the
option of the employer and
employee, contribution paid
on salary exceeding Rupees
six thousand and five
hundred per month from the
date of commencement of
this Scheme or from the
date salary exceeds Rupees
Six thousand five hundred,
whichever is later, and 8.33
per cent share of the
employers thereof is
remitted into the Pension
Fund, pensionable salary
pay during the period of
sixty months preceding the
day he ceased to be the
member of the Pension
Fund, the average of
previous sixty months full
pay drawn by him during
the period for which
contribution to the pension
fund was recovered, shall
be taken into account as
pensionable salary for
calculating pension.
(2) If during the said span
of 60 months there are non
contributory periods of
service including cases
where the member has
drawn salary for a part of
the month, the total wages
during the 60 months span
shall be divided by the
actual number of days for
which salary has been
drawn and the amount so
derived shall be multiplied
by 30 to work out the
average monthly pay.
(3) The maximum
pensionable salary shall be
limited to fifteen thousand
rupees per month.
(4) The existing members as
on the 1st day of
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shall be based on such
higher salary.
September, 2014, who at
the option of the employer
and employee, had been
contributing on salary
exceeding six thousand and
five hundred rupees per
month, may on a fresh
option to be exercised
jointly by the employer and
employee continue to
contribute on salary
exceeding fifteen thousand
rupees per month and the
pensionable salary for the
existing members who
prefer such fresh option
shall be based on the
higher salary:
Provided that the aforesaid
members have to contribute
at the rate of 1.16 per cent.
on salary exceeding fifteen
thousand rupees as an
additional contribution from
and out of the contributions
payable by the employees
for each month under the
provisions of the Act or the
rules made thereunder:
Provided further that the
fresh option shall be
exercised by the member
within a period of six
months from the 1st day of
September, 2014:
Provided also that the
period specified in the
second proviso may, on
sufficient cause being
shown by the member, be
extended by the Regional
Provident Fund
Commissioner for a further
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period not exceeding six
months:
Provided also if no option is
exercised by the member
within such period
(including the extended
period), it shall be deemed
that the member has not
opted for contribution over
wage ceiling and the
contributions to the Pension
Fund made over the wage
ceiling in respect of the
member shall be diverted to
the Provident Fund account
of the member along with
interest as
7.The legality of the modified scheme was questioned in different
writ petitions in different High Courts. The Bench decisions of the
High Courts of Kerala, Rajasthan and Delhi went in favour of the
employees. The appeals which we shall be dealing with in this
judgment arise out of the decisions of the said High Courts. We
shall mainly be addressing the judgment of the Division Bench of the
Kerala High Court delivered on 12
th
October 2018 [in Writ Petition (C)
No. 13120 of 2015] which sustained the employees’ contentions and
invalidated the notification of 22
nd
August 2014. The Division
Benches of the Rajasthan and Delhi High Court followed the ratio of
the decision in the case of R. C. Gupta (supra) broadly on the same
reasoning forming foundation of the judgment of the Kerala High
Court. The petitions for special leave to appeal filed by the Employees
13 | P a g e
Provident Fund Organization (“EPFO”) [SLP (Civil) Nos. 865859 of
2019] assailing the judgment of the Division Bench of the Kerala
High Court was initially dismissed by a Coordinate Bench of this
Court on 1
st
April 2019. In SLP (C) Nos. 1672116722 of 2019, the
Union of India also appealed against the same judgment. A Review
Petition was filed by the EPFO in respect of the order dated 1
st
April
2019 dismissing their Special Leave Petition. On 12
th
July 2019, this
Court directed listing of the SLPs filed by the Union of India along
with the Review Petitions in open Court. On 29
th
January 2021, this
Court allowed the Review Petitions and the order of 1
st
April 2019
was recalled. A point has been taken on behalf of the employees that
the Employees Provident Fund Organisation has no locus standi to
maintain these appeals. This objection is technical in nature and
having regard to the fact that we are also hearing writ petitions
challenging the legality of the 2014 amendments, we do not consider
it necessary to dilate on this issue. Moreover, in the appeals arising
out of SLP (C) Nos.1672116722 of 2019, the Union of India is the
appellant. Since the amendment made by the Central Government
has been quashed, the locus of Union of India remains undisputed.
8.The pension scheme was conceived by way of introduction of
Section 6A to the 1952 Act, under Act 25 of 1996, with effect from
16
th
November 1995. The said Section stipulates:
14 | P a g e
“6A. Employees’ Pension Scheme —
(1) The Central Government may, by notification in the
Official Gazette, frame a scheme to be called the
Employees’ Pension Scheme for the purpose of
providing for—
(a) superannuation pension, retiring pension or
permanent total disablement pension to the
employees of any establishment or class of
establishments to which this Act applies; and
(b) widow or widower’s pension, children pension or
orphan pension payable to the beneficiaries of such
employees.
(2) Notwithstanding anything contained in section 6,
there shall be established, as soon as may be after
framing of the Pension Scheme, a Pension Fund into
which there shall be paid, from time to time, in respect
of every employee who is a member of the Pension
Scheme,—
(a) such sums from the employer’s contribution under
section 6, not exceeding eight and onethird per cent,
of the basic wages, dearness allowance and retaining
allowance, if any, of the concerned employees, as
may be specified in the Pension Scheme;
(b) such sums as are payable by the employers of
exempted establishments under subsection (6) of
section 17;
(c) the net assets of the Employees' Family Pension
Fund as on the date of the establishment of the
Pension Fund;
(d) such sums as the Central Government may, after
due appropriation by Parliament by law in this behalf,
specify.
(3) On the establishment of the Pension Fund, the
Family Pension Scheme (hereinafter referred to as the
ceased scheme) shall cease to operate and all assets
of the ceased scheme shall vest in and shall stand
transferred to, and all liabilities under the ceased
scheme shall be enforceable against, the Pension
Fund and the beneficiaries under the ceased scheme
shall be entitled to draw the benefits, not less than
the benefits they were entitled to under the ceased
scheme, from the Pension Fund.
15 | P a g e
(4) The Pension Fund shall vest in and be
administered by the Central Board in such manner as
may be specified in the Pension Scheme.
(5) Subject to the provisions of this Act, the Pension
Scheme may provide for all or any of the matters
specified in Schedule III.
(6) The Pension Scheme may provide that all or any of
its provisions shall take effect either prospectively or
retrospectively on such date as may be specified in
that behalf in that Scheme.
(7) A Pension Scheme, framed under subsection (1),
shall be laid, as soon as may be after it is made,
before each House of Parliament, while it is in
session, for a total period of thirty days which may be
comprised in one session or in two or more successive
sessions, and if, before the expiry of the session
immediately following the session or the successive
sessions aforesaid, both Houses agree in making any
modification in the scheme or both Houses agree that
the scheme should not be made, the scheme shall
thereafter have effect only in such modified form or be
of no effect, as the may be; so, however, that any
such modification or annulment shall be without
prejudice to the validity of anything previously done
under that Scheme.]”
9.Under the same Amendment Act, Sections 2(kA) and 2(kB) were
introduced to the Act. These provisions specify:
“2. Definitions.—In this Act, unless the context
otherwise requires,—
[(kA) “Pension Fund” means the Employees’ Pension
Fund established under subsection (2) of section 6A;]
[(kB) “Pension Scheme” means the Employees’
Pension Scheme framed under subsection (1) of
section 6A;]”
10.The pension scheme was framed in terms of Section 6A of the
Act and brought into operation by G.S.R. 748(E) dated 16
th
November
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1995. The crucial paragraph, so far as these proceedings are
concerned, is paragraph 11 thereof. We have already quoted this
paragraph. The quantum of pension is to be fixed as per the formula
specified in paragraph 12 of the scheme, which contemplates, inter
alia, superannuation pension for a member of the Scheme after
service of 10 years and retiring on attaining the age of 58 years. Sub
clause (2) of paragraph 12 as sought to be amended by the 2014
amendment stipulates the methodology of computation of monthly
member’s pension. Subclauses (1) and (2) of this paragraph are
reproduced below:
“12. Monthly Member's Pension. (1) A member shall
be entitled to :
(a) superannuation pension if he has rendered eligible
service of 10 years or more and retires on attaining
the age of 58 years;
(b) early pension, if he has rendered eligible service of
10 years or more and retires or otherwise ceases to be
in the employment before attaining the age of 58
years.
12 (2). In the case of a new entrant, the amount of
monthly superannuation pension or early pension, as
the case may be, shall be computed in accordance
with the following factors, namely:
Monthly member’s pension= Pensionable Salary x
Pensionable Service
70
Provided that the members’ monthly pension shall be
determined on a prorata basis for the pensionable
service up to the 1st day of September, 2014 at the
maximum pensionable salary of six thousand and five
hundred rupees per month and for the period
thereafter at the maximum pensionable salary of
fifteen thousand rupees per month.”
17 | P a g e
11.The initial entry into the pension scheme is contemplated in
paragraph 26(6) of Employees Provident Funds Scheme, 1952 read
with paragraph 6 of the pension scheme. Paragraph 6 of the pension
scheme as it stood prior to the amendment of 22
nd
August 2014 and
thereafter reads:
Before 22
nd
August 2014 After 22
nd
August 2014
“6. Membership of the
Employees' Pension Scheme.
Subject to subparagraph (3)
of paragraph 1, the Scheme
shall apply to every employee
–
(a) who on or after the 16th
November, 1995, becomes a
member of the Employees'
Provident Fund Scheme,
1952, or of the Provident
Funds of the factories and
other establishments
exempted by the appropriate
Government under section 17
of the Act, or in whose case
exemption has been granted
under paragraph 27 or 27A
of the Employees' Provident
Fund Scheme, 1952 from the
date of such membership;
(b) who has been a member
of the ceased Employees'
Family Pension Scheme,
1971 before the
“6. Membership of the
Employees' Pension Scheme.
Subject to subparagraph
(3) of paragraph 1, the
Scheme shall apply to every
employee –
(a) who on or after the 16th
November, 1995, becomes a
member of the Employees'
Provident Fund Scheme,
1952, or of the Provident
Funds of the factories and
other establishments
exempted by the appropriate
Government under section
17 of the Act, or in whose
case exemption has been
granted under paragraph 27
or 27A of the Employees'
Provident Fund Scheme,
1952 and whose pay on
such date is less than or
equal to fifteen thousand
rupees, from the date of
such membership;
(b) who has been a member
of the ceased Employees'
Family Pension Scheme,
1971 before the
commencement of this
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commencement of this
Scheme from 16th November,
1995;
(c) who ceased to be a
member of the Employees'
Family Pension Scheme,
1971 between 1st April, 1993
and 15th November, 1995
and opts to exercise his
option under Paragraph 7;”
Scheme from 16th
November, 1995;
(c) who ceased to be a
member of the Employees'
Family Pension Scheme,
1971 between 1st April,
1993 and 15th November,
1995 and opts to exercise
his option under Paragraph
7;
(d) who has been a member
of the Employees' Provident
Fund or of Provident Funds
of factories and other
establishments exempted by
the appropriate Government
under section 17 of the Act
or in whose case exemption
has been granted under
Paragraph 27 or 27 A of the
Employees' Provident Fund
Scheme, 1952, on 15th
November, 1995 but not
being a member of the
ceased Employees' Family
Pension Scheme, 1971 opts
to exercise his option under
paragraph 7. Explanation.
An employee shall cease to
be the member of Pension
Fund from the date of
attaining 58 years of age or
from the date of vesting
admissible benefits under
the Scheme, whichever is
earlier.”
12.Section 7 of the 1952 Act empowers the Central Government to
amend the said scheme both prospectively and retrospectively,
19 | P a g e
subject to certain procedural compliances, as outlined in the said
provision. This provision specifies:
“7. Modification of scheme.—
(1) The Central Government may, by notification in the
Official Gazette, add to [amend or vary, either
prospectively or retrospectively, the Scheme, the
[Pension] Scheme or the Insurance Scheme, as the
case may be].
[(2) Every notification issued under subsection (1)
shall be laid, as soon as may be after it is issued,
before each House of Parliament, while it is in
session, for a total period of thirty days, which may
be comprised in one session or in two or more
successive sessions, and if, before the expiry of the
session immediately following the session or the
successive sessions aforesaid, both Houses agree in
making any modification in the notification, or both
Houses agree that the notification should not be
issued, the notification shall thereafter have effect
only in such modified form or be of no effect, as the
case may be; so, however, that any such modification
or annulment shall be without prejudice to the validity
of anything previously done under that notification.]”
13.The judgment of this Court in R.C. Gupta (supra) was delivered
examining the provisions of paragraph 11 of the scheme as it stood
prior to issue of the 2014 notification. The changes brought by the
amended provision altered the methodology of computing pensionable
salary, which ultimately would have an impact on the quantum of
monthly pension. Instead of taking twelve months of average pay in
the year preceding the date of a member’s exit from the pension fund,
computation was contemplated on the basis of average monthly pay
20 | P a g e
drawn during the contributory period of service in the span of 60
months preceding the date of exit.
14.In the post amendment context, the maximum pensionable
salary was to be kept to Rs.15000/ per month, raising the earlier
ceiling of Rs.6500/ per month. It was also provided that an existing
member who, at the option of the employer and employee as on 1
st
September 2014, had been contributing on a salary exceeding
Rs.6500/ per month could exercise fresh option jointly with the
employer to continue to remain in the fund even if the salary went
beyond Rs.15000/ per month and the pensionable salary for the
existing member exercising such an option was to be based on the
higher salary.
15.As per paragraph 3(ii) of the pension scheme, the Central
Government was to contribute to the fund at the rate of 1.16 per cent
of the pay of the members. Employees within the changed pension
regime drawing more than Rs.15000/ per month have to also
contribute at the rate of 1.16 per cent on salary exceeding
Rs.15000/ as additional contribution each month under the
amended provisions. Further, fresh option was to be exercised by the
member within a period of six months from the 1
st
day of September
2014, which was extendable up to about 6 months on sufficient
cause shown by the member.
21 | P a g e
16.Under the post2014 regime, the fourth proviso to subclause
(4) of paragraph 11 specifies that if no option is exercised by a
member within the aforesaid period, it would be deemed that the
concerned member has not opted for contribution over the wage
ceiling. In such a case, the contributions to the pension fund made
beyond the wage limit in respect of such a member is to be diverted to
the provident fund account of the member along with interest, as
declared under the provident fund scheme from time to time.
17.It was held in the case of R. C. Gupta (supra), dealing with pre
2014 position of the scheme that the dates or timelimit specified in
clause 11(3) of the pension scheme were not cutoff dates. The said
timelimit determined the eligibility of the employer and employee to
exercise their option under the proviso to the said paragraph. It was
also observed in this judgment that a beneficial scheme ought not to
be allowed to be defeated by refence to a cutoff date in a situation
where the employer was not following the ceiling limit of Rs.5000/ or
Rs.6500/ and had deposited 12 per cent of the actual salary.
18.Main submission of the employees in support of the judgments
under appeal has been that there was no additional burden imposed
on the provident fund authorities or the Central Government if the
earlier system continued and no cutoff date was factored in, as entry
into the hybrid regime of provident fund plus pension beyond the
22 | P a g e
ceiling limit only entailed switching of funds. The authorities had to
remit the 8.33 per cent from the employer’s share of the contribution
lying in the provident fund corpus to the corpus of the pension fund.
It has been argued before us that the pattern of investment that was
permissible under both the schemes were broadly the same and
hence interest generated by such investment ought to correspond to
in each situation.
19.The Division Bench of the Kerala High Court examined the
impact of the amendment to the pension scheme in respect of the
following classes of pensioners or potential pensioners:
“(i) Employees who had exercised option under the
proviso to para 11 (3) of the 1995 Scheme and
continued to be in service as on 1
st
September 2014.
(ii)Employees who had not exercised their option
under the proviso to paragraph 11(3) of the 1995
Scheme and were continuing in service as on 1
st
September 2014.
(iii) Employees who had retired prior to 1
st
September
2014 without exercising an option under paragraph
11(3) of the 1995 Act scheme.
(iv) Employees who had retired prior to 1
st
September
2014 after exercising of an option under the
paragraph 11(3) of the 1995 Scheme.”
20.It was held by the Kerala High Court, following the judgment of
this Court in the case of R.C. Gupta (supra), that paragraph 11 of the
pension scheme did not stipulate a cutoff date at all. Any such
23 | P a g e
stipulation, in the opinion of the High Court, would have the effect of
defeating the purpose of a beneficial scheme. After the relevant date,
that is 1
st
September 2014, on the question of capping the salary to
Rs.15000/ per month for continuing in the pension scheme, it was,
interalia, held by the High Court:
“33. As per the amendments, the maximum
pensionable salary has been fixed 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. The
said provision is arbitrary and cannot be
sustained. The employees, who have been
making contributions on the basis of their actual
salaries after submitting a joint option with their
employers as required by the Pension Scheme,
are denied the benefits of their contributions by
the said amendments without any justification.
Apart from the above, to cap the salary at Rs.
15,000/ for quantifying pension is absolutely
unrealistic. A monthly salary of Rs.15,000/
works out only to about Rs.500/ per day. It is
common knowledge that, even a manual
labourer is paid more than the said amounts as
daily wages. Therefore, to limit the maximum
salary at Rs.15,000/ for pension would deprive
most of the employees of a decent pension in
their old age. Since the pension scheme is
intended to provide succour to the retired
employees, the said object would be defeated by
capping the salary. The duty of the trustees of
the Fund is to administer the same for the
benefit of the employees by wise investments
24 | P a g e
and efficient management. They have no right to
deny the pension legitimately due to them on the
ground that the fund would get depleted. The
demand of additional payment of 1.16% of their
salaries exceeding Rs.15,000/ is unsustainable
for the reason that, Section 6A does not require
the employees to make any additional
contribution to constitute the Pension Fund. Nor
does it empower the authorities to demand
additional contribution. In the absence of any
statutory backing, the said provision in the
Pension Scheme is ultra vires. The amendment
in so far as it stipulates the average monthly
pay drawn over a span of 60 months preceding
the date of exit as the pensionable service is
also arbitrary for the reason that it deprives the
employees of a substantial portion of the
pension to which they would have been eligible
had it not been for the amendment. The
provision as it originally stood stipulated
computation of pensionable salary on the basis
of the monthly pay drawn over a period of 12
months prior to their exit. The reason for the
amendments as disclosed by the counter
affidavit filed is that payment of pension on the
basis of the Scheme as it stood prior to the
amendment would result in depletion of the
Fund. Absolutely no material or data to support
the above contention has been placed before us.
On the contrary, placing reliance on a news
report carried by “The Hindu” newspaper on
17.8.2014, it is contended by the petitioners
that, a staggering amount of Rs.32,000 Crores
of unclaimed amount is lying in various
inoperative accounts across the country, as
unclaimed pension as disclosed by the Central
Provident Fund Commissioner at an interactive
25 | P a g e
session with employees at Hyderabad. In the
absence of any material to support the
contention that the fund is likely to be depleted,
we reject the said contention. Apart from the
above, there is no provision in the Act that
stipulates the pension payments to
commensurate with the amounts actually
remitted by an employee and his employer. It is
also a fact that the administrators of the Fund
invest the amounts and generate profit from
such investments.”
21.The High Court made its assessment of ground realities on the
wage structures in the economy and found capping of Rs.15000/ per
month as pensionable salary would deprive most of the employees of
decent pension in their old age.
22.As regards requirement of an employee to contribute 1.16 per
cent of their pay under the amended scheme, the High Court found
that there is no statutory basis under which an employee can be
made to make additional contribution to the pension fund. On the
aspect of altering the basis of calculation of average monthly pay, the
High Court held such alteration to be arbitrary as it deprived the
employees of a substantial portion of the pension to which they would
have been entitled to under the scheme as it originally prevailed. On
justification of the amendment on potential depletion of fund, a point
which has also been argued before us by the EPFO, it was observed
26 | P a g e
by the High Court that there was no material or data to support this
contention taken by the fund organisation. The High Court also
referred to the growing number of workforce in our country, which, as
per this judgment, was constantly adding to the base of the fund by
accumulation to fund contribution. In paragraphs 37 and 38 of the
judgment under appeal, the reasoning of the High Court was
summarised:
“37. The stated objective of the amendments is to
prevent depletion of the fund. The said apprehension
is absolutely baseless for the reasons stated above.
The number of persons who are contributing to the
Provident Fund as well as the Pension Fund have
only grown over the years. The work force in our
country would only grow further in the future. It has
to be stated here that in view of the increase in the
number of workers over the years, the contributions
would also grow. The phenomenon is only bound to
continue in future. Therefore, even when payments of
pension are made to the retired employees, the
pension fund would continue to get replenished with
the contributions of the new entrants. The said
ongoing process would maintain the Fund in a stable
condition. If at all, a situation where the Fund base
gets eroded occurs, the situation could be remedied
at that time by enhancing the rates of contributions of
persons contributing to the Fund through a legislative
exercise. The attempt to maintain the stability of the
fund by reducing the pension would only be counter
productive and would defeat the very purpose of the
enactment.
38. As rightly contended by the counsel appearing for
the petitioners, the effect of the amendments to the
Pension Scheme is to create different classes of
pensioners on the basis of the date, 1.9.2014, the
date on which the amended Scheme came into force.
Consequently, there would be
27 | P a g e
(i) employees who have exercised option under the
proviso to paragraph 11(3) of the 1995 Scheme and
continuing in service as on 1.9.2014;
(ii) employees who have not exercised their option
under the proviso to paragraph 11(3) of the 1995
Scheme, and continuing in service as on 1.9.2014;
(iii) employees who have retired prior to 1.9.2014
without exercising an option under paragraph 11(3)
of the 1995 Scheme; (iv) employees who have retired
prior to 1.9.2014 after exercising the option under
paragraph 11(3) of 1995 Scheme. The rationale in so
classifying the employees covered by the Pension
Scheme on the basis of the above date is not
forthcoming. The object sought to be achieved is
stated to be prevention of depletion of the Pension
Fund, which cannot be accepted as a justification to
support the classification. Inasmuch as the statutory
scheme is to make the Pension Fund ensure to the
benefit of the homogeneous class of the totality of
employees covered by the Provident Fund, a further
classification of the said class by formulating a
Scheme is ultra vires the power available to the
Central Government under Sections 5 and 7 of the
EPF Act. Therefore, it has to be held that, the
impugned amendments are arbitrary, ultra vires the
EPF Act and unsustainable. For the foregoing
reasons, the petitioners are entitled to succeed. The
writ petitions are all allowed as follows:
i) The Employee's Pension (Amendment) Scheme,
2014 brought into force by Notification No. GSR.
609(E) dated 22.8.2014 evidenced by Ext.P8 in W.P.
(C) No. 13120 of 2015 is set aside;
ii) All consequential orders and proceedings issued
by the Provident Fund authorities/respondents on
the basis of the impugned amendments shall also
stand set aside.
iii) The various proceedings issued by the Employees
Provident Fund Organisation declining to grant
opportunities to the petitioners to exercise a joint
option along with other employees to remit
contributions to the Employees Pension Scheme on
the basis of the actual salaries drawn by them are
set aside.
28 | P a g e
iv) 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.
v) There will be no order as to costs.”
For these reasons, the High Court quashed the Employees’
Pension (Amendment) Scheme 2014 sought to be brought into force
by notification no. G.S.R. 609(E) dated 22
nd
August 2014.
23.The first point on which argument has been made on behalf of
the appellants before us is that the aforesaid amendment had been
made in exercise of power under Section 7 of the 1952 Act read with
entry 10 of the III Schedule of the Act. Thus, the legislative
authorisation is there for modification of a scheme whether
prospectively or retrospectively. Moreover, our attention has been
drawn to paragraph 32 of the 1995 scheme, which stipulates :
“32. Valuation of the Employees' Pension Fund
and review of the rates of contributions and
quantum of the pension and other benefits. (1)
The Central Government shall have an annual
valuation of the Employees' Pension Fund made by a
Valuer appointed by it:
Provided that it shall be open to the Central
Government to direct a valuation to be made at such
other times s it may consider necessary.
(2) At any time, when the Employees' Pension Fund
so permits, the Central Government may alter the
rate of contributions payable under this Scheme or
the scale of any benefit admissible under this
Scheme or the period for which such benefit may be
given.”
29 | P a g e
Entry 10 of the III Schedule to the Act, which refers to matters
for which provision may be made in the pension scheme, provides:
“10. The scale of pension and pensionary benefits
and the conditions relating to grant of such benefits
to the employees.”
24.Stand of the appellants is that there has been no encroachment
on any vested legal right of existing members. It has been highlighted
that after the 2014 amendments, the option of the members to
further opt to remain in the scheme beyond the ceiling limit has been
taken away. But the existing option members who had chosen to
contribute beyond the salary limit has been permitted to exercise
fresh option to continue with such contribution upon payment of an
additional 1.16 per cent of their salary beyond the said ceiling.
25.In assailing the said judgments, it has also been contended on
behalf of the appellants that the membership of the pension scheme
may have become a vested right for those opting under paragraph
26(6) of the EPFS before amendment to paragraph 6 of the pension
scheme. Those who were yet to exercise option under paragraph 26(6)
could not claim such vested right of membership to pension scheme.
The omission of proviso 3 to paragraph 11 of the pension scheme also
did not affect the membership of those who had already come within
the scheme by exercising option under paragraph 26(6), but to
30 | P a g e
remain in the scheme beyond the ceiling limit an existing option
member had to exercise fresh option.
26.Submission of the appellants is that all the employees of an
establishment do not constitute a homogenous class. It is within the
power and authority of the Central Government to differentiate
between employees earning lower wages and those earning higher
salary and offer improved social benefits for those in the lower wage
bracket.
27. Arguments have been advanced on two other features of the post
amendment scheme. Legality of requirement of the employees who go
beyond the salary threshold to contribute to the pension scheme at
the rate of 1.16 per cent of their salary has been questioned. The
other point in controversy is that for existing pensioners also the
basis of computation of pensionable salary having changed, there
could be reduction in the monthly pension. It is, however, contention
of the appellants that the amendment had extended the period
prescribed in paragraph 12(1) from 12 months prior to a member’s
exit from the pension scheme to 60 months. This, according to
appellants, has been done to achieve a clearer picture of the
pensionable salary to eliminate the possibility of fluctuations in pay
drawn in the last 12 months for determining the quantum of pension.
Illustration has been given of manual labourers and women who
31 | P a g e
drawing low wages, who may suffer such fluctuation on account of ill
health, incapacitation, etc., and in the case of such employees, if only
12 months’ pay is accounted for, they may get reduced pension.
28.On behalf of the employees it has been urged that the decision
of this Court in R.C. Gupta (supra) does not require any revisit as
this decision has held good for almost six years. In support of this
argument, following authorities have been relied upon:
(i)Bengal Immunity Company Limited v. State of Bihar
and Others [(1955) 2 SCR 603]
(ii)Union of India and Another v. Raghubir Singh (Dead)
by Lrs. Etc. [(1989) 2 SCC 754]
(iii)Keshav Mills Co. Ltd. v. Commissioner of Income Tax
Bombay North, Ahmedabad [(1965) 2 SCR 908]
(iv)Waman Rao and Others v. Union of India and Others
[(1981) 2 SCC 362].
29.In the given context, however, this point may not hold good as
what we are examining in this judgment is certain amendments to
the scheme which were not before this Court based on which the
judgment of R.C. Gupta (supra) was delivered. In the said judgment,
the provisions of law as it subsisted prior to issue of the amendment
notification was considered. Thus, the ratio of the four authorities
32 | P a g e
referred to in the preceding paragraph would not be applicable in the
given context.
30.The employees have argued that under the law, there is no
requirement of exercising second option. In this regard, our attention
has been drawn to paragraphs 3(1) and 3(2) of the scheme, which
requires remittance of a part of contribution of the employer to the
provident fund scheme. The employees’ argument is that the
obligation is only on the employer to remit the sum from one fund to
the other. There is no ceiling limit and the remittance required to be
made is of 8.33 per cent of the employee’s pay. But this point also, in
our opinion, does not aid the employees. While paragraphs 3 and 6 of
the scheme have laid down what the fund would be constituted of
and who would be the members of the pension scheme, paragraph
11, which is an integral part of the pension scheme, specifies the
criteria for those who become mandatory members and, from among
the existing members, who may be permitted to exercise option to
remain in the scheme in spite of drawing salary beyond the ceiling
limit. It is a fact that those who are covered by paragraph 26(6) of the
provident fund scheme automatically enters into the pension scheme
as well. But this provision cannot be held to have precluded the
Central Government from laying down conditions to remain eligible
for the pension scheme and specify wage or salary ceiling for
33 | P a g e
individual employees beyond which the scheme may not operate. We
also do not accept the argument that the pension scheme considers
employees as a homogenous group and no distinction can be made
among different categories of employees based on their monthly
salary to determine for whom the scheme shall operate in a particular
manner. It is well within the power and authority of the statutory
authorities to reasonably classify different sets of employees and
categorise them for the nature of benefits they might get from an
existing scheme. In fact, the scheme, at its inception was made
applicable to those drawing wages upto Rs.5000/. The provision
relating to exercising option was introduced later, in the year 1996.
31.On behalf of the employees, argument was also advanced
against the claim of negative financial impact on the corpus in
response to the stand of the appellants that having a large scale of
beneficiaries from higher salary earners may result in remitting
asymmetrical sums from the corpus to them as pension. In this
regard, learned senior counsel for the appellants (Provident Fund
Organisation and Union of India) have made distinction between the
provident fund scheme and pension scheme in their respective
operation. While provident fund scheme entails a onetime
settlement in favour of the member, the pension scheme carries, by
its very nature, benefits for an unspecified time, which has to be
34 | P a g e
based on actuarial calculation. This difference has been recognised in
the judgments of this Court in the cases of Otis Elevator Employees’
Union S. Reg. and Ors. vs. Union of India & Others [(2003) 12 SCC
68] and Pepsu Road Transport Corporation, Patiala vs. Mangal
Singh & Others [(2011) 11 SCC 702]. In an actuarial report relied on
by the appellants after delivery of the Kerala High Court judgment,
the net liability of the fund is projected to be Rs.5,75,918.88/ crores
for the pension fund, exclusive of the provident fund balance that
might be transferred. This assessment has been made on 27
th
December 2018 and the report has been annexed to the Rejoinder
Affidavit of the appellants in the appeals arising out of SLP (C)
Nos.86588659 of 2019 filed on 20
th
March 2021 with I.A. No.43576
of 2021 at page 410 of that document. This projection is based on
assumption that every person will opt for higher contribution and
statutory salary is restored to Rs.6500/ per month.
32.We find that the amendment was made in exercise of power
otherwise vested in the authority making such amendment and the
amendments were made on the basis of certain relevant materials
and not whimsically. In this context, the scope of judicial scrutiny to
test the constitutionality of the amendment provisions becomes
narrow. This is the opinion of the Constitution Bench of this Court in
the case of Krishena Kumar vs. Union of India and Others [(1990)
35 | P a g e
4 SCC 207]. In our view, classification of the employees made by the
authorities on the basis of the salary drawn in the 2014 amendment
meets the test of reasonable classification contemplated in Article 14
of the Constitution of India. The newspaper report quoted in the
Kerala High Court judgment, in our opinion, would not give an
effective guidance as regards position of the pension fund and it
would be prudent for the Court leave such decisions to be made by
the scheme framing body. This approach would be in line with the
reasoning of the Constitution Bench in the case of Krishena Kumar
(supra). In the case of Mafatlal Group Staff Association and Others
vs. Regional Commissioner Provident Fund and Ors. [(1994) 4 SCC
58], it was held by a Coordinate Bench of this Court:
“10. …Merely because the employees who were the
members of the Employees Provident Fund Scheme
before March 1, 1971 were given an option to become
or not to become members of the Family Pension
Scheme, it does not follow that the employees who
become members of the Provident Fund Scheme after
March 1, 1971, and who are not given such option are
discriminated against…”
33.The Division Bench of the Kerala High Court, in coming to its
finding that the amendment was arbitrary, mainly relied on various
economic factors. The reasoning of the Bench was based on macro
economic reasons like general increase in salary, addition to the base
of the fund and the negative impact on denial of pension benefits for
36 | P a g e
a large number of employees. The High Court rejected the argument
based on depletion of fund on the ground that over the years, more
and more persons are contributing to the provident fund and the
corpus of the fund is growing. We are alive to the concern expressed
by the High Court as regards impact on the economic stability of
retired employees suddenly being deprived of pension. But, based on
such macrolevel social disparities, we do not think in exercise of
judicial power we can require the State to operate a pension scheme
in a particular manner. These factors would be for the policy makers
to examine and prescribe. We cannot issue directions on the Central
Government to work out statutory scheme in a particular fashion. So
far as fixing of cutoff date is concerned, the 2014 amendment
specifically provides for that. In the case of R.C. Gupta (supra), the
wording of the scheme in paragraph 11(3) was different. Thus, the
ratio of that judgment cannot be applied to the changed provision of
the scheme. Fixing of cutoff date was considered in the case of
Mafatlal Group Staff Association (supra) and held to be permissible.
We have quoted earlier the relevant passage from that judgment.
34.The case of Bank of Baroda and Another vs. G. Palani &
Others [(2022) 5 SCC 612] was cited in support of the proposition
that pension is not a bounty but a right and such right cannot be
taken away retrospectively. In the context of the provisions which we
37 | P a g e
are examining in this judgment, existing members have been given
option to remain in the scheme even if their salary go beyond the
ceiling limit. Thus, the right of such members to draw pension is
protected. The other area where the pension amount may get
impacted is on determination of monthly pension on the basis of
altered computation method. But this judgment is not the authority
for the proposition that pension amount cannot be altered at all. The
factual basis of this judgment was that a joint note/agreement in
derogation of statutory regulations was giving retrospective effect. It
was in that context the said decision was delivered. In the cases
before us, amendment is contemplated of the scheme itself.
35.The requirement in the scheme for employee’s contribution to
the extent of 1.16 per cent for option members, in our opinion, is
illegal. There is nothing in the 1952 Act which requires payment to
the pension fund by an employee. Section 6A of the Act also does not
have any such stipulation. Since the Act does not contemplate any
contribution to be made by an employee to remain in the scheme, the
Central Government under the scheme itself cannot mandate such a
stipulation. What is to be considered here is that for the mandatory
members, the Central Government continues to contribute the
requisite 1.16 per cent of their salary. For option members,
additional contribution by them is contemplated in order to remain in
38 | P a g e
the scheme. In such a situation, in our opinion, a legislative
amendment of the Act would have been necessary, providing for
contribution to be made by an employee. To that extent, the
provision of the scheme requiring contribution by an individual
employee is ultra vires the parent act. At the same time, we cannot
ignore the fact that the pension amount to be paid has been
calculated on projections that the corpus would include the option
employees’ additional contribution of 1.16 per cent. We also cannot
mandate the Central Government to contribute to a pension scheme,
in absence of a legislative provision to that effect. It would be for the
administrators to readjust the contribution pattern within the scope
of the statute and one possible solution could be to raise the level of
the employer’s contribution in the scheme. We shall, however,
suspend the operation of this part of our judgment for a period of six
months so that the legislature may consider the necessity of bringing
appropriate legislative amendment on this count. For the aforesaid
period, the scheme as it stands shall continue. Till such time, if no
such legislative exercise is undertaken, the duty to contribute 1.16
per cent of the salary shall apply on option members as well. This
contribution shall be adjusted depending on any amendment that
may be brought. For the period of six months, however, the opting
employees shall make payment of 1.16 per cent contribution as stop
39 | P a g e
gap measure. In the event no amendment to the statute or the
scheme is made within such extended time, then the administrators
of the fund will have to operate the pension fund for the option
members from out of the existing corpus.
36.The other aspect of the controversy involves changing the
method of computation of the pensionable salary. We have given the
points and counter points articulated by the contesting parties
pertaining to this feature of the controversy earlier in this judgment.
In our opinion, this change of methodology comes within the power of
the Central Government to modify a scheme under Section 7 of the
1952 Act read with item 10 of the Schedule III to the Act as also
paragraph 32 of the scheme. This alteration of computation is
ancillary to determination of scale of pension alongwith pensionary
benefits and paragraph 32 of the pension scheme specifically
authorises the Central Government to alter the rate of contribution
payable under the Scheme or the scale of any benefit admissible
under the scheme. There is a reasonable basis for effecting change in
the computation methodology for determining pensionable salary and
we do not find any illegality or unconstitutionality in effecting this
amendment.
37.We shall now address the question as to whether the members
from an exempted establishment under the 1952 Act would be
40 | P a g e
entitled to the benefits of enrolling in the scheme beyond the ceiling
limit. We would point out here that before us no argument has been
advanced as regards members of the pension scheme of exempted
establishments in terms of paragraph 39 of the said scheme. Thus, in
this judgment, we are not addressing the cases of that category of
members. We find from Section 17 (A) of the Act that the investment
of the provident fund for the trust fund are also to be as per the
directions of the Central Government. In quashing the circular dated
31
st
May 2017, the Delhi High Court has held that the employees of
unexempted establishments and exempted establishments form a
homogenous group. Section 6A of the Act also envisages coverage of
employees of exempted establishments under Section 17(6) of the Act
within the pension scheme. Section 17(6) of the Act stipulates:
“(6) Subject to the provisions of subsection [(1C)]
the employer of an exempted establishment or of
an exempted employee of an establishment to
which the provisions of the [Pension] Scheme
apply, shall, notwithstanding any exemption
granted under subsection (1) or subsection (2),
pay to the [Pension] Fund such portion of the
employer’s contribution to its provident fund
within such time and in such manner as may be
specified in the [Pension] Scheme.”
38.Further, Clause 1(3) of the pension scheme contemplates
keeping within its fold the establishments to which the 1952 Act
applies. These establishments would include exempted
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establishments as well. The employees of exempted establishments
are integrated into the pension scheme and we are of the opinion that
the employees of an exempted establishment should not be deprived
of the benefit of getting option to remain in the pension scheme while
drawing salary beyond the ceiling limit, in situations where similarly
situated employees of unexempted establishments can exercise such
option. In the event the scheme is construed in a way which would
exclude them, that would lead to artificial classification of otherwise
same categories of employees. Thus, the pension scheme ought to
apply to the employees of the exempted establishments in the same
manner as this scheme applies to the employees of unexempted or
regular establishments.
39.One of the arguments against their inclusion into the scheme by
exercising option is that the corpus of the contribution for exempted
establishments have been kept in separate coffers maintained by the
trust created for such purpose and not with the authorities specified
under the Act. Taking that factor into account, we are of the view
that in order to be entitled to the benefits of the pension fund, the
employer and the employee, simultaneously with exercising option in
terms of the order of this Court, shall also have to give an
undertaking of transferring the employers’ contribution at the
stipulated rate maintained by the trusts, which shall be equivalent to
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and not lower than the sum which would have been transferable, had
such fund been maintained by the provident fund authorities. Such
transfer shall take place, immediately after exercise of such option,
within such period as may be directed by the administrators of the
pension fund.
40.We shall now deal with argument of the appellants that no
vested legal right of the employees has been encroached upon by the
2014 amendment. For this purpose, amended paragraph 11(4) needs
to be analysed. The said paragraph 11(4) provides for extending the
pension coverage in respect of individual employees drawing salary
more than Rs. 15000/ per month. This paragraph however, is
subject to two conditions:
(i) The first one is that to be eligible for the benefits of
extended coverage, the existing members as on 1
st
September 2014 must contribute at the rate of 1.16 per
cent on salary exceeding Rs. 15,000/ per month.
ii) The second one is that a fresh option should be exercised
within a period of six months from the first day of
September 2014. The scheme contemplates that those
members of the fund who had exercised option to remain in
the scheme as per the requirement of proviso to paragraph
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11(3) of the scheme, as it stood prior to the 2014
amendment, would be able to give fresh option with the
employer if their salary cross the ceiling limit. In respect of
that provision, this Court in the Case of R.C. Gupta (supra)
had held that the said proviso did not contemplate a cutoff
date.
41.So far as the first condition is concerned, we have expressed
our views earlier in this judgment as regards legality of having such
a provision. In relation to the second condition, our opinion is that
the eligibility for enhancement cannot be restricted to those
employees only who had exercised the option to remain in the
scheme once their salary went beyond the capping of Rs. 6500/ per
month. As we have already discussed, in case of R.C. Gupta (supra),
it has been specifically held that there was no cutoff date in proviso
to paragraph 11(3) as it stood before the 2014 amendment. In our
opinion, the interpretation given to the proviso to paragraph 11(3)
prior to 2014 amendment does not require any reconsideration. We
agree with the reasoning of the twojudge Bench of this Court on this
point, as expressed in the said judgment. As there was no cutoff
date to be contemplated prior to the 2014 amendment, limiting the
entitlement of enhanced pension coverage to those employees only
who had already exercised an option under Clause 11(3) of the
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unamended scheme would be contrary to the ratio of the decision of
this Court held in the case of R.C. Gupta (supra). We are not holding
that no option was required to be exercised as per proviso to
paragraph 11(3) of the scheme, as it stood prior to 2014 amendment.
As held in the case of R.C. Gupta (supra), there was no timelimit for
exercising such option.
42.The dual option, as is contemplated in paragraph 11(4) of the
pension scheme (post 2014 amendment), has to be merged into one.
In the event the employer and employee jointly opt for coverage
beyond the salary limit of Rs. 15000/, without giving an earlier
option under the unamended Clause 11(3) of the pension scheme,
they would not be automatically excluded from their right to exercise
option under paragraph 11(4) of the scheme, post amendment.
43.The other condition for enhanced coverage relates to the date
within which such fresh option is to be exercised by a member,
which is stipulated to be within a period of six months from 1
st
September 2014. It would be legitimate to proceed on the basis that
several members did not exercise such option earlier because of the
stand taken by the Provident Fund authorities that option under
proviso to paragraph 11(3) of the scheme (prior to 2014 amendment)
has to be exercised within a specified date, which stand was negated
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in the decision of R.C. Gupta (supra). We are of the view that the
time limit for coverage beyond the ceiling amount should be
extended by a further period of four months from today to enable all
the members of the pension fund drawing more than Rs.6500/ to
exercise the joint option as contemplated in paragraph 11(4) of the
pension scheme (post 2014 amendment). Once such joint option is
exercised, the transfer of fund from the provident fund corpus to the
pension fund shall be effected in terms of the scheme.
44.We accordingly hold and direct:
(i)The provisions contained in the notification no. G.S.R.
609(E) dated 22
nd
August 2014 are legal and valid. So
far as present members of the fund are concerned, we
have read down certain provisions of the scheme as
applicable in their cases and we shall give our findings
and directions on these provisions in the subsequent
subparagraphs.
(ii)Amendment to the pension scheme brought about by
the notification no. G.S.R. 609(E) dated 22
nd
August
2014 shall apply to the employees of the exempted
establishments in the same manner as the employees
of the regular establishments. Transfer of funds from
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the exempted establishments shall be in the manner as
we have already directed.
(iii)The employees who had exercised option under the
proviso to paragraph 11(3) of the 1995 scheme and
continued to be in service as on 1
st
September 2014,
will be guided by the amended provisions of paragraph
11(4) of the pension scheme.
(iv)The members of the scheme, who did not exercise
option, as contemplated in the proviso to paragraph
11(3) of the pension scheme (as it was before the 2014
Amendment) would be entitled to exercise option under
paragraph 11(4) of the post amendment scheme. Their
right to exercise option before 1
st
September 2014
stands crystalised in the judgment of this Court in the
case of R.C. Gupta (supra). The scheme as it stood
before 1
st
September 2014 did not provide for any cut
off date and thus those members shall be entitled to
exercise option in terms of paragraph11(4) of the
scheme, as it stands at present. Their exercise of
option shall be in the nature of joint options covering
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preamended paragraph 11(3) as also the amended
paragraph 11(4) of the pension scheme.
There was uncertainty as regards validity of the post
amendment scheme, which was quashed by the
aforesaid judgments of the three High Courts. Thus, all
the employees who did not exercise option but were
entitled to do so but could not due to the interpretation
on cutoff date by the authorities, ought to be given a
further chance to exercise their option. Time to exercise
option under paragraph 11(4) of the scheme, under
these circumstances, shall stand extended by a further
period of four months. We are giving this direction in
exercise of our jurisdiction under Article 142 of the
Constitution of India.
Rest of the requirements as per the amended provision
shall be complied with.
(v)The employees who had retired prior to 1
st
September
2014 without exercising any option under paragraph
11(3) of the preamendment scheme have already
exited from the membership thereof. They would not be
entitled to the benefit of this judgment.
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(vi)The employees who have retired before 1
st
September
2014 upon exercising option under paragraph 11(3) of
the 1995 scheme shall be covered by the provisions of
the paragraph 11(3) of the pension scheme as it stood
prior to the amendment of 2014.
(vii)The requirement of the members to contribute at the
rate of 1.16 per cent of their salary to the extent such
salary exceeds Rs.15000/ per month as an additional
contribution under the amended scheme is held to be
ultra vires the provisions of the 1952 Act. But for the
reasons already explained above, we suspend operation
of this part of our order for a period of six months. We
do so to enable the authorities to make adjustments in
the scheme so that the additional contribution can be
generated from some other legitimate source within the
scope of the Act, which could include enhancing the
rate of contribution of the employers. We are not
speculating on what steps the authorities will take as it
would be for the legislature or the framers of the
scheme to make necessary amendment. For the
aforesaid period of six months or till such time any
amendment is made, whichever is earlier, the
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employees’ contribution shall be as stop gap measure.
The said sum shall be adjustable on the basis of
alteration to the scheme that may be made.
(viii) We do not find any flaw in altering the basis for
computation of pensionable salary.
(ix)We agree with the view taken by the Division Bench in
the case of R.C. Gupta (supra) so far as interpretation
of the proviso to paragraph 11(3) (preamendment)
pension scheme is concerned. The fund authorities
shall implement the directives contained in the said
judgment within a period of eight weeks, subject to our
directions contained earlier in this paragraph.
(x)The Contempt Petition (C) Nos.19171918 of 2018 and
Contempt Petition (C) Nos. 619620 of 2019 in Civil
Appeal Nos. 1001310014 of 2016 are disposed of in
the above terms.
45.All the appeals which we have heard simultaneously are
allowed in the above terms and the judgments impugned are
modified accordingly. The writ petitions brought by employees
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or their representatives shall also stand disposed of in the same
terms.
46.Pending application(s), if any, shall also stand disposed of.
47. There shall be no order as to costs.
. . . . . . . . . . . . . . . . . . . . . CJI.
(UDAY UMESH LALIT)
. . . . . . . . . . . . . . . . . . . . . J.
(ANIRUDDHA BOSE)
. . . . . . . . . . . .. . . . . . . . . . J.
(SUDHANSHU DHULIA)
NEW DELHI;
November 04, 2022
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