SC upholds Employees’ Pension (Amendment) Scheme 2014; Grants Relief to Employees

Read Time: 07 minutes

Synopsis

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”, bench opined.

The Supreme Court, in a landmark judgment upheld the validity of Employees’ Pension (Amendment) Scheme, 2014, which had raised the pensionable salary cap to Rs 15,000 a month from Rs 6,500 a month. 54 petitions both from exempted and unexempted establishments had sought invalidation of the Amendment Scheme.

“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”, opined the bench led by the former CJI UU Lalit also comprising of Justice Aniruddha Bose and Justise Sudhanshu Dhulia.

In the present matter the appeals arose assailing the judgments of the High Courts of Kerala, Rajasthan and Delhi, where the Courts had set aside the Employees’ Pension Amendment (Scheme), 2014.

The amendment with a retrospective effect from March 1996, gave an option to the employer and employee for contribution on salary exceeding the aforesaid ceiling of Rs.6500 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 with a time limit. Pursuant to which certain aggrieved employees, who were almost on the verge of retirement approached the authorities for lack of knowledge of such proviso.

The amendment further mandated members to contribute an additional 1.16 per cent of their salary exceeding Rs 15,000 a month towards the pension fund.

While relying on R.C. Gupta v. Regional Provident Fund Commissioner, the Court stated, “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”.

“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 bench further opined.

The Court while upholding the validity of the amendment scheme, held:

-the provisions contained in the 2014 notification are legal and valid. For the present members of the fund, read down certain provisions of the scheme;

- Amendment of pension scheme to apply to the employees of the exempted establishments in the same manner as the employees of the regular establishments;

- extended cut-off date by the authorities by four months for employees who did not exercise option but were entitled to do so;

- employees who retired prior to 1st September 2014 without exercising the option, would not be granted any benefit. While the employees who did exercise the option upon retirement, would be granted the benefit.

Background: Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 which provides for a pension scheme, originally did not have any pension scheme. It was post the amendments and modifications made by the Central Government to the Employees’ Pension Scheme, 1995, that the scheme was introduced. 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.

Case Title: THE EMPLOYEES PROVIDENT FUND ORGANISATION & ANR. ETC. vs. SUNIL KUMAR B. & ORS. ETC