New Delhi: The Supreme Court on Friday held the provisions of the Employees Pension (Amendment) Scheme 2014 to be legal and valid.
In a relief to several employees, the court held that employees who have not exercised the option to join the Employees Pension Scheme must be given a further chance of 6 months to do so.
The court said that the employees, who were entitled to join the pension scheme but could not do so as they did not exercise the option within the cut-off date, should be given an additional opportunity as there existed lack of clarity regarding the cut-off date in view of the High court judgments invalidating the provisions of the Employee's Pension (Amendment) Scheme, 2014.
Condition for additional contribution for salary above Rs 15,000 declared invalid
The court further held as invalid the condition in the 2014 scheme that the employees are required to make a further contribution at the rate of 1.16% on the salary exceeding Rs.15,000/-. The court held this condition to make additional contribution on the salary exceeding the threshold limit to be ultra vires. However, this part of the judgment has been kept in suspension for 6 months to enable the authorities to generate funds.
The court was pronouncing the judgments in the appeals filed by the Employees Provident Fund Organization and the Union Government challenging the Kerala, Rajasthan and Delhi High court judgments which had quashed the Employee's Pension (Amendment) Scheme, 2014.
The court further held that it has agreed with the judgment in R.C. Gupta v. Regional Provident Fund Commissioner. In the said case, a division bench of the SC had held that there cannot be any cut-off date for exercise of option.
A bench comprising Chief Justice of India Uday Umesh Lalit, Justices Aniruddha Bose and Sudhanshu Dhulia had reserved the judgment.
There was uncertainty regarding validity of the post amendment scheme.
The Kerala High Court had set aside the 2014 amendment by holding that the threshold limit of Rs 15,000/-monthly salary for joining the pension fund is unreasonable. The High Court allowed paying pension in proportion to the salary above the threshold limit of Rs 15,000 per month and held that there can be no cut-off date for joining the pension scheme.
What were the changes brought by the 2014 amendment?
The 2014 amendment had the brought following changes.
1. 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.
2. 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.
3. 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.
4. Provides for withdrawal of the benefits where a member has not rendered the eligible service as required.
The main argument raised by the EPFO is that the Pension Fund and the Provident Fund are distinct and the membership in the latter will not automatically translate into a membership of the former. It was argued that Pension Scheme is intended for low-age employees and if the persons drawing salaries above the cut-off limit are allowed to draw pension as well, it will create huge imbalance within the fund. The 2014 amendments were brought to address the issue of cross-subsidization between the pension and provident funds.
The pensioners disputed the argument of financial burden raised by the EPFO. It was argued by them that the corpus fund remains intact and the payments have been made from the interest. The pensioners also disputed the argument of the EPFO that there has to be separate option exercised within the cut-off period to join the pension scheme and contended that the stand of the EPFO is contrary to the statute.
(With LiveLaw inputs.)