EPFO Case Judgement By Delhi High Court: For Employees Of Exempted Organisations


There is good news both for the employees and those who have retired from any of the exempted organizations. The High Court of Delhi on May 22 has delivered a judgment that is in favour of the employees of the exempted organization governed by the Employees’ Provident Fund Organisation (EPFO). This judgment after the all-important judgment of the Supreme Court in 2016, which had given its judgment favouring the employees of the un-exempted organisations is to bring cheer to the retirees of the exempted firms as well.

According to the judgment, even the employees of the exempted firms will be entitled to higher monthly pension on the basis of the contribution on the actual salary without any reference to any cut-off date or any ceiling limit of the salary. An organization having its own Trust to manage provident fund is an exempted organization while that managed by the EPFO is an un-exempted organisation.

The 2014 EPFO notification

Employee’s Pension Scheme (EPS 95) had its rollout in 1995. Initially, the ceiling was Rs 5,000, which was raised to Rs 6500 in 2011 and then to Rs 15000 in 2014. A portion of the employer’s share, 8.33 per cent to be exact of the employee’s salary ( subject to ceiling) is diverted towards EPS 95.

In 1996, a provision was added to the EPS 95 rules of “Granting an option to the employer and the employee, on joint request, to contribute amounts towards the Provident Fund over and above the ceiling limits and on the actual salary.”

In 2014, the government had issued a notification bringing out some major changes in the way Employees’ Pension Scheme 1995 works. According to Notification No.GSR 609(E), dated 22.08.2014, from September 1, 2014, the monthly pensionable wage ceiling for the Employees’ Pension Scheme 1995 was enhanced from Rs 6500 to Rs15000. The mode of calculating the average pensionable wage was also changed.

The cut-off date issue

Another para which ultimately turned out to be the most contentious was added to provide that, “ The employees contributing on salary exceeding Rs. 6500 could give a fresh option to be exercised jointly by the employer and employee and continue to contribute on a salary exceeding Rs. 15000 per month. The provision provided that the fresh option was to be exercised within a period of six months from 01.09.2014 extendable by another six months at the discretion of the PF office. If the option was not exercised by the member within the stipulated period or extended period, it would be deemed that the member had not opted for contribution over the wage ceiling and the extra contributions to the Pension Fund would be diverted to the Provident Fund Account of the member, along with interest.”

Several employees failed to opt for such higher pension of higher salary kind of scheme, primarily because of lack of adequate awareness around it. Court cases were fought and ultimately in 2016, the Apex Court ruled in favour of the employees citing that there need not be any such cut-off date for any such scheme or doles for the benefit of the employees. In December 2018, the Kerala High Court had quashed this Notification No.GSR 609(E) and also had set aside the various orders and proceedings related to that notification.

However, the employees that had gone up to the Supreme Court were largely from the un-exempted organizations. Subsequently, employees from un-exempted organizations too filed cases.

Delhi High Court View

Hearing one such case of the exempted firm employees, the court in its judgment says, “ No doubt in our mind that there is complete and pervasive control of the EPFO over the private Trusts as regards the Provident Fund contributions, even in the case of an Exempted Establishment. The only distinction between the petitioners and the employees of the un-exempted establishments is that while in the case of the former the recipient of the contribution was a private trust and in the case of the latter, the recipient was the EPFO. This again was not the fault of the petitioners and this cannot be the basis to negate their right to them to receive higher pension on the contributions made on actual salary.”

The Delhi High Court also observed that even the judgment of the Apex Court delivered in 2016 for un-exempted employees, the Apex Court had taken note of an earlier Kerala HC judgment regarding an exempted establishment that the pension should be paid on the actual salary and not on the ceiling limit.

The Delhi High Court in its 26 page judgment remarks that “ All employees who are governed by the Pension Scheme will have to be treated alike as they form a homogenous group and any discrimination
to one group by paying lesser pension would be clearly arbitrary, unreasonable and violative of Article 14 of the Constitution of India.” Therefore, it allows the present petitions and quash the circular dated 31.05.2017. of the EPFO.

Finally, the Delhi High Court suggests the following route for the respondent of the case and the EPFO to follow:

1. Calculation process: Respondents need to cooperate EPFO and render all assistance in quantifying the amount to be refunded by each of the petitioners, with an interest rate of 6 per cent per annum.

2. Handing over the corpus to Trust: The Trust would have already remitted 8.33 per cent of the contribution of the petitioners on the ceiling amount. This means the retired employees need to first approach and handover the corpus to their respective Trust i.e. previous employer.

3. Handing over the corpus by Trust to EPFO: The balance corpus comprising of the remaining contributions on the actual salary of 8.33 per cent would be transferred by the Trust to the Pension Fund of the EPFO with all gains and the interest accrued so far.

4. Higher pension: On refund of the above-mentioned amounts, the EPFO shall calculate and disburse enhanced pension to the petitioners on the basis of the actual salaries. The arrears of pension falling due to the petitioners from the date of their respective retirement will be cleared by the EPFO and the EPFO shall continue to pay the monthly pension henceforth at the enhanced rates.

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