A Division Bench of the Supreme Court on Tuesday referred to a larger Bench an appeal filed by the Employees Provident Fund Organisation (EPFO) challenging a decision of the Kerala High Court, which set aside amendments to “determination of pensionable salary” under the Employees Pension Scheme (EPS) of 1995 as “ultra vires”.
A Bench of Justices U.U. Lalit and Ajay Rastogi found that an authoritative decision on the question of law concerning the amendments should be made in consideration with a 2016 decision of another two-judge Bench of the Supreme Court in the R.C. Gupta case.
Justice Lalit’s Bench said a larger Bench of at least three judges should consider the appeal in the background of the “governing principles” laid down in the R.C. Gupta case, which “go to the root of the matter” in this appeal.
The appeal was referred to the Chief Justice of India for forming a larger Bench.
The dispute revolves around the controversial amendments made to Clause 11(3) of the EPS-1995.
Challenges to the EPS amendments said they were skewed. The people who challenged the amendments came from all walks of life and work. They sought a more secure life with decent pension.
In the earlier version of EPS-1995, the maximum pensionable salary cap was ₹ 6500. However, members whose salaries exceeded this cap could opt, along with their employers, to contribute up to 8.33% of their actual salaries.
Raising of cap
The amendments raised the cap from ₹6500 to ₹15000. But the amendments said only employees, who were existing EPS members as on September 1, 2014, could continue to contribute to the pension fund in accordance with their actual salaries. They were given a window of six months to opt for the new pension regime.
However, the changed pension regime introduced through the amendments meant that someone who became an EPS member after September 1, 2014 would not get pension on a par with his or her actual salary.
“That is, even if your salary is ₹1 lakh, you will get pension only for a salary ₹15000,” advocate Nishe Rajen Shonker, for the main respondents, explained.
The case concerns thousands of employees and pensioners who draw merely ₹2000 or ₹3000 as pension.
In the R.C. Gupta case, the Supreme Court had said that a “beneficial scheme” like EPS-1995 “ought not to be allowed to be defeated by reference to a cut-off date like September 1, 2014.
Besides, the amendments created additional obligations for members whose salaries exceeded the ₹15000 ceiling. They had to contribute at the rate of 1.16% of the salary in addition to their EPF contribution. Besides, these employees had to make a fresh option within six months.
Before the amendments were introduced, every employee, who became a member of the Employees Provident Fund Scheme of 1952 as on November 16, 1995, could avail of EPS. Again, the pensionable salary was an average of 12 months’ pay before the date of the employee’s exit from the EPS. The amendments extended the period of calculation of average salary from 12 months to 60 months.
The respondents, who are employees and pensioners, argued that salaries were usually the highest during the last year before retirement.
An extension of the period of calculation of average pensionable salary from 12 to 60 months would see a corresponding depletion in the pension, they contended.
In its appeal, the EPFO argued in favour of the amendments, saying the High Court had not only defeated the “object and purpose of EPS-1995 but will also prejudice the interests of the lower waged employees”. It said the pension of higher salaries would deplete the pension fund and “employees making contribution on lower salary will not be able to avail the benefit of the scheme in its true spirit”.
“Collections [to the pension fund] is galloping. To hold people’s money is unfair merely because of some projected actuarial deficit,” senior advocate Jaideep Gupta, appearing for some pensioners and employees, said.
“We are only asking for a pittance. It is our own money… Many retirees do not have money to buy medicines or care for their basic needs. The EPFO has nomo locus standi to thwart a beneficial scheme,” advocate Purushottam Sharma Tripathi submitted.