TMI Blog2018 (10) TMI 1659X X X X Extracts X X X X X X X X Extracts X X X X ..... d from the mouths of the pensioners to secure the Pension Fund. Though the Fund is replenished by the present workers, its beneficiaries are the old and infirm former workers; the pensioners. The Fund is meant for their sustenance. The stated objective of the amendments is to prevent depletion of the fund. The said apprehension is absolutely baseless. 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 atte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3, 29234, 29253, 29359, 29475, 29517, 29547, 29524, 29546, 29554, 29557, 29558, 29748, 29763, 29795, 29831, 29888, 30009, 30081, 30083, 30086, 30266, 30399, 30727, 30904, 30990, 31088, 31130, 31165, 31166, 31175, 31275, 31279, 31301, 31322, 31441, 31484, 31539, 31594, 31604, 31606, 31643, 31739, 31760, 31762, 31767, 31791, 31806, 31850, 32005, 32093, 32184, 32380, 32461, 32523, 32532, 32557, 32788, 32797, 32815, 32900, 32919, 32975, 33032, 33048, 33051, 33070, 33122, 33214, 33220, 33237, 33238, 33244, 33245, 33246, 33249, 33250, 33372, 33422, 33491, 33545, 33552, 33553, 33620, 33627, W.P.(C). 13120/2015 con.cases 14 33695, 33700, 33740, 33875, 33917, 33963, 34038, 34098, 34101, 34182, 34284, 34324, 34438, 34530, 34533, 34552, 34559, 34582, 34608, 34671, 34955, 34986, 34997, 34729, 34753, 34764, 34766, 34771, 34791, 34792, 35012, 35038, 35039, 35040, 35157, 35212, 35217, 35274, 35341, 35363, 35375, 35456, 35527, 35530, 35587, 35640, 35644, 35645, 35707, 35733, 35737, 35757, 35763, 35790, 35859, 35860, 36014, 36016, 36038, 36050, 36076, 36085, 36284, 36381, 36829, 37035, 37209, 37291, 37298, 37312, 37315, 37339, 37357, 37417, 37421, 37553, 37588, 37607, 37743, 37786, 37883, 37902, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Fund Account in the name of each employee of a covered establishment. The fund was to be constituted by depositing an employee's share at the rate of 10% or 12% of the basic wages including Dearness Allowance. The employer has also to contribute an identical amount, which together would constitute the Provident Fund. Initially, the Act did not provide for the creation of a Pension Fund or for the payment of pension. Later on, Section 6A was inserted, authorizing the creation of a scheme for the purpose of providing pension to the employees. Accordingly, the Employees Pension Scheme, 1995 was framed. As per the said scheme the maximum pensionable salary was Rupees six thousand five hundred per month and contributions to the pension fund were to be made only on that amount. The corpus of the pension fund was to be constituted by transferring 8.33% out of the employer's contribution under Section 6 of the Act. As per the scheme, the maximum pensionable salary was initially fixed as ₹ 5000/- and was later on enhanced to ₹ 6500/-. Accordingly, contribution was payable only in respect of the said amount. Subsequently, a proviso was added to paragraph 11(3) of the Pens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ising of a span of sixty months preceding the date of exit from the membership of the pension fund. The pensionable salary shall be determined on pro-rata basis for the pensionable service up to the first day of September, 2014, subject to a maximum of ₹ 6500/- per month and for the period thereafter at the maximum of ₹ 15,000/- per month. The maximum pensionable salary shall be limited to ₹ 15000/- per month. Consequently, it is pointed out by the petitioners that the pension that is to be drawn by them has been drastically reduced without any justification. The amendments are therefore under challenge in these Writ Petitions. These Writ Petitions are posted before us pursuant to an order of reference dated 21.06.2016 made by a learned Single Judge of this Court. 7. The Writ Petitions are contested by the Provident Fund Authorities. A detailed counter affidavit has been filed in W.P.(C) No.18287 of 2016, which has been adopted in the other cases also. As per the counter affidavit, the Writ Petition itself is not maintainable and the allegation that the amendments are violative of Articles 14,15 and 21 of the Constitution is without any basis. The members who u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exhibit P2, this Court held that the stipulation of a cut off date was unsustainable. Though the matter was carried in appeal before the Division Bench, W.A.No. 1137 of 2012 was also dismissed by exhibit P3 judgment. A Special Leave Petition filed before the Supreme Court was also dismissed. Therefore, according to the learned counsel, no stipulation regarding a cut off date is permissible. Reliance is placed on exhibit P12 judgment of the Supreme Court to point out that stipulation of a similar cut off date was held to be unsustainable there also. In spite of the above, the amended Pension Scheme has again stipulated a cut off date which is liable to be struck down. As per the amendments, the contents of both 'pensionable service' as well as the 'pensionable salary' have been altered. The persons who had joined the scheme prior to the amendments had become vested with a right to claim pension on the terms as they stood prior to the amendments. Such vested rights cannot be taken away. Before the amendment, pension was to be calculated on the basis of the average pay drawn over a period of twelve months prior to retirement. As per the amendment, the pension is to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Therefore, they stand to lose the benefit of their contribution. It is contended that, the authorities have no power to limit the pension payable by prescribing a limit on the pensionable salary. The manner of computing the pensionable service of an employee is also unsustainable. The counsel places reliance on the decision in Amrit Lal Berry v. Collector of Central Excise, New Delhi [(1975) 4 SCC 714] and Kunj Behari Lal Butail v. State of H.P. [(2000) 3 SCC 40] to contend that, the impugned provisions of the Scheme are ultra vires the power to frame scheme available to the Government. Therefore, the counsel seeks interference of this Court to set aside the scheme as arbitrary and ultra vires. 11. Advocate P. Ramakrishnan while reiterating the contentions advanced by the other counsel points out that though pension before the amendment of the scheme was to be calculated on the basis of the salary drawn by an employee over a period of twelve months prior to his retirement, the said period has been extended to sixty months. Since the pay of the employees have been revised and enhanced more than once during the said period, the employees would be denied the benefit of their enha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... create different categories of employees with some drawing higher amounts of pension while the other draw only much lesser amounts. Thus, the employees are treated differently without any rational basis leading to discrimination that is unsustainable under Article 14 of the Constitution. The employees are also being burdened with the liability to make an additional contribution of 1.16% on the salary exceeding ₹ 15,000/-. There is no justification for the fresh option that is contemplated by the amendment. There is no cut off date in paragraph 26(6) of the EPF Scheme. Since insistence on a cut off date has already been found to be bad and set aside by this Court, there is no justification for introducing the same again. The manner in which the scheme has been amended to reduce the pension payable to the employees is arbitrary and liable to be set aside. 14. Advocate Titus Mani points out that the amendments are ultra vires the Act. According to the learned Counsel, money is authorised to be extracted only as per Sections 5 and 6 of the EPF Act. No such power is conferred by Section 6A of the Act. Section 6A only empowers the authorities to appropriate a portion of the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s only to make available to the employees pension that is commensurate with the contribution received from them. Any other course would result in depletion of the pension fund itself to the prejudice of a large section of employees who are low paid and under privileged. Reliance is placed on various decisions of the Apex Court to contend that the decision on the quantum of benefits made available to the employees was a policy decision taken by the Central Government after considering various inputs. For the above reason, it is contended that the Courts would be averse to considering the wisdom of such policy or interfering with the same. The learned Senior Counsel therefore seeks dismissal of the Writ Petitions. 16. We have considered the respective contentions advanced by the counsel on either side anxiously. In many of the cases before us, the validity of the amendments made to the pension scheme are under challenge. The Pension Scheme is made under Section 6A of the EPF Act. Therefore, it is necessary for us to consider the scope of the provisions of the EPF Act first. In the above context, it is necessary to take note of the background in which the EPF act was enacted. The i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 5 of the EPF Act reads as under. 5. Employees' Provident Fund Schemes .-(1) The Central Government may, by notification in the Official Gazette, frame a Scheme to be called the Employees' Provident Fund Scheme for the establishment of Provident Funds under this Act for employees or for any class of employees and specify the establishments or class of establishments to which the said Scheme shall apply and there shall be established, as soon as may be after the framing of the Scheme, a Fund in accordance with the provisions of this Act and the Scheme. (1-A) The Fund shall vest in, and be administered by, the Central Board constituted under section 5-A. (1-B) Subject to the provisions of this Act, a Scheme framed under sub-section (1) may provide for all or any of the matters specified in Schedule II. (2) A Scheme framed under sub-section (1) may provide that any of its provisions shall take effect either prospectively or retrospectively on such date as may be specified in this behalf in the Scheme. The fund under the above provision is to be administered by the Central Board constituted under Section 5A. Section 6 stipulates payment of contribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any other establishment employing twenty or more persons or class of such establishments which the Central Government may, by notification in the Official Gazette, specify in this behalf: Provided that the Central Government may, after giving not less than two month's notice of its intention so to do, by notification in the Official Gazette, apply the provisions of this Act to any establishment employing such number of persons less than twenty as may be specified in the notification. The above provision refers to the power of the Central Government to notify an establishment employing less than the stipulated number of workers also. Therefore, the above provisions define the class of persons to whom the provisions of the EPF Act would apply. The Act as it was originally framed did not contain a provision for payment of pension to the employees. Later on, Section 6A was inserted in 1971 empowering the Central Government to frame a Scheme called the Employees Family Pension Scheme to provide Family Pension and Life Assurance benefits to the employees of the establishments to which the Act applies. Accordingly, provision for payment of Family Pension at prescribed rates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is 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 sub-section (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 case may be; so however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that Scheme. The above provision empowers the Central Government to frame, by notification in the official gazette, an Employees Pension Scheme and to establish a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into force in such factory or other establishment. (b) Every employee employed in or in connection with the work of a factory or other establishment to which this Scheme applies, other than an excluded employee, shall also be entitled and required to become a member of the fund from the day this paragraph comes into force in such factory or other establishment if on the date of such coming into force, such employee is a subscriber to a provident fund maintained in respect of the factory or other establishment or in respect of any other factory or establishment (to which the Act applies) under the same employer: Provided that where the Scheme applies to a factory or other establishment on the expiry or cancellation of an order of exemption under section 17 of the Act, every employee who but for the exemption would have become and continued as a member of the Fund, shall become a member of the fund forthwith. (2) After this paragraph comes into force in a factory or other establishment, every employee employed in or in connection with the work of that factory or establishment, other than an excluded employee, who has not become a member already shall also be entitled a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emption under section 17 of the Act or an order of exemption under paragraph 27 or paragraph 27-A. (2) Every member employed as an employee other than an excluded employee, in a factory or other establishment to which this Scheme applies shall contribute to the fund, and the contribution shall be payable to the fund in respect of him by the employer. Such contribution shall be in accordance with the rate specified in paragraph 29: Provided that subject to the provisions contained in sub-paragraph (6) of paragraph 26 and in sub-paragraph (1) of paragraph 27, or sub-paragraph (1) of paragraph 27-A, where the monthly pay of such a member exceeds fifteen thousand rupees the contribution payable by him, and in respect of him by the employer, shall be limited to the amounts payable on a monthly pay of fifteen thousand rupees including dearness allowance, retaining allowance (if any) and cash value of food concession. 24. As already noticed above, since there is no provision in the EPF Act contemplating the payment of any amount by either the employer or employee in addition to what has been stipulated by Section 6 of the EPF Act, it was not possible to require any further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e under that notification. 26. The effect of the above provisions is that, a scheme has to be framed under Sub section 1 of Section 5 of the EPF Act. Such scheme as already noticed above, is for establishing a provident fund for the employees of the establishment to which the scheme shall apply. Such scheme has been made subject to the provisions of the EPF Act by Section 5(1D) of the Act. Therefore, there cannot be any doubt that the scheme to be framed by the Central Government and the modification to be effected thereto by Section 7 shall be subject to the provisions of the EPF Act. In view of the above, it has next to be examined whether the provisions of the impugned pension scheme have exceeded the limits of the power conferred. 27. It is clear from the Scheme of things discernible from an examination of the above provisions that, the legislative intention has been to constitute a Pension Fund utilizing 8 1/3% of the employer's contribution made under Section 6 of the EPF Act. Sub paragraph 6 of paragraph 26 of the EPF Scheme gives an option to the employee to remit contributions at the rate of 12% of the actual salary drawn by him, provided a joint request is mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... necessary to consider the effect of the amendments that are impugned in the light of the object of the enactment and to ascertain whether the amendments would subserve an attainment of the said objective. 29. As per the impugned amendments, the following changes have been effected: (i) Paragraph 11 of the Pension Scheme limits the maximum pensionable salary to ₹ 15,000/- per month. Prior to the amendment, though the maximum pensionable salary was only ₹ 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 ₹ 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. (ii) Paragraph 11(4) of the Pension Schem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oportionately higher than those contributing below the wage ceiling. It can be seen from the report for the year ending 31.03.2014 that the percentage of members contributing on wages higher than the wage ceiling is only 0.41% whereas the benefit obligation is 7.31%. Accordingly, the said proviso has now been omitted with effect from 01/09/2014 vide Ext.P-6 Notification dated 22/08/2014. The amendment is meant to be made applicable to all the existing members as the new members as on 01/09/2014 considering that after the amendment, the provisions of the Employees' Pension Scheme, 1995 will henceforth apply only to those Employees' Provident Fund (EPF in short) members whose pay at the time of becoming EPF member is not more than ₹ 15000/- per month on or after 01/09/2014. 55. It is submitted that in the case of the Petitioners who are contributing on actual wages also the calculation of pensionable salary on the basis of average salary during the 12 months would result in disbursement of pensionary benefits disproportionate to the contribution remitted by the employer on their b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10013-10014 of 2016 (arising out of SLP (C)Nos. 33032-33033 of 2015) and held as per order dated 4.10.2016 that the date of commencement of the Scheme referred to in the proviso to paragraph 11(3) of the Pension Scheme was not a cut-off date to determine the eligibility of the employer-employee to indicate their option under the said proviso. The Apex Court has also in the said order approved the view taken by this Court on the point. Therefore, the stipulation of a cut-off date for conferring the benefits under the Pension Scheme cannot be sustained. In paragraphs 10 and 11 of the said order, evidenced by Ext.P12 in W.P.(C) No. 13120 of 2015, the Apex Court has further held as follows: 10. We do not see how exercise of option under paragraph 26 of the Provident Fund Scheme can be construed to estop the employees from exercising a similar option under paragraph 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 paragraph 26 of the Provident Fund Scheme is inevitable. Exercise of the option under paragraph 26(6) is a necessary precursor to the exercise of option under Clause 11(3). Exercis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more than the said amounts as daily wages. Therefore, to limit the maximum salary at ₹ 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 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 ₹ 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 employee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of the EPF Act. The contributions paid by them on the basis of the actual salaries drawn by the employees are constantly adding to the base of the fund. Such process of accretion is a continuing phenomenon. Therefore, there is no evidence of the fact that the fund is getting depleted by the payment of pension, as alleged. At the same time, the Statistics only prove otherwise. It is commonly accepted that the fund base has only grown over the years by the accumulation of EPF contributions. 36. Considering the fact that, the pension fund is created for the purpose of providing succour to the employees in the their old age, taking into account the further fact that the fund is created by collecting contributions from the employers and employees, casting no financial burden on the State, it follows that no scheme that defeats the purpose of the enactment by reducing the pension payable to the employees in their old age to a ridiculously low amount, which is not sufficient even for ensuring a decent life to them, cannot be sustained. There is no justification for stealing bread from the mouths of the pensioners to secure the Pension Fund. Though the Fund is replenished by the pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heme. 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 enure 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 amendm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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