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The Employees Provident Fund

Court name – Supreme Court of India    

Judgment Date – 24/08/2021

Judgement name–  The Employees Provident Fund Organization V. Sunil Kumar B. and Ors.

Judges/ bench – Hon’ble Judges/Coram: U.U. Lalit and Ajay Rastogi, JJ


Employee Provident Fund (EPF) is a retirement savings plan in which workers contribute a small percentage of their monthly income to the fund. In a similar vein, the employer contributes a comparable amount to the plan on their behalf.

The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (“Act”) establishes provident funds, pension funds, and deposit linked insurance funds for factory and other establishment employees. Under the Act, the following three schemes have been framed and notified:

a) the Employees’ Provident Fund Scheme, 1952, established under Section 5 of the Act (“Scheme”); b) the Employees’ Provident Fund Scheme, 1952, established under Section 5 of the Act (“Scheme”); c)

b) the Employees Pension Scheme of 1995 (EPS) established under Section 6A of the Act; and

c) under Section 6C of the Act, the Employees’ Deposit Linked Insurance Scheme, 1976.

The maximum pensionable wage was established at INR 5000/- when EPS was implemented on November 16, 1995, and it was later increased to INR 6,500/- by a 1996 modification.

Following that, on March 16, 1996, a proviso was introduced to the EPS, allowing the employer and employee to pay funds to the pension fund at a rate of 8.33 percent of the real income collected by the employee, when the salary exceeded INR 6,500/-. As a result, the majority of workers with incomes in excess of the stipulated maximum chose to pay contributions based on their real earnings.

Brief facts of the case

In Employees Provident Fund Organisation & Anr. vs. Sunil Kumar B & Ors. (the “Judgement”), the Supreme Court dismissed an EPFO Special Leave Petition (SLP) challenging a Kerala High Court judgement on EPF pension in P. Sasikumar & Ors. vs. Union of India (UOI) of 2015 dated 12.10.2018 setting aside the amendment brought in the Employee Pension Scheme.

Employees of various enterprises covered by the terms of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 have filed writ petitions with the Kerala High Court, which had previously granted them. The employee’s complaint was about the modifications brought about by the Employee’s Pension (Amendment) Scheme, 2014, which took effect on September 1, 2014 (‘EPS 2014 Amendment’), which substantially decreased the pension due to them.

Key issues

  • The Court’s main concern / inquiry in KHC 2018 was whether the following characteristics added by EPS 2014 are legitimate and sustainable:
  • The EPS 2014 Amendment established a cutoff date for determining the employer-eligibility employee’s to declare their option and confer EPS benefits.
  • The new clause established by the EPS 2014 Amendment, which requires employees to contribute an additional 1.16 percent of their salaries above INR 15,000/-.

Judgement held

  • In SLP 2016, the Supreme Court decided that the date of EPS implementation referenced to in the proviso to paragraph 11(3) of the EPS was not a cut-off date for determining the employer-ability employee’s to express their preference under the said proviso. In the same order, the Supreme Court affirmed KHC 2015’s position on the matter.
  • As a result, the EPS’s need for a cut-off date for granting benefits cannot be upheld. To put it another way, the EPS proviso to paragraph 11 makes no mention of a cutoff date.
  • Any such provision of a cutoff date for bestowing EPS benefits would have the effect of categorising personnel as having retired before or after that date. Such a categorization was held to be arbitrary by the Court. The goal is to keep the Pension Fund from running out of money, which isn’t enough to justify the categorization.
  • Every employee who is a member of the provident fund is entitled and obligated to become a member of the pension fund from the day the provision takes effect, according to paragraph 26 of the Scheme. There is no other choice for any employee. However, under paragraph 6 of the same paragraph, an employee has the option of contributing to the provident fund on the basis of his real wage.
  • Because the Act makes no provision for the payment of any sum by either the employer or the employee in addition to what is specified in Section 6 of the Act, it was not feasible to demand any further payment from the contributories. That appears to be the reason why both the employer and the employee are given the option to declare their desire to contribute more than the INR 15,000/- wage limit in writing.

My opinion

In my opinion the Supreme Court’s judgement dismissing the EPFO’s special leave plea and therefore upholding the Kerala High Court’s decision in Sasikumar is a welcome relief for employees working in various companies.

The previous position regarding membership in the EPS Scheme appears to have been restored, allowing any EPF Scheme member, including those earning more than INR 15,000 (Indian Rupees Fifteen Thousand) per month and who became members as a result of a request under EPF Scheme Paragraph 26(6), to become members of the EPS Scheme.

Similarly, instead of 60 (sixty) months, the pensionable wage would now be based on the average salary over 12 (twelve) months.

 As a result, the amount of monthly pension would rise because employees typically earn a greater pay near the conclusion of their employment.

Reported by: Shreya Kashyap, University of Petroleum and Energy Studies, Dehradun, 2nd year ( 3rd semester)



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