[Employees Pension Amendment Scheme 2014] Supreme Court to re-examine RC Gupta decision; refers EPFO appeals to 3-judge Bench

The Supreme Court on Tuesday referred to a three-judge Bench, the question regarding validity of the Employees Pension (Amendment) Scheme 2014.

A Bench of Justices UU Lalit and Ajay Rastogi said that it is referring the matter to a larger Bench in view of the 2016 decision rendered by the apex court in RC Gupta case.

Since that RC Gupta order was rendered by a Division Bench, the Court opined that it would not be appropriate for another Division Bench to consider the issue.

"We are referring the matter to a 3-judge Bench. Two principle questions which arise for consideration are whether RC Gupta needs reconsideration and whether there will be cut off date for the option under Paragraph 11(3) of the EPF Pension scheme," the Court said.

The order was passed on a batch of appeals filed against various High Court judgments quashing the 2014 amendment scheme.

The Employees Provident Fund Organisation had challenged the High Court judgments before the Supreme Court.

In the RC Gupta case, the issue before the Court was whether there was a cut-off date for employees to avail benefit of the option under the Employees Pension Scheme (EPS), which permits the employer and employee to make uncapped pension contribution.

Initially, when the EPS was introduced in 1995, clause 11(3) of the scheme mandated that the maximum pensionable salary was limited to Rs. 5,000, which was subsequently enhanced to Rs.6,500 per month in 2001.

However, a couple of months after the EPS was framed, a proviso was added to Clause 11(3) with effect from March 16, 1996 permitting an option to the employer and an employee for contribution on salary exceeding Rs. 5,000 or Rs. 6,500 per month. 8.33% of such contribution on full salary was required to be remitted to the Pension Fund.

The appellant-employees in the RC Gupta case had, on the eve of their retirement i.e. sometime in the year 2005, taken the plea that the proviso brought in by the amendment of 1996 was not within their knowledge and, therefore, they may be given the benefit of the same, particularly, when the employer's contribution under the Act has been on actual salary and not on the basis of ceiling limit of either Rs.5,000 or 6,500 per month.

This contention was negatived by the Provident Fund Authority on the ground that the proviso visualized a cut-off date for exercise of option, namely, the date of commencement of scheme or from the date the salary exceeded the ceiling amount of Rs.5,000 or 6,500 per month. As the request of the appellant-employees was subsequent to either of the said dates, the same cannot be acceded to, it was argued.

The Supreme Court in RC Gupta had, however, turned down this argument holding that reference to the date of commencement of the scheme or the date on which the salary exceeds the ceiling limit are dates from which the option exercised are to be reckoned with for calculation of pensionable salary.

"The said dates are not cut-off dates to determine the eligibility of the employer-employee to indicate their option under the proviso to Clause 11(3) of the Pension Scheme," the top court had said in RC Gupta verdict.

The EPS scheme was amended in 2014 to increase the maximum pensionable salary to Rs. 15,000 from Rs. 6,500.

However, it excluded new members who earned above Rs. 15,000 and joined after September 2014 from the scheme completely. Existing members had to decide within six months from September 2014 on whether they wanted to exercise the option to make uncapped contributions.

The amendments were then challenged before various High Courts leading to the present batch of appeals before the top court.

The 3-judge Bench will now consider whether the present batch of appeals will also be governed by the RC Gupta judgment.

[Read Order]

[Read RC Gupta order]