Foreign employees in India must contribute to Employees' Provident Fund: Delhi High Court

The Delhi High Court recently upheld the validity of the 2008 and 2010 notifications that require non-excluded international workers employed in India to mandatorily enrol in the Employees’ Provident Fund (EPF), dismissing writ petitions by SpiceJet and LG Electronics [SpiceJet v. Union of India]..A Bench of Chief Justice Devendra Kumar Upadhyaya and Justice Tushar Rao Gedela held that the Central government was empowered to extend the EPF Scheme, 1952, to foreign nationals and that the classification between Indian and foreign workers was constitutionally permissible.“We have already held above that there is no legal infirmity in the said notifications,” the Court said while recording its conclusions..The first notification - GSR 706(E) dated October 1, 2008 - inserted Paragraph 83 into the EPF Scheme, 1952, making special provisions for international workers. The second notification - GSR 148(E) dated September 3, 2010 - substituted paragraph 83, defining “international worker”, carving out the “excluded employee” category via the SSA route and mandating membership and contribution from the date of joining. SpiceJet’s plea additionally assailed a demand notice dated March 14, 2011 requiring deposit of dues for international workers and a summons dated March 15, 2012 under Section 7A seeking records for determination of contributions. LG Electronics challenged the same framework. The petitions argued that paragraph 83 unlawfully distinguishes between Indian and foreign employees by imposing compulsory contribution on foreign nationals irrespective of wages, even though Indian employees drawing above ₹15,000 a month are not mandatorily covered. They also assailed the withdrawal rule (age 58) as unworkable for expatriates who typically serve short stints in India. It was further claimed that paragraph 83 exceeded delegated power since the Act’s definition of “employee” does not differentiate by nationality. The matters were heard together as they raised common questions of law on the validity of the 2008/2010 notifications, the scope of delegated legislation under Sections 5 and 7 of the EPF Act, and the permissibility of treating international workers as a distinct class for contribution and withdrawal. The Court framed issues around alleged Article 14 violation and the reasonableness of the withdrawal condition applicable to international workers.Explaining its decision, the Court applied the classic Article 14 test, endorsed permissible classification and expressly disagreed with a contrary single-judge view of the Karnataka High Court on similar issues. “We have already held above that the classification in the instant case has a reasonable basis, which is based on economic duress, and such consideration is absent in the judgment rendered by the Karnataka High Court,” the Court observed..The Court also addressed the challenge to the withdrawal condition, noting the international obligations backdrop to paragraph 83 and the role of Social Security Agreements (SSAs)."So far as the submission of the petitioner that substituted paragraph 69 as is applicable to foreign employees is unreasonable, we may only observe that paragraph 83 in the Scheme has been added to implement India‟s international treaty obligations and entering into an international treaty is a sovereign prerogative, and therefore, if such a provision is struck down, that will amount to taking away the legal basis for entering into and applying the SSA.".Finally, the Court gave conclusive directions and upheld the downstream measures as well. It recorded that since the core notifications stand, challenges to later circulars and notices must also fail. The writ petitions were thus dismissed..SpiceJet was represented by Advocates Atul Sharma, Abhilasha Sharma and Dipan Sethi.The Union of India was represented by Advocates Manisha Agrawal Narain, Vikram Jetly, Shreya Jetly, Nipun Jain and Ananya Arora.EPFO was represented by Advocate Siddharth with Advocates Amit Kumar, Prateek Goyal, and Harshit Manwani..LG Electronics was represented by Senior Advocate Sudhir Nandrajog with Advocates Rishi Awasthi, Amit Awasthi and Piyush Vatsa..[Read Judgment]