NOTE ON HIGHER PENSION UNDER EMPLOYEES PENSION SCHEME

S.N. Murthy
Senior Advocate

A batch of retired employees approached the Hon’ble Supreme Court seeking for benefit of higher pension since their employer and they themselves had paid EPF contribution on actual wages which was much higher than the prescribed limit for coverage. This ultimately resulted in an order passed on 04.10.2016, wherein the Learned Judges of the Hon’ble Supreme Court held that there was no cut-off date under the proviso to para-11 (3) of the Pension Scheme as it existed then, and so, the request of the retired employees for exercising option for higher pension should not have been rejected.  With this, the retired employees who were before the Hon’ble Supreme Court got an option to seek higher pension.

On the above issue, the Hon’ble Supreme Court in a subsequent judgment in the Employees Provident Fund Organization and Another etc., Vs. Sunil Kumar B & Others has held that employees who retired prior to September 2014 without exercising any option under paragraph 11(3) of the pre-amendment scheme would not be entitled to the benefit of opting for higher pension.

The Hon’ble Supreme Court held that the members of the Scheme (that is continuing to be members as on date) who did not exercise option as contemplated under the proviso to paragraph 11(3) of the Pension Scheme, (as it was before 2014 amendment) would be entitled to exercise option under Paragraph 11(4) of the post-amended scheme.  The option should be exercised in the nature of joint option covering pre-amendment paragraph 11(3) as also amended paragraph 11(4) of the Pension Scheme. Four months time from 04.11.2022 has been given to exercise the option.  The Court also made it clear that the amendment brought about through notification dated 22.08.2014 would apply to the employees of the exempted establishments also in the same manner as to the employees of the regular establishments.

In the case of R.C.Gupta and Others Vs. Regional Provident Fund Commissioner, Employees Provident fund Organization & Others reported in 2018 (14) SCC 809, a judgment of the Hon’ble Supreme Court interpreted proviso to para-11 of the Pension Scheme as it existed before the amendment and held that the six months period referred to in the proviso for making request for higher pension is not cut-off date. The Court held that the six months period referred to in the proviso has to be reckoned with for calculation of pensionable salary. It made it clear that the said dates are not cut-off dates to determine the eligibility of the employer-employee to indicate their option under the proviso to para-11 (3) of the Pension Scheme.  The Court stated that all that the provident fund commissioner is required to do is to make an adjustment of accounts.

In the Employees Provident Fund Organization & Another Vs.Sunil Kumar B and others, a three-judge bench of the Hon’ble Supreme Court reported in 2022 Live Law (SC) 912 held at para-44 (iv) that the members of the Scheme who did not exercise option, as contemplated in the proviso to paragraph 11(3) of the Pension Scheme (as it was before 2014 amendment) would be entitled to exercise option under paragraph 11(4) of the post-amendment scheme. The Learned Judges of the three-judges Bench agreed with the decision of the Court in two-judges bench delivered in R.C.Gupta’s case.  If that is so, at para-44(iv), the three-judges have stated that the employees who had retired prior to 1st September 2014 without exercising any option under paragraph 11(3) of the pre-amendment scheme, have already exited from the membership thereof.  They would not be entitled to the benefit of this judgment.

From the above, it becomes clear that the Learned Judges in the three-judges Bench have committed a serious error in first concluding that those who did not exercise option before retiring may exercise option.  While at the same time, concluding that the employees who retired prior to 1st September 2014 without exercising any option are not entitled to the benefit of the judgment. Should this be considered as those who retired prior to 1st September 2014 may still exercise option going by R.C.Gupta’s case and there is no need for them to fall back on the three-judges Bench.  The Learned Judges of the Hon’ble Supreme Court have to clarify this issue.

The requirement of the members to contribute @ 1.16% of their salary to the extent such salary exceeds Rs.15,000/- per month as additional contribution under the amended scheme has been held to be ultra vires the provisions of the 1952 Act. However, this portion of the order has been suspended for a period of six months. This means that the employees should contribute @ 1.16% of their salary to the extent such salary exceeds Rs.15,000/- as additional contribution and this has to be paid for six months or till arrangements are made to collect the said amount from the employer or government.

Unfortunately, the Hon’ble Supreme Court has agreed with the notification of the Government with regard to computation of pension by accepting the change made in the notification. In other words, instead of taking the last twelve months average salary for the purpose of computation of pensionable salary, the notification requires last sixty months average salary to be taken into consideration for computation of pensionable salary.

After the judgment of the Hon’ble Supreme Court, EPF department has been sleeping over the judgment.  The first Circular from the EPF department is dated 29.12.2022.  For the first forty five days out of four months’ time given, the EPF department did nothing. Thereafter, the EPF department issued a Circular dated 29.12.2022 which dealt only with the retired employees and had nothing to do with the existing employees.  Thereafter, the department came up with circular dated 25.01.2023 which means that for over eighty days, the department slept on the issue.  Even now, no form is prescribed for submission to seek higher pension.  In fact, all these in the face of Hon’ble Supreme Court directing the EPF department to bring out necessary circulars and widely circulate the same for the benefit of all the members of EPF and EPS.

It is a sorry state of affairs that the EPF department do not seem to be concerned about the way it should be implementing the Hon’ble Supreme Court judgment and in dealing with the members. A large number of members of EPS have approached the department for clarification, for which there is no response at all from the department.  Even queries sent in writing are not answered. 

In these circumstances, the contributors to the pension scheme will have to design their own form and submit to the EPF authorities preferably latest by 02.03.2013 though four months would expire on 04.03.2023.
Thanks,
 
S.N. Murthy
Senior Advocate