Larger Bench of Apex Court to decide applicability of cut-off date under Employees’ Pension Scheme for grant of benefits to retirees

Read judgment: The Employees Provident Fund Organization & Etc vs. Sunil Kumar B. & Etc

Pankaj Bajpai

New Delhi, August 26, 2021: While deciding whether applicability of a cut-off date under paragraph 11(3) of the Employees Pension Scheme and the dictum laid down by the Top Court in the decision of R.C. Gupta [(2018) 14 SCC 809] would act as the governing principle in matters related to retiral pension benefits or not, the Supreme Court has referred the matter to a Larger Bench for appropriate decision. 

A Division Bench of Justice Uday Umesh Lalit and Justice Ajay Rastogi observed that the judgment of the Kerala High Court which quashed the Employee’s Pension (Amendment) Scheme, 2014 holding it to be unreasonable, merits to be decided on the touchstone of the Krishena Kumar case [(1990) 4 SCC 207].  

The dispute arose when some employees on the eve of their retirement in the year 2005 took the plea that the proviso brought in by the amendment of 1996 to the Employees Provident Fund Act, was not within their knowledge and, therefore, they may be given the benefit thereof, particularly, when the employers contribution under the Act has been on actual salary and not on the basis of ceiling limit. 

This plea was negated 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 the Scheme or from the date the salary exceeded the ceiling amount. As the request of the employees was subsequent to either of the said dates, the same was not acceded to.

The matter went before the High Court Division Bench which upheld the view of the Provident Fund Authority that under the proviso to Clause 11 (3) of the Pension Scheme there was a cut-off date. 

Ultimately, the Apex Court in 2016 came to the aid of the retirees and held that a beneficial Scheme ought not be allowed to be defeated by reference to a cut-off date, particularly, in a situation where the employer had deposited 12% of the actual salary and not 12% of the ceiling limit of Rs.5,000/- or Rs.6,500/- per month, as the case may be.

Challenging the same, the counsel for the Petitioner submitted that the difference between the Provident Fund Scheme on the one hand and the Pension Scheme on the other was well recognized. Under the former scheme, the contributions made by the employer and the employees during the employment of the employee would be made over to the employee along with interest accrued thereon at the time of his retirement. 

Thus, the obligation on the part of the operators of the Provident Fund Scheme would come to an end after the retirement of the employee, whereas the obligation under the Pension Scheme would begin when the employee retired, urged the counsel. 

It was also pleaded that under the former scheme, the liability was only to pay interest on the amount deposited and to make over the entire amount at the time of his retirement. On the contrary, in the latter scheme, it would be for the operators of the Pension Scheme to invest amount deposited in such a way that after the retirement of the concerned employee the invested amount would keep on giving sufficient returns so that the pension would be paid to the concerned employee not only during his life time but even to his family members after his death. 

The counsel highlighted that if the option under paragraph 11(3) of the Scheme, was to be afforded well after the cutoff date, it would create great imbalance and would amount to cross-subsidization by those who were regularly contributing to the Pension Scheme in favour of those who come at a later point in time and walk away with all the advantages.

It was further submitted that the emphasis on investment of the amount in both the funds would qualitatively be of different dimensions and it would not be a mere adjustment of amount to transfer from one fund to another as stated in the R.C. Gupta case (supra). 

After considering the arguments, the Top Court found that the submissions touching upon the applicability of the principle laid down in the decision in R.C. Gupta (supra), goes to the very root of the matter. 

“Sitting in a Bench of two Judges it would not be appropriate for us to deal with said submissions. The logical course would be to refer all these matters to a Bench of at least three Judges so that appropriate decision can be arrived at,” added the Top Court. 

“The principal questions that arise for consideration are whether there would be a cut-off date under paragraph 11(3) of the Employees Pension Scheme and whether the decision in R.C. Gupta [(2018) 4 SCC 809] would be the governing principle on the basis of which all these matters must be disposed of,” opined the Division Bench. 

The Apex Court therefore directed the Registry to place these matters before the Chief Justice for requisite directions so that these matters can be placed before a larger Bench.