Article (April-2018)


Controversies post S.C. order on higher contribution to pension fund

Ram Niwas Bairwa

Designation : -   Regional PF Commissioner (II)- Retired

Organization : -  Jaipur


376229 Total View        

Consequent to the Supreme Court order in the SLP No. 33032-33033/2015 (R.C. Gupta and others vs. Regional P.F. Commissioner and others - 2017 LLR 86 - S.C.) EPFO issued a circular No. Pension-I/12/33/EPS Amendment/96/Vol.II/34007 dated 23.03.2017, with approval of the Central Government, Ministry of Labour and Employment, to "allow members of EPS, 1995 the benefit of the actual salary in the Pension Fund exceeding wages limit of either Rs. 5000/- or Rs. 6500/- per month from the effective date respectively as per Hon'ble Supreme Court's Judgment in SLP No. 33032-33033/2015". The circular says -
"Thus a member contributing to the provident fund on the wages exceeding the statutory ceiling or who had contributed to the Provident Fund on the wages exceeding the Statutory ceiling cannot be debarred from exercising the option to contribute on such higher wages to the pension fund."
In the same circular, it has also been expressed that - 
"It has further been observed that a beneficial Scheme, ought not to be allowed to be defeated by reference to a cut-off date, particularly, in a situation where (as in the present case) the employer has deposited 12% of the actual salary and not 12% of the ceiling limit of Rs. 5000/- or Rs. 6500/- per month, as the case may be."
Thus, the circular dated 23.03.2017 is day-light clear and leaves not to any further controversy. However, the scenario in the field offices is somehow different. Someone may call it "whims and wisdom" or some may say "whims versus wisdom" but, ultimately, the scenario does not bear the sense of a beneficial scheme, ought not to be allowed to be defeated by reference to a cut-off date or so.
In fact the controversy began with the issue of the EPFO circular no. Pension/Misc.2005/65836 dated 22.11.2006 as guidelines for regulating the cases under the said proviso to para 11(3) linking the issue to para 26 (6) of the EPF Scheme, 1952 which led the field offices to put an embargo on all such cases, which finally went to the Supreme Court to pass orders in R.C. Gupta's case on 04.10.2016.
Now the field offices are putting embargos to deny accepting EPS contribution on a higher salary on the following grounds, especially with reference to the amendments made by the GSR 609(E) dated 22.08.2014 (w.e.f. 01.09.2014) -
(i) The S.C. Judgment is not applicable to exempted employees as their contributions kept by the trust of the exempted establishment vide H.Q. circular dated 31.05.2017.
(ii) The proviso to para 11 (3) has been removed hence no option is available to post-notification retirees.
(iii) Deleted Proviso provides for a fresh option within 6 month for continuing the paying contribution on higher salary hence in-service EPS members do not have opportunity to continue contribution on higher salary and are governed by newly inserted para 11 (4).
The amendments w.e.f. 01.09.2014 are -
(i) GSR 609 (E) dated 22.08.2014 (w.e.f. 01.09.2014) redrafting the entire para 11 including deleting the proviso providing a rider,
(ii) Providing for a fresh option within 6 months, to continue EPS contribution on higher salary who already opted and paying contribution on higher salary,
(iii) Barring new employees to become EPS member who are drawing salary more than Rs. 15,000 p.m.
With the above mentioned facts, let the constraints be examined due to which the benefits are being denied.
In the initially notified EPS, 1995, there was proviso to para 11 (3) providing optional higher benefits. It was inserted vide notification NO. GSR 134 dated 28.02.1996 w.e.f. 16.03.1996. No time limit was prescribed in that proviso for option for contribution on higher salary, but due to ill publicity, options were not exercised by willing members or maybe their calculation and comparison of benefits of pension and deposits in the P.F. Over a period of time, when return of P.F deposits became less beneficial, retiring or retired members found pension on higher salary more beneficial where their employers paid PF contribution on higher salary. Then they approached the PF department and field offices sought some clarifications from the H.Q. In turn, EPFO H.Q. issued circular dated 22.11.2006. which linked such option with the permission of the PF authorities under para 26 (6) of the E.P.F. Scheme, 1952. As evident, this para was never revoked in general except some individual cases where the PF authorities used to grant permission. Despite this, PF contributions on higher salary were and are being accepted and PF accounts were prepared and annual accounts slips were being issued to individual members. In one case of a widow, the M.P. High Court accepted the option as deemed option where a PF member joined prior to 01.03.1971 did not exercise option for Employees' Family Pension Scheme, 1971 but continued to contribute EFPS contribution and died after certain period  thereafter which made his widow entitled to family pension. Accordingly, revoking and linking para 28 (6) of the EPF Scheme, 1952 for higher contribution to EPS, 1995 was required to be interpreted and the circular dated 22.11.2006 was to be acted upon. It is also relevant to mention that the exempted employees are required to contribute as per provision of the PF Rules of the exempted establishments, therefore, the provision of para 26(6) are not applicable to exempted employees. They were also denied the option for higher contribution and higher pension accordingly. Therefore, the matter was brought to the notice of various high courts across the country. The first judgment on this issue was first delivered by the Orissa High Court in the case of a District Central Cooperative Bank Ltd in compliance of which pension benefits on higher salary was allowed in the state of Odisha, but H.Q. denied to implement it in other states. Hence the matter finally decided by the Supreme Court on 04.10.2016 in the case of R.C.Gupta.
Before the judgment dated 04.10.2016, the Supreme Court earlier dismissed various appeals SLP (C) No. 7074, 7075, 7076, 7107, 7108, 7224 of 2014 and 697 of 2016 filed by the EPF against Kerala High Court order in the case of 1135/2012 on 31.03.2016 and SLP (c) No. 19954/2015 against Kerala high Court orders in the WA No. 1362/2014 on finding no legal and valid grounds. There after judgments from other high courts were also announced, but the Supreme Court finally passed a detailed order on 04.10.2016 in the SLP (C) No. 10013-10014/2016 arose out of order of DB of Himachal Pradesh High Court order in SLP (C) 33032-33033/2015 in which the DB reversed the order of the Single Judge.
Consequent to this judgment, the EPFO issued a circular dated 23.03.2017 with the approval of the Ministry of Labour & Employment, Govt. Of India, with the intention to honour and implement the Supreme Court order. Subsequent to issue of the circular dated 23.03.2017, some queries were raised by the field offices of the EPFO, specially the Regional Office, Thiruvantpuram, wide its letter dated 28.03.2017, who has been facing binding order of the Kerala High Court. The raised point was -
"(i) Whether member of EPS. 1995 as on 01.09.2014 (including those retired on or after 01.09.2014) and were contributing jointly with the employer on higher (actual) wages to the EPF Scheme are also to be allowed option to contribute to the EPS '95 on higher actual wages exceeding the statutory wage ceiling of Rs. 15000/- despite the notification No. GSR 609 (E) dated 22.08.2014 whereby the proviso to para 11(3) of the EPS '95 stands deleted w.e.f. 01.09.2014."
"(ii) If yes, whether such individuals can be allowed to opt now because as per the said notification, fresh option  to contribute on wages exceeding Rs. 15000/- had to be exercised within a period of six months from 01.09.2014 and this is extendable by the RPFC only by another six months i.e. upto 01.09.2015."
In addition to this, through another email dated 06.04.2017, the same Regional Office raised another point that - "request has been made to confirm if the provisions of the circular dated 23.03.2017 are applicable to employees of the EPF exempted establishments."
(The above abstract has been taken from the note-sheet - page NO. 93, 94, 95 & 96 supplied under the RTI Act.) In the same note-sheet. It is further mentioned on page No. 96, for the higher authorities, that -
"1) The PEIC in the 38th meeting gave approval to comply with the order of Hon'ble Supreme Court in the matter of R.C.Gupta and others in respect of Provident Fund and pensions members whose accounts are maintained by EPFO. The decision of PEIC is as under -
'However, it was agreed that compliance may be made immediately in respect of the Provident fund & pension members including superannuated cases whose accounts are maintained by EPFO as their details are already available with the EPFO and contribution on higher wages has been received by EPFO. Their pension settlement may be regulated in accordance with the order of the Hon'ble Supreme Court by taking joint option from the employee and the employer and transfer/payment to Pension Fund as per details of payable contribution with interest.
'In respect of those members of Exempted Provident Fund Trusts whose contribution on higher wages has not been received by EPFO, it was decided that their cases may be examined on verification of books of record of the exempted establishments and the trust regarding compliance to Provident Fund and Pension Fund as per the provisions of EPF Scheme, 1952 and Employees' Pension Scheme, 1995 and the information may be submitted to the committee.' And The above said proposal was approved by the CBT in its 215th meeting and recommended to the Government.
Accordingly, approval was sought from MOLE vide U.O. Note dated 10.01.2017."
On both the points, the matter of extending benefits of the Supreme Court orders to the Provident fund & pension Members including superannuated cases. By this approved mandate, every PF member including superannuated are eligible to get benefit of the S.C. order and the EPFO circular dated 23.003.2017.
But, in the same Note-sheet (page 95) as quoted above, the matter was twisted by adding a wiseacre remark by the R.P.F.C. Pension, who submitted that note to the higher authorities with reference to the GSR 609 (E) dated 22.08.2014 that "the date of exercising a fresh option as per para 11(4) (New) stands over on 31.08.2015. The matter was twisted despite the matter is day-light clear and a layman can also understand what the approved proposal means.”
When embargo of exercising option under para 26 (6) was sub-judice prior to the notification dated 22.08.2014 and that embargo has been demolished only on 04.10.2016 i.e. after more than one year of the lapse of the so called period upto 31.08.2015, how it could be possible for a person in service or retiring after the said crucial date of 01.09.2014 to exercise a fresh option with the proscribed period when he was not given opportunity or liberty to exercise option by invoking para 11(3). When the Supreme Court allowed liberty to give option under para 11(3) after it was finally deleted, how the new provision of para 11(4) can be insisted for. Secondly, Option to contribution on a higher wages to EPS would be effective from 16.11.1995 or a later date from which either the member was enrolled as PF and EPS member or from which his salary exceeded the ceiling amount for contribution. That means the option for contribution on a higher salary will be effective only from a date prior to 01.09.2014 for which the Supreme Court has opened the window.
Thirdly, if the worry about the new para 11(4) is to be much insisted, then the EPFO would have drawn a fresh deadline in appreciation of para 11(4) either from the order of the Supreme Court i.e. 04.10.2016 (which would not be justifiable as the department took almost 6 months to issue direction to implement the S.C. order, hence it would be better to fix a fresh deadline under para 35 of the EPS, 1995 by the Central Government, on the same footing of para 11(4). It can still be done from a prospective date by the Central Government from which date the Central Government issues such direction. That new deadline has to be given a vide publicity, instead of un-necessarily lingering on the matter by judicial - picnics. Now, the question is of exempted establishments. The Air on this matter has already been cleared by the PEIC, CBT and the Government, as mentioned here-in-above. The logic that has been advanced is only that the PF amounts are kept by the exempted trusts (note - not kept by the employer who is not believed or not trusted in the name of the employees or members) to be heinous toward the same employees or the members.
However, a circular dated 31.05.2017 was issued bearing a note "this issues with approval of CPFC" barring all exempted employees from the benefits available after the SC judgment. The Note referred above (page 94 to 97) was prepared by RPFC (Pension) on 26.04.2017; Addl. CPFC put a Note on that on 04.05.2017 in which he suggested that -
"….'B' page 94/N pertaining to the deletion of 11 (3) of EPS 1995 vide dated 22.08.2014 w.e.f. 01.09.2014 and the newly added 11 (4) of EPS 1995 w.e.f. 01.09.2014 and the effect thereof, Legal advice can be sought in the matter.'
"As far as 'C' on page 96/N, DFA 'C' may be approved. Data in respect of pensioner... retired from exempted establishment under EPF Scheme 1952 can be collected as per DFA 'D' for taking any further action in the matter."
The CPFC put his remarks on 12.5.2017 as under -
"Pls. call for the details as to the number of Pension Fund members from exempted establishments who have credited to EPFO pension /fund on full wages."
In his note, the CPFC neither approved the draft issued on 31.05.2017 nor said anything except asking for collection of data as already required by the PEIC, however the letter dated 31.05.2017 was issued. Before issue of the letter dated 31.05.2017, a note (100-101) was submitted on 30.5.2017 for taking opinion of Legal Advisor and the Legal Advisor (Dr. R.M. Sharma) gave his opinion on the same day which reads -
"I have discussed the matter with Sh. Mukesh Kumar, RPFC-I (Pension).
"The matter has been referred by CPFC to seek my opinion on the question whether the judgment of the Supreme Court in the matter of R.C. Gupta and others vs. RPFC, EPFO in the matter of Civil Appeal No. 10013/10014 of 2016 is applicable in the matter of exempted establishments. My opinion has also been sought whether the circular No. Pension-1/12/33/EPS. Amendments/ 96/Vol.II is legally in order.
"I have perused the judgment of the Hon'ble Supreme Court as above and perused the notes at page 100-101 and the Agenda and approved minutes of the 40th PEIC.
"After perusal, I am of the considered opinion that the facts of the case as in the judgment of Hon'ble Supreme Court in the aforesaid case is not applicable in the facts and situation of the exempted establishments.
"I have also perused the circular as above to be issued by the EPFO, the same is legally in order."
Anybody may understand how the legal opinion was given and how it was drafted, which has created an un-revocable dilemma and led to hundreds of writ petitions in various High Court inviting intervention of the Supreme Court. The opinion seems to have been prepared in few minutes as per discussions with the RPFC (Pension) without mention of his analysis and synthesis of the case and without disclosing the merits and demerits. Such opinion costs the EPFO a lot.
Before 16 years, legal opinion given in 3 lines only on a DB judgment of Rajasthan High Court messed the implementation of the EPF & MP Act, 1952 to the Educational Institutes in Rajasthan depriving more than 10 lakh Non-Govt. Educational employees. The matter did not stop there only, subsequently, the EPFO is bound to pay the cost of that OPINION given in 2002. Recently, Rajasthan High Court has ordered the EPFO to give pension to a teacher of a private school who was getting pension under EPS but her pension was stopped without her consent and all PF and EPS contributions were refunded to the School. What one can say for such legal opinions.
The PF money of the exempted employees is kept by the registered and recognized trusts, and that too by a notification under section 17 or 27-A of the EPF & MP Act, 1952 and works under the direct and effective control of the PF authorities by the laid - down mandated guidelines of para 27-AA of the EPF Scheme, 1952, then there cannot be any question of doubt or any legal issue that the PF money of the exempted employees is kept by a trust and by the EPFO.
Moreover, the employer, even of the exempted establishment is under obligation by law under para 3 of the EPS, 1995 to segregate a part of his contribution payable under section 6 (read with para 29 of the EPF Scheme, 1952) @ 8.33% of the pay and transfer it to the Pension Fund. In this para 3, no wage ceiling is prescribed, however, the employer is not at liberty to avoid that provision. If the employer is directed, and of course, he has been directed by the Supreme Court, he in no way can avoid that payment. But, in this controversy, it is not the employer, but it is the PF trust of the exempted establishment, who is under obligation to transfer any amount to the pension fund if he is asked. Then, where is, what is the constraint? Obviously none. About 486 writs are pending before the Kerala High Court, wherein in one case there are 153 petitioners in one writ. Here, one may remember Shakespeare and recall his saying - I have to be cruel only to be kind, thus, bad begin and worse remains behind.