THE EMPLOYEES PROVIDENT FUND ORGANISATION & ANR. ETC. versus SUNIL KUMAR B. & ORS. ETC. on 4 November 2022

THE EMPLOYEES PROVIDENT FUND ORGANISATION &ANR. ETC.

v.

SUNIL KUMAR B. & ORS. ETC.

(Civil Appeal No. 8143 of 2022)

November 04, 2022

[UDAY UMESH LALIT, CJI, ANIRUDDHA BOSE ANDSUDHANSHU DHULIA, JJ.]

Service Law:

Employees’ Provident Funds and Miscellaneous ProvisionsAct, 1952: ss. 6A, 7 - Employees’ Pension Scheme, 1995 – Paras 3,6, 11, 12 and 14 – Certain amendments and modifications made bythe Central Government to the Employees’ Pension Scheme, 1995 –Legality of – Changes sought be effected in paragraphs 3, 6, 11,12 and 14 of the 1995 scheme, whereby s. 6A was introduced to thesaid Act, which contemplated formulation of a scheme for employees’pension and the pension fund was to comprise of deposit of 8.33per cent of the employers’ contribution made towards provident fundcorpus and determination of pensionable salary; that the maximumpensionable salary was enhanced from Rs.5000/- to Rs.6500/- by anotification G.S.R. 609(E) dated 22nd August 2014, to be effectivefrom 1 st September 2014; that the Central Government was tocontribute to the fund at the rate of 1.16 per cent of the pay of themembers, the employees within the changed pension regime drawingmore than Rs.15000/- per month have to also contribute at the rateof 1.16 % on salary exceeding Rs.15000/- as additional contributioneach month under the amended provisions; fresh option was to beexercised by the member within a period of six months, and if not, itwould be deemed that the concerned member has not opted forcontribution over the wage Ceiling – Several writ petitions filed indifferent High Courts seeking invalidation of this notification – Writpetitions also filed u/Art. 32 challenging the Notifications – Held:Provisions contained in the notification no. G.S.R. 609(E) dated22nd August 2014 are legal and valid – Amendment to the pensionscheme brought about by the notification would apply to theemployees of the exempted establishments in the same manner as

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Athe employees of the regular establishments – Employees who hadexercised option under the proviso to paragraph 11(3) of the 1995scheme and continued to be in service as on 1st September 2014,would be guided by the amended provisions of paragraph 11(4) ofthe pension scheme – Members, who did not exercise option, as

contemplated in the proviso to paragraph 11(3) of the pensionBscheme (as it was before the 2014 Amendment) would be entitled toexercise option under paragraph 11(4) of the post amendmentscheme – Scheme as it stood before 1st September 2014 did notprovide for any cutoff date and thus those members shall be entitledto exercise option in terms of paragraph 11(4) of the scheme, as itCstands at present – Time to exercise option under paragraph 11(4)of the scheme, under these circumstances, shall stand extended bya further period of four months – Employees who had retired priorto 1st September 2014 without exercising any option underparagraph 11(3) of the pre-amendment scheme have already exitedfrom the membership thereof, thus, they would not be entitled to theDbenefit of this judgment – Employees who have retired before 1stSeptember 2014 upon exercising option under paragraph 11(3) ofthe 1995 scheme shall be covered by the provisions of the paragraph11(3) of the pension scheme as it stood prior to the amendment of2014 – Requirement of the members to contribute at the rate of 1.16Eper cent of their salary to the extent such salary exceeds Rs.15000/- per month as an additional contribution under the amended schemeis held to be ultra vires the provisions of the 1952 Act – Operationof this part of its order is suspended for a period of six months – Noflaw is found in altering the basis for computation of pensionablesalary – View taken by the Division Bench in the case of R.C. Gupta’sFcase so far as interpretation of the proviso to paragraph 11(3) (pre-amendment) pension scheme is concerned, is upheld – Fundauthorities to implement the directives contained in the said judgmentwithin the stipulated period – Impugned judgment modifiedaccordingly – Constitution of India – Arts. 14 and142.G

Constitution of India: Art. 14 – Reasonable classification –Provident Funds Employees’ Pension Scheme, 1995 – Employees ofthe pension scheme – Held: Cannot be considered as a homogenousgroup – No distinction can be made among different categories ofemployees based on their monthly salary to determine for whom theHscheme shall operate in a particular manner – It is within the power and authority of the statutory authorities to reasonably classifydifferent sets of employees and categorise them for the nature ofbenefits they might get from an existing scheme – Classification ofthe employees made by the authorities on the basis of the salarydrawn in the 2014 amendment meets the test of reasonableclassification contemplated inArt. 14.

Allowing the appeals, the Court

Conclusion

HELD : 1. The provisions contained in the notification no.G.S.R. 609(E) dated 22nd August 2014 are legal and valid. So faras present members of the fund are concerned, this Court hasread down certain provisions of the scheme as applicable in theircases. The amendment to the pension scheme brought about bythe notification no. G.S.R. 609(E) dated 22nd August 2014 shallapply to the employees of the exempted establishments in thesame manner as the employees of the regular establishments.The employees who had exercised option under the proviso toparagraph 11(3) of the 1995 scheme and continued to be in serviceas on 1st September 2014, will be guided by the amendedprovisions of paragraph 11(4) of the pension scheme. Themembers of the scheme, who did not exercise option, ascontemplated in the proviso to paragraph 11(3) of the pensionscheme (as it was before the 2014 Amendment) would be entitledto exercise option under paragraph 11(4) of the post amendmentscheme. Their right to exercise option before 1st September 2014stands crystalised in the judgment of this Court in the case ofR.C. Gupta . The scheme as it stood before 1st September 2014did not provide for any cutoff date and thus those members shallbe entitled to exercise option in terms of paragraph 11(4) of thescheme, as it stands at present. All the employees who did notexercise option but were entitled to do so but could not due tothe interpretation on cut-off date by the authorities, ought to begiven a further chance to exercise their option. Time to exerciseoption under paragraph 11(4) of the scheme, under thesecircumstances, shall stand extended by a further period of fourmonths. The employees who had retired prior to 1st September2014 without exercising any option under paragraph 11(3) of thepre-amendment scheme have already exited from the membership AB

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Athereof. They would not be entitled to the benefit of this judgment.The employees who have retired before 1st September 2014 uponexercising option under paragraph 11(3) of the 1995 scheme shallbe covered by the provisions of the paragraph 11(3) of the pensionscheme as it stood prior to the amendment of 2014. Therequirement of the members to contribute at the rate of 1.16 perBcent of their salary to the extent such salary exceeds Rs.15000/- per month as an additional contribution under the amendedscheme is held to be ultra vires the provisions of the 1952 Act.This Court suspends operation of this part of its order for a periodof six months. This Court does so to enable the authorities toCmake adjustments in the scheme so that the additional contributioncan be generated from some other legitimate source within thescope of the Act, which could include enhancing the rate ofcontribution of the employers. This Court does not find any flawin altering the basis for computation of pensionable salary. This Court agrees with the view taken by the Division Bench in theDcase of R.C. Gupta so far as interpretation of the proviso toparagraph 11(3) (pre-amendment) pension scheme is concerned.The fund authorities shall implement the directives contained inthe said judgment within a period of eight weeks, subject todirections contained earlier in this paragraph. The judgmentsEimpugned are modified accordingly. [Paras 44 and 45][997-F-H;998-A-H; 999-A-H]

2.1 The employees’ argument is that the obligation is onlyon the employer to remit the sum from one fund to the other.There is no ceiling limit and the remittance required to be made

Fis of 8.33 per cent of the employee’s pay. But this point also,does not aid the employees. While paragraphs 3 and 6 of thescheme have laid down what the fund would be constituted of andwho would be the members of the pension scheme, paragraph11, which is an integral part of the pension scheme, specifies the criteria for those who become mandatory members and, fromGamong the existing members, who may be permitted to exerciseoption to remain in the scheme in spite of drawing salary beyondthe ceiling limit. It is a fact that those who are covered byparagraph 26(6) of the provident fund scheme automatically entersinto the pension scheme as well. But this provision cannot beHheld to have precluded the Central Government from laying down conditions to remain eligible for the pension scheme and specifywage or salary ceiling for individual employees beyond which thescheme may not operate. The submission that the pension schemeconsiders employees as a homogenous group and no distinctioncan be made among different categories of employees based ontheir monthly salary to determine for whom the scheme shalloperate in a particular manner cannot be accepted. It is well withinthe power and authority of the statutory authorities to reasonablyclassify different sets of employees and categorise them for thenature of benefits they might get from an existing scheme. Infact, the scheme, at its inception was made applicable to thosedrawing wages upto Rs.5000/-. The provision relating toexercising option was introduced later, in the year 1996. [Para30][990-D-H; ]

2.2 The amendment was made in exercise of powerotherwise vested in the authority making such amendment andthe amendments were made on the basis of certain relevantmaterials and not whimsically. The scope of judicial scrutiny totest the constitutionality of the amendment provisions becomesnarrow. Classification of the employees made by the authoritieson the basis of the salary drawn in the 2014 amendment meetsthe test of reasonable classification contemplated in Article 14 ofthe Constitution of India. This Court is alive to the concernexpressed by the High Court as regards impact on the economicstability of retired employees suddenly being deprived of pension.But, based on such macro-level social disparities, this Court doesnot think in exercise of judicial power this Court can require theState to operate a pension scheme in a particular manner. Thesefactors would be for the policy makers to examine and prescribe.This Court cannot issue directions on the Central Governmentto work out statutory scheme in a particular fashion. So far asfixing of cut-off date is concerned, the 2014 amendmentspecifically provides for that. In the case of R.C. Gupta’s case,the wording of the scheme in paragraph 11(3) was different. Thus,the ratio of that judgment cannot be applied to the changedprovision of the scheme. Fixing of cut-off date was considered inthe case of Mafatlal Group Staff Association and held to bepermissible. [Paras 32 and 33][991-G-H; 992-A-B; 992-F-H]

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A2.3 The requirement in the scheme for employee’scontribution to the extent of 1.16 per cent for option members isillegal. There is nothing in the 1952 Act which requires paymentto the pension fund by an employee. Section 6A of the Act alsodoes not have any such stipulation. Since the Act does notcontemplate any contribution to be made by an employee toBremain in the scheme, the Central Government under the schemeitself cannot mandate such a stipulation. What is to be consideredis that for the mandatory members, the Central Governmentcontinues to contribute the requisite 1.16 per cent of their salary.For option members, additional contribution by them isCcontemplated in order to remain in the scheme. A legislativeamendment of the Act would have been necessary, providing forcontribution to be made by an employee. To that extent, theprovision of the scheme requiring contribution by an individualemployee is ultra vires the parent act. At the same time, it cannotbe ignored the fact that the pension amount to be paid has beenDcalculated on projections that the corpus would include the optionemployees’ additional contribution of 1.16 per cent. This Courtalso cannot mandate the Central Government to contribute to apension scheme, in absence of a legislative provision to that effect.It would be for the administrators to readjust the contributionpattern within the scope of the statute and one possible solutionEcould be to raise the level of the employer’s contribution in thescheme. The operation of this part of judgment is suspended fora period of six months so that the legislature may consider thenecessity of bringing appropriate legislative amendment on thiscount. For the said period, the scheme as it stands shall continue.FTill such time, if no such legislative exercise is undertaken, theduty to contribute 1.16 per cent of the salary shall apply on optionmembers as well. This contribution shall be adjusted dependingon any amendment that may be brought. For the period of sixmonths, however, the opting employees shall make payment of1.16 per cent contribution as stop gap measure. In the event noGamendment to the statute or the scheme is made within suchextended time, then the administrators of the fund will have tooperate the pension fund for the option members from out of theexisting corpus.[Para 35][993-D-H; 994-A-C]

2.4 The change of methodology comes within the power ofHthe Central Government to modify a scheme under Section 7 of the 1952 Act read with item 10 of the Schedule III to the Act asalso paragraph 32 of the scheme. This alteration of computationis ancillary to determination of scale of pension along withpensionary benefits and paragraph 32 of the pension schemespecifically authorises the Central Government to alter the rateof contribution payable under the Scheme or the scale of anybenefit admissible under the scheme. There is a reasonable basisfor effecting change in the computation methodology fordetermining pensionable salary and there is no illegality orunconstitutionality in effecting this amendment. [Para 36][994-C-F]

2.5 Clause 1(3) of the pension scheme contemplateskeeping within its fold the establishments to which the 1952 Actapplies. These establishments would include exemptedestablishments as well. The employees of exemptedestablishments are integrated into the pension scheme and theemployees of an exempted establishment should not be deprivedof the benefit of getting option to remain in the pension schemewhile drawing salary beyond the ceiling limit, in situations wheresimilarly situated employees of unexempted establishments canexercise such option. In the event the scheme is construed in away which would exclude them, that would lead to artificialclassification of otherwise same categories of employees. Thus,the pension scheme ought to apply to the employees of theexempted establishments in the same manner as this schemeapplies to the employees of unexempted or regularestablishments. [Para 38][995-D-E]

2.6 One of the arguments against their inclusion into thescheme by exercising option is that the corpus of the contributionfor exempted establishments have been kept in separate coffersmaintained by the trust created for such purpose and not withthe authorities specified under the Act. Taking that factor intoaccount, in order to be entitled to the benefits of the pensionfund, the employer and the employee, simultaneously withexercising option in terms of the order of this Court, shall alsohave to give an undertaking of transferring the employers’contribution at the stipulated rate maintained by the trusts, whichshall be equivalent to and not lower than the sum which wouldhave been transferable, had such fund been maintained by theprovident fund authorities. Such transfer shall take place, AB

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Aimmediately after exercise of such option, within such period asmay be directed by the administrators of the pension fund. [Para39][995-F-H; 996-A]2.7 The paragraph 11(4) provides for extending the pensioncoverage in respect of individual employees drawing salary moreBthan Rs. 15000/- per month. This paragraph however, is subjectto two conditions: The first one is that to be eligible for the benefitsof extended coverage, the existing members as on 1 st September2014 must contribute at the rate of 1.16 per cent on salaryexceeding Rs. 15,000/- per month. The second one is that a freshoption should be exercised within a period of six months fromCthe first day of September 2014. The scheme contemplates thatthose members of the fund who had exercised option to remainin the scheme as per the requirement of proviso to paragraph11(3) of the scheme, as it stood prior to the 2014 amendment,would be able to give fresh option with the employer if their salarycross the ceiling limit. In respect of that provision, this Court inDthe R.C. Gupta’s case had held that the said proviso did notcontemplate a cut-off date. So far as the first condition isconcerned, viwes are expressed as regards legality of having sucha provision. In relation to the second condition, the eligibility forenhancement cannot be restricted to those employees only whoEhad exercised the option to remain in the scheme once their salarywent beyond the capping of Rs. 6500/- per month. In case of R.C.Gupta’s case, it has been specifically held that there was no cut-offdate in proviso to paragraph 11(3) as it stood before the 2014amendment. The interpretation given to the proviso to paragraph11(3) prior to 2014 amendment does not require anyFreconsideration. The reasoning of the two-judge Bench of thisCourt on this point , is accepted. As there was no cut-off date tobe contemplated prior to the 2014 amendment, limiting theentitlement of enhanced pension coverage to those employeesonly who had already exercised an option under Clause 11(3) of Gthe unamended scheme would be contrary to the ratio of thedecision of this Court held in the case of R.C. Gupta’s case. It isnot held that no option was required to be exercised as per provisoto paragraph 11(3) of the scheme, as it stood prior to 2014amendment. As held in the case of R.C. Gupta’s case, there wasno time-limit for exercising such option. [Para 40, 41][996-B-H;H997-A-B]

2.8 The dual option, as is contemplated in paragraph 11(4)of the pension scheme (post 2014 amendment), has to be mergedinto one. In the event the employer and employee jointly opt forcoverage beyond the salary limit of Rs. 15000/-, without givingan earlier option under the unamended Clause 11(3) of thepension scheme, they would not be automatically excluded fromtheir right to exercise option under paragraph 11(4) of the scheme,post amendment. [Para 42][997-B-C]

2.9 The other condition for enhanced coverage relates tothe date within which such fresh option is to be exercised by amember, which is stipulated to be within a period of six monthsfrom 1st September 2014. It would be legitimate to proceed onthe basis that several members did not exercise such optionearlier because of the stand taken by the Provident Fundauthorities that option under proviso to paragraph 11(3) of thescheme (prior to 2014 amendment) has to be exercised within aspecified date, which stand was negated in the decision of R.C.Gupta’s case. The time limit for coverage beyond the ceilingamount should be extended by a further period of four monthsfrom today to enable all the members of the pension fund drawingmore than Rs.6500/- to exercise the joint option as contemplatedin paragraph 11(4) of the pension scheme (post 2014 amendment).Once such joint option is exercised, the transfer of fund from theprovident fund corpus to the pension fund shall be effected interms of the scheme. [Para 43][997-C-F]

R.C. Gupta and Others vs. Regional Provident FundCommissioner, Employees Provident Fund Organisationand Other(2018) 14 SCC 809 – affirmed.

Bengal Immunity Company Limited v. State of Biharand Others(1955) 2 SCR 603;Union of India andAnother v. Raghubir Singh (Dead)by Lrs. Etc.(1989)2 SCC 754 : [1989] 3 SCR 316;Keshav Mills Co. Ltd.v. Commissioner of Income Tax Bombay North,Ahmedabad(1965) 2 SCR 908;Waman Rao and Othersv. Union of India and Others(1981) 2 SCC 362 : [1981]2 SCR 1 – held inapplicable.

Case Law Reference

(2018) 14 SCC 809affirmed

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A(1955) 2 SCR 603held inapplicablePara 28[1989] 3 SCR 316held inapplicablePara 28(1965) 2 SCR 908held inapplicablePara 28[1981] 2 SCR 1held inapplicablePara 28

CIVIL APPELLATE/ORIGINAL/INHERENT JURISDICTIONB: Civil Appeal Nos.8143-8144 of 2022.

From the Judgment and Order dated 12.10.2018 of the High Courtof Kerala at Ernakulam in Writ Petition (C) Nos.602 and 13120 of 2015.

With

Civil Appeal Nos.8145-8146, 8147, 8149, 8155, 8156, 8150-8151,C8152, 8148, 8153, 8154 OF 2022, Writ Petition (C) Nos.318 of 2022,1218 of 2020, 1332 of 2020,1312 of 2019, 875 of 2019, 832 of 2019, 601of 2019, 500 of 2019, 512 of 2019, 466 of 2019, 86 of 2021, 1356 of 2021,1379of 2021, 767 of 2021, 477 of 2021, 414 of 2021,1134 of 2018, 390 of2019, 511 of 2019, 1459 of 2020, 349 of 2019, 372, 360, 233, 141, 118,250, 406, 368, 393, 395, 371, 374, 385, 367, 369, 411, 466 of 2018, 269 ofD2019, 327 of 2019, 352 of 2019, 69 of 2018, 804 of 2018, 594 of 2018,884 of 2018, 778 of 2018, 874 of 2018, 1149 of 2018, 1167 of 2018, 1430of 2018, 1433 of 2018, 1428 of 2018, 380 of 2018, 498 of 2022, ContemptPetition (C) Nos.1917-1918 of 2018 in Civil Appeal Nos.10013-10014 of2016 and Contempt Petition (C) Nos.619-620 of 2019 in Civil AppealENos.10013-10014 of 2016

K.K Venugopal, AG, Vikramjit Banerjee, Sanjay Jain, ASGs, R.Balasubramanian, C.A. Sundaram, Dr. K.P. Kylasanatha Pillay, V.Chitambaresh, P.N. Ravindran, Venkatramani, J.P. Cama, SoumyaChakraborty, Ms. Meenakshi Arora, Siddharth Bhatnagar, R. Basant,A.N.S. Nadkarni, R. Venkatramani, Gopal Sankaranarayanan, JayanthFMuthraj, Ms. V.P. Seemanthini, Vikas Singh, Sanjay Parikh, Dr. ManishSinghvi, Sr. Advs., Ankur Talwar, Ms. Chinmayee Chandra, Ms. RuchiKohli, Siddhartha Sinha, Prashant Rawat, Ms. Janhvi Prakash, TathagatSharma, Shubhendu Anand, Kartik Dev, Ms. Sujatha Bagadhi, RajBahadur Yadav, Amrish Kumar, Siddharth, Raman Yadav, NringGChamwibo Zeliang, Ms. Rohini Musa, Abhishek Gupta, Zafar Inayat,Amit Kumar Agrawal, C.U. Singh, Ms. Nandini Gore, Ms. Sonia Nigam,Ms. Tahira Karanjawala, Ms. Shreyas Maheshwari, M/s. Karanjawala& Co., A. Venayagam Balan, C.M. Sundaram Iyer, Ms. RashmiSinghania, Roy Abraham, Ms. Reena Roy, Akhil Abraham, AudhinderLal, Himinder Lal, Bahar U. Barqui, Aftab Ali Khan, Benny P. Thomas,HPrakash Ranjan Nayak, Udayaditya Banerjee, Ms. Pracheta Kar, Aditya Sidhra, Nadeem Afroz, Raghenth Basant, Ms. Liz Mathew, VishnuPazhanganat, Akshay Sahay, Ms. Roopali Lakhotia, P. S. Sudheer, RishiMaheshwari, Ms. Anne Mathew, Ms. Shruti Jose, Bharat Sood,Purushottam Sharma Tripathi, Ravi Chandra Prakash, Mukesh KumarSingh, Narendra Kumar Goyal, Ms. Kajal Rani, Neeraj Chaudhri, Ms.Rashmi Verma, Ms. Pooja Dhar, Pratul Pratap Singh, Mantavya Sharma,Ms. Tanya Srivastava, Ms. Vani Vyas, Abhishek Tripathi, Amit, RajivKumar, Nishe Rajen Shonker, Abraham C. Mathews, Ms. Anu K. Joy,Alim Anvar, Ms. Sushma Singh, Trilok Nath Saxena, L. Nidhiram Sharma,Ms. Srishti Agnihotri, Satwik Parikh, Ms. Sanjana Grace Thomas, DeepakGoel, Chaman Rana, Ms. Urvashi Sharma, R. Anand Padmanabhan,Shashi Bhushan Kumar, Neeleshwar Pavani, Vedavalli Kumar, VipinKumar Saxena, Vipin Sundu, Yatish Yadav, Maneesh Saxena, Ms. KajalRani, Pawan Kumar, Ikshit Singhal, Sagar Kumar, Ranvir Singh Chhillar,Mukesh Kumar, Shantanu Jugtewat, Mohit Paul, Kartik Nayar, RishabKumar, Rohan Thawani, Ramjee Pandey, Sujit Kumar Jha, GrijeshPandey, Raghvendra Shukla, Uday Prakas, Girijesh Pandey, KafeelAhmad, Ms. Alapana Pandey, Ajay Tiwari, Akash Kakade, SomanathPadhan, Neelmani Pant, Ms. Sukhada Kakade, Swetab Kumar, AnandVarma, Ms. Apoorva Pandey, Ms. Adyasha Nanda, Jagjit Singh Chhabra,Saksham Maheshwari, Ms. Binisa Mohanty, Mritunjay Kumar Sinha, Y.Raja Gopala Rao, Korada Pramod Kumar, Dhuli Gopi Krishna, HimanshuGupta, Manoj C. Mishra, Ashwin Kumar DS, Ms. Aditi Dani,Rangasharan Mohan, Ms. Surbhi Mehta, Pranesh, S. S. Bandyopadhyay,Rajiv Shukla, Md. Shahid Anwar, Dr. Shakeelazama Ansari, Syed Rehan,Aryan P. Nanda, Nikhil Goyal, Rishabh Sancheti, Anchit Bhandari, SuyashJain, K. Paarivendhan, V.N. Koura, Mrs. Paramjeet Benipal, AvneeshArputham, Praveen Kr. Singh, M/s. Arputham Aruna and Co, GunnamVenkateswara Rao, Dishant Bhati, Ms. Anushka Sharda, Rohit Ghosh,M/s. Khaitan & Co., Rakesh Sinha, MG Akbar, Jeemon Raju K, ArvindGupta, Ms. Laxmi Kumari, Amit Kumar, Puneet Taneja, Ms. Priti,Manmohan Singh Narula, Ms. Anupriya, Sameer Parekh, D.P. Mohanty,Aditya Sharma, Ishan Nagar, Abhiram Naik, M/s. Parekh & Co., TabrezMalawat, Sourajit Sarkar, Syed Hamza, N D Kaushik, Abhaya NathDas, V K Shukla, Rahul Gupta, Shashank Sharma, Ms Riya Soni, SatishKumar, Punit Dutt Tyagi, Abhijeet Kumar Pandey, Ashish Bhan, MohitRohatgi, Rajendra Dangwal, Kaustub Narendran, Syed Jafar Alam, K.C.Kaushik, Rahul Kaushik, Bhuvneshwari Pathak, Ms. Shilpi SatyapriyaSatyam, Ms. Sangeeta Bharti, Ashish Kumar, Malvi Balyan, Sushil KumarSingh, Ajit Pudussery, Vijayan K., R.K. Kapoor, Rajat Kapoor, Ms.

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AKheyali Singh, Karunakar Mahalik, B. Paramesh, Sarbendra Kumar,Onkar Singh, Vimal Johnson Kerketta, Ms. Neha Tripathi, Ms. Monika,C. K. Sasi, Abdulla Naseeh V.J., Ms. Meena K. Poulose, Ms. NeeticaSharma, Rishabh Dua, M/s M.V.Kini & Associates, M. Gireesh Kumar,Ankur S. Kulkarni, Ms. Puspita Basak, Sunil Kumar, Rakesh Mishra,Sandeep Kumar Dwivedi, Umesh Dubey, Pradeep Kumar Dwivedi,BRaghuvendra Upadhyay, Kisalaya Shukla, Ms. Purnima Jain, VaibhavTripathi, Awadhesh Kumar, Thampan Thomas, K.V. Mohan, Ms. TessyVarghese, K.V. Balakrishnan, Rahul Kumar Sharma, K. Parameshara,Anand Dilip Landge, Ms. A. Sregurupriya, P. S. Sudheer, Rahul Jain,Ms. Lalit Mohini Bhat, Hetu Arora Sethi, Sriram P., Santhosh Krishnan,CMohammed Sadique T.A., Devashish Bharuka, Kunal Rawat, Ms.Radhika Maharwal, Ms. Pratiksha Sharma, Mueed Shah, Ankit Acharya,S. Rajappa, Ms. Shilpa Liza George, Shashank Shekhar, Chander ShekharAshri, Aditya Dhawan, Ms. Kiran Dhawan, Ms. Madhvi S. Sawant,Hitesh Kumar Sharma, Akhileshwar Jha, Ms. Deepti S. Rane, SubhashS. Kadam, Naresh Kumar, Dr. Ashwani Bhardwaj, Ms. Vinay Bhardwaj,DManoj Pandey, Sibo Sankar Mishra, Debabrata Dash, Niranjan Sahu,Rajesh Kumar Nayak, Ms. Kanika Chug, Satish Bhargawa, LakshmeeshS. Kamath, Ms. Samriti Ahuja, Mohan Lal Sharma, Ms. Shikha Sharma,Rajesh Gupta, Harpreet Singh, Ajay Chandra, Sumit R. Sharma, PreetPal Singh, Prasenjit Keswani, Rohan Thawani, Upmanyu Tewari, Ms.ESonia Dube, Shatadru Chakraborty, Ms. Kanchan Yadav, Ms. SurbhiAnand, M/s. Legal Options, Mrs. Lalita Kaushik, Ms. MadhumitaBhattacharjee, Ms. Manjula Gupta, Mrs. Rani Chhabra, Rahul Pratap,Anil Nag, S.D. Singh, Harsh Nandwana, Ram Kripal Singh, SiddharthSingh, Ms. Bharti Tyagi, Varinder Kumar Sharma, Siddharth Mittal, AnkitGoel, Ashish Rana, S. K. Bhattacharya, L.K. Paonam, Ms. TomthinnganbiFKoijam, Niraj Bobby Paonam, Santosh Kumar - I, P. A. Noor Muhamed,Ms. Vandana Sehgal, Advs. for the appearing parties.

The Judgment of the Court was delivered by ANIRUDDHA BOSE, J.Leave granted.G

2. In this judgment, we shall deal with the legality of certainamendments and modifications made by the Central Government to theEmployees’ Pension Scheme, 1995 (“1995 Scheme”). Such scheme hasbeen made in pursuance of, inter-alia, Section 6A of the Employees’Provident Funds and Miscellaneous Provisions Act, 1952 (“the Act”).HSuch changes, inter-alia, are sought be effected in paragraphs 3, 6, 11, 12 and 14 of the 1995 scheme. The Act originally did not provide for anypension scheme and Section 6A was introduced to the said Act by wayof an amendment made in 1995. The amendment of 1995 contemplatedformulation of a scheme for employees’ pension and the pension fundwas to comprise of deposit of 8.33 per cent of the employers’ contributionmade towards provident fund corpus as per the prevailing Statue.Paragraph 11 of the scheme dealt with determination of pensionablesalary. At that point of time, maximum pensionable salary was Rs.5000/- and this sum had been enhanced subsequently to Rs.6500/-. Pensionablesalary was raised to Rs.15000/- by a notification dated 22[nd] August 2014[numbered G.S.R. 609 (E)], which was to be effective from 1[st]September 2014. This notification brought certain other modifications inthe scheme mainly restricting its coverage and we shall discuss thesemodifications later in this judgment.

3. In the appeals before us, judgments of the High Courts of Kerala,Rajasthan and Delhi are assailed. In the case of P. Sasikumar & Othersvs. Union of India (UOI) Represented by the Secretary to Govt.of India Ministry of Labour & Department of Employment andOthers [in Writ Petition (C) No. 13120 of 2015], a Division Bench ofthe Kerala High Court in its judgment delivered on 12[th] October 2018set aside the Employees’ Pension Amendment (Scheme), 2014 conceivedin G.S.R. 609 (E). The Delhi High Court in its judgment delivered on22[nd] May 2019 in the case of Bhartiya Khadya Nigam KaramchariSangh and Anr. vs. Union of India and Ors. [in Writ Petition (C) No.5678 of 2018] followed the view expressed by the Kerala High Courtand quashed a circular issued by the provident fund authorities on 31[st]May 2017 precluding exempted establishments from the benefits of higherpension. In a decision delivered on 28[th] August 2019 in the case of Unionof India and Others vs. Jale Singh and Others [in D.B. SpecialAppeal Writ No. 436 of 2019] a Division Bench of the Rajasthan HighCourt also expressed the same opinion. Appeals arising out of SLP (C)No. 3289 of 2021, SLP (C) No. 3290 of 2021, SLP (C) No. 2465 of 2021and SLP (C) No. 3287 of 2021 are directed against the aforesaid judgmentof the Rajasthan High Court and a subsequent decision of a Bench ofequal strength delivered on 24[th] September 2019 in the same line. Theappeals originating from SLP (C) Nos. 15063-15064 of 2022 are againstthe judgment of the Delhi High Court delivered on 22[nd] May 2019,whereas in appeals having their roots in SLP (C) No. 1366 of 2021, SLP(C) No. 1738 of 2021, judgments of the Delhi High Court delivered AB

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Afollowing the case of Bhartiya Khadya Nigam Karamchari Sangh(supra) have been assailed. In another judgment delivered by the sameBench of the Kerala High Court in the case of Sunil Kumar and Ors.vs. Union of India & Ors. [in Writ Petition (C) No. 602 of 2015] onthe same day, i.e. 12[th] October 2018, the aforesaid notification of 22[nd]August 2014 was invalidated. That judgment is under challenge in theBappeals in connection with SLP (C) Nos. 16721-16722 of 2019. In acontempt action brought before the Kerala High Court by aspiringbeneficiaries of the pension scheme for implementation of the directionsissued in the judgment dated 12[th] October 2018, certain directions havebeen issued by the Kerala High Court. The judgment to that effectCdelivered on 6[th] November 2020 is impugned in SLP (C) No. 8547 of2021.4. Fifty-four writ petitions have been filed by the employeesthemselves or on their behalf under Article 32 of the Constitution ofIndia seeking invalidation of the notification dated 22[nd] August 2014.

DThe writ petitioners are members of both exempted and unexemptedestablishments. We shall address these writ petitions as well in thisjudgment, as they involve the same questions of law. We find that noticesare yet to be issued in W.P. (C) No. 1356 of 2021, W.P. (C) No. 1379 of2021, W.P. (C) No. 767 of 2021 and W.P. (C) No. 477 of 2021 but these

petitions also involve the same questions of law and the main respondentsEhave participated in addressing us on these points. As such, these writpetitions shall also be dealt with in this judgment. We have also heard theintervenors, most of whom support the employees. In addition, there arecontempt petitions (Contempt Petition (C) Nos. 1917-1918 of 2018 andContempt Petition (C) No. 619-620 of 2019) in which implementation ofFa judgment of this Court in the case of R.C. Gupta and Others vs.Regional Provident Fund Commissioner, Employees ProvidentFund Organisation and Other [(2018) 14 SCC 809] delivered on 4[th]October 2016 has been asked for. This judgment dealt with the questionof entitlement of members of the pension scheme, whose pensionablesalary exceeded Rs.6500/- per month to exercise option in terms ofGproviso to paragraph 11 (3) of the scheme. In this judgment, a DivisionBench of this Court repelled the contention of the provident fund authoritiesthat the said proviso contemplated exercise of option within a specifiedtime. The said proviso has been omitted by the amendment of 2014.Rs.6500/- was the maximum pensionable salary prior to 1[st] September2014. We shall discuss this judgment in greater detail later.H

5. With effect from 16[th] March 1996, the proviso was added toparagraph 11(3) of the scheme giving an option to the employer andemployee for contribution on salary exceeding the aforesaid ceiling ofRs.6500/-, (which was Rs.5000/- per month prior to 8[th] October 2001)to retain the right to pension as per the scheme. 8.33 per cent ofemployer’s contribution of salary of an employee out of the deductibleamount towards provident fund had to be remitted to the pension fund.Stand of the authorities was that there were certain restrictions as regardsthe time for exercising such option. A set of employees had approachedthe provident fund authorities much beyond such perceived specifieddate, mostly on the eve of their retirement, seeking to be included in thepension scheme. The point urged by them was that the amendment of1996 was not within their knowledge, the same not having been widelypublicised. The provident fund authorities had rejected their plea. Oneset of employees successfully brought action before a Single Judge ofthe High Court of Himachal Pradesh. Their right to exercise such optionbeyond the time of their salary exceeding the pensionable limit was inquestion. According to the authorities, that was the cut-off limit. TheDivision Bench of the High Court, however, accepted the stand of theprovident fund authorities holding that paragraph 11(3) of the pensionscheme, as it prevailed then, stipulated a cut-off limit. The matterultimately came to this Court and in the case of R.C. Gupta (supra), aDivision Bench of this Court accepted the employees’ stand and, inter-alia, held:- “7. Reading the proviso, we find that the reference to the dateof commencement of the Scheme or the date on which thesalary exceeds the ceiling limit are dates from which the optionexercised are to be reckoned with for calculation ofpensionable salary. The said dates are not cut-off dates todetermine the eligibility of the employer-employee to indicatetheir option under the proviso to Clause 11(3) of the PensionScheme. A somewhat similar view that has been taken by thisCourt in a matter coming from the Kerala High Court [Unionof India v. A. Majeed Kunju, Writ Appeal No. 1135 of 2012,order dated 5-3-2013 (Ker)] , wherein Special Leave Petition(C) No. 7074 of 2014 filed by the Regional Provident FundCommissioner was rejected by this Court by order dated 31-3-2016 [Regl. Provident Fund Commr. v. A. Majeed Kunju,2016 SCC OnLine SC 1744, wherein it was directed: “SLPs ABC

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(C) Nos. 7074-76, 7107-108, 7224 of 2014 and 697 of 2016Heard the learned counsel for the parties and perused therelevant material. We do not find any legal and valid groundfor interference. The special leave petitions are dismissed SLPs(C) Nos. 19954 and 33032-33 of 2015 List these special leavepetitions on 26-4-2016. As prayed for, liberty is granted tofile additional documents.”]. A beneficial scheme, in ourconsidered view, ought not to be allowed to be defeated byreference to a cut-off date, particularly, in a situation where(as in the present case) the employer had deposited 12% ofthe actual salary and not 12% of the ceiling limit of Rs 5000or Rs 6500 per month, as the case may be.

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9. We do not see how exercise of option under Para 26 of theProvident Fund Scheme can be construed to estop theemployees from exercising a similar option under Para 11(3).If both the employer and the employee opt for deposit againstthe actual salary and not the ceiling amount, exercise of optionunder Para 26 of the Provident Scheme is inevitable. Exerciseof the option under Para 26(6) is a necessary precursor tothe exercise of option under Clause 11(3). Exercise of suchoption, therefore, would not foreclose the exercise of a furtheroption under Clause 11(3) of the Pension Scheme unless thecircumstances warranting such foreclosure are clearlyindicated.

10. The above apart in a situation where the deposit of theemployer’s share at 12% has been on the actual salary andnot the ceiling amount, we do not see how the Provident FundCommissioner could have been aggrieved to file the LPA beforethe Division Bench of the High Court. All that the ProvidentFund Commissioner is required to do in the case is anadjustment of accounts which in turn would have benefitedsome of the employees. At best what the ProvidentCommissioner could do and which we permit him to do underthe present order is to seek a return of all such amounts thatthe employees concerned may have taken or withdrawn fromtheir provident fund account before granting them the benefitof the proviso to Clause 11(3) of the Pension Scheme. Oncesuch a return is made in whichever cases such return is due, consequential benefits in terms of this order will be grantedto the said employees.”

6. Further modification to the scheme, as we have alreadyindicated, came on 22[nd] August 2014 to be effective from 1[st] September2014. Paragraph 11 of the scheme, before such modification by G.S.R.No. 609 (E) of 22[nd] August 2014 was introduced, and subsequent to thesaid G.S.R. becoming operational, read:- Before Modification After Modification11. Determination of Pensionable Salary. - (1) The pensionable salary shall be the average monthly pay drawn in any manner including on piece rate basis during contributory period of service in the span of sixty months preceding the date of exit from the membership of the Pension Fund and the pensionable salary shall be determined on pro-rata ·basis for the pensionable service up to the 1st day of September, 2014, subject to a maximum of six thousand and five hundred rupees per month, and for the period thereafter at the maximum of fifteen thousand rupees per month :

11. Determination of Pensionable Salary. - (1) The pensionable salary shall be the average monthly pay drawn in any manner including on piece rate basis during contributory period of service in the span of 12 months preceding the date of exit from the membership of the Employees’ Pension Fund.

Provided that if a member w as not in receipt of full pay during the period of twelve months preceding the day he ceased to be the member of the Pension Fund, the average of previous 12 months full pay draw n by him during the period for which contribution to the pension fund w as recovered, shall be taken into account as pensionable salary for calculating pension.

Provided that if a member was not in receipt of full pay during the period of sixty months preceding the day he ceased to be the member of the Pension Fund, the average of previous sixty months full pay drawn by him during the period for which contribution to the pension fund was recovered, shall be taken into account as pensionable salary for calculating pension.

(2) If during the said span of 12 months there are non-contributory periods of service including cases where the member has drawn salary for a part of the month, the total wages during the 12 months span shall be divided by the actual number of days for which salary has been draw n and the amount so derived shall be multiplied by 30 to work out the average monthly pay.

(2) If during the said span of 60 months there are non-contributory periods of service including cases where the member has draw n salary for a part of the month, the total wages during the 60 months span shall be divided by the actual number of days for which salary has been drawn and the amount so derived shall be multiplied by 30 to work out the average monthly pay.

(3) The maximum pensionable salary shall be limited to Rupees Six thousand five hundred per month. Provided that if at the option of the employer and employee, contribution paid on salary exceeding Rupees six thousand and five hundred per month from the date of commencement of this Scheme or from the date salary exceeds Rupees Six thousand five hundred, whichever is later, and 8.33 per cent share of the employers thereof is

(3) The maximum pensionable salary shall be limited to fifteen thousand rupees per month.

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976SUPREME COURT REPORTS

7. The legality of the modified scheme was questioned in differentGwrit petitions in different High Courts. The Bench decisions of the HighCourts of Kerala, Rajasthan and Delhi went in favour of the employees.The appeals which we shall be dealing with in this judgment arise out ofthe decisions of the said High Courts. We shall mainly be addressing thejudgment of the Division Bench of the Kerala High Court delivered on12[th] October 2018 [in Writ Petition (C) No. 13120 of 2015] which H

sustained the employees’ contentions and invalidated the notification of22[nd] August 2014. The Division Benches of the Rajasthan and DelhiHigh Court followed the ratio of the decision in the case of R. C. Gupta(supra) broadly on the same reasoning forming foundation of the judgmentof the Kerala High Court. The petitions for special leave to appeal filedby the Employees Provident Fund Organization (“EPFO”) [SLP (Civil)Nos. 8658-59 of 2019] assailing the judgment of the Division Bench ofthe Kerala High Court was initially dismissed by a Coordinate Bench ofthis Court on 1[st] April 2019. In SLP (C) Nos. 16721-16722 of 2019, theUnion of India also appealed against the same judgment. A ReviewPetition was filed by the EPFO in respect of the order dated 1[st] April2019 dismissing their Special Leave Petition. On 12[th] July 2019, thisCourt directed listing of the SLPs filed by the Union of India along withthe Review Petitions in open Court. On 29[th] January 2021, this Courtallowed the Review Petitions and the order of 1[st] April 2019 was recalled.A point has been taken on behalf of the employees that the EmployeesProvident Fund Organisation has no locus standi to maintain theseappeals. This objection is technical in nature and having regard to thefact that we are also hearing writ petitions challenging the legality of the2014 amendments, we do not consider it necessary to dilate on this issue.Moreover, in the appeals arising out of SLP (C) Nos.16721-16722 of2019, the Union of India is the appellant. Since the amendment made bythe Central Government has been quashed, the locus of Union of Indiaremains undisputed.

8. The pension scheme was conceived by way of introduction ofSection 6A to the 1952 Act, under Act 25 of 1996, with effect from 16[th]November 1995. The said Section stipulates: - “6A. Employees’ Pension Scheme —

(1) The Central Government may, by notification in the OfficialGazette, frame a scheme to be called the Employees’ PensionScheme for the purpose of providing for—

(a) superannuation pension, retiring pension or permanenttotal disablement pension to the employees of anyestablishment or class of establishments to which this Actapplies; and (b) widow or widower’s pension, children pension or orphanpension payable to the beneficiaries of such employees.

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(2) Notwithstanding anything contained in section 6, thereshall be established, as soon as may be after framing of thePension Scheme, a Pension Fund into which there shall bepaid, from time to time, in respect of every employee who is amember of the Pension Scheme,—

(a) such sums from the employer’s contribution under section6, not exceeding eight and one-third per cent, of the basicwages, dearness allowance and retaining allowance, if any,of the concerned employees, as may be specified in thePension Scheme; B

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(c) the net assets of the Employees’ Family Pension Fund ason the date of the establishment of the Pension Fund; (d) such sums as the Central Government may, after dueappropriation by Parliament by law in this behalf, specify.

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(3) On the establishment of the Pension Fund, the FamilyPension Scheme (hereinafter referred to as the ceased scheme)shall cease to operate and all assets of the ceased schemeshall vest in and shall stand transferred to, and all liabilitiesunder the ceased scheme shall be enforceable against, theEPension Fund and the beneficiaries under the ceased schemeshall be entitled to draw the benefits, not less than the benefitsthey were entitled to under the ceased scheme, from the PensionFund.

(4) The Pension Fund shall vest in and be administered byFthe Central Board in such manner as may be specified in thePension Scheme.

(5) Subject to the provisions of this Act, the Pension Schememay provide for all or any of the matters specified in ScheduleIII.

(6) The Pension Scheme may provide that all or any of itsprovisions shall take effect either prospectively orretrospectively on such date as may be specified in that behalfin that Scheme.

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(7) A Pension Scheme, framed under sub-section (1), shall belaid, as soon as may be after it is made, before each House of H

Parliament, while it is in session, for a total period of thirtydays which may be comprised in one session or in two ormore successive sessions, and if, before the expiry of thesession immediately following the session or the successivesessions aforesaid, both Houses agree in making anymodification in the scheme or both Houses agree that thescheme should not be made, the scheme shall thereafter haveeffect only in such modified form or be of no effect, as themay be; so, however, that any such modification or annulmentshall be without prejudice to the validity of anything previouslydone under that Scheme.]”

9. Under the same Amendment Act, Sections 2(kA) and 2(kB)were introduced to the Act. These provisions specify: - “2. Definitions.—In this Act, unless the context otherwiserequires,—

[(kA) “Pension Fund” means the Employees’ Pension Fundestablished under sub-section (2) of section 6A;]

[(kB) “Pension Scheme” means the Employees’ PensionScheme framed under sub-section (1) of section 6A;]”

10. The pension scheme was framed in terms of Section 6A ofthe Act and brought into operation by G.S.R. 748(E) dated 16[th] November1995. The crucial paragraph, so far as these proceedings are concerned,is paragraph 11 thereof. We have already quoted this paragraph. Thequantum of pension is to be fixed as per the formula specified in paragraph12 of the scheme, which contemplates, inter-alia, superannuation pensionfor a member of the Scheme after service of 10 years and retiring onattaining the age of 58 years. Sub-clause (2) of paragraph 12 as soughtto be amended by the 2014 amendment stipulates the methodology ofcomputation of monthly member’s pension. Sub-clauses (1) and (2) ofthis paragraph are reproduced below:- “12. Monthly Member’s Pension. - (1) A member shall beentitled to : - (a) superannuation pension if he has rendered eligible serviceof 10 years or more and retires on attaining the age of 58years; (b) early pension, if he has rendered eligible service of 10years or more and retires or otherwise ceases to be in theemployment before attaining the age of 58 years.

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12 (2). In the case of a new entrant, the amount of monthlysuperannuation pension or early pension, as the case maybe, shall be computed in accordance with the followingfactors, namely:- Monthly member’s pension= Pensionable Salary xBPensionable Service

Provided that the members’ monthly pension shall bedetermined on a pro-rata basis for the pensionable serviceup to the 1st day of September, 2014 at the maximumCpensionable salary of six thousand and five hundred rupeesper month and for the period thereafter at the maximumpensionable salary of fifteen thousand rupees per month.”

11. The initial entry into the pension scheme is contemplated inparagraph 26(6) of Employees Provident Funds Scheme, 1952 read withparagraph 6 of the pension scheme. Paragraph 6 of the pension schemeas it stood prior to the amendment of 22[nd] August 2014 and thereafterreads:- D

Before 22[nd]August 2014After 22[nd]August 2014“6. Membership of the Employees' “6. Membership of the Employees' Pension Scheme. - Subject to sub-Pension Scheme. - Subject to sub-Eparagraph (3) of paragraph 1, the Scheme paragraph (3) of paragraph 1, the shall apply to every employee – Scheme shall apply to every employee – (a) who on or after the 16th November, (a) who on or after the 16th November, 1995, becomes a member of the 1995, becomes a member of the Employees' Provident Fund Scheme, Employees' Provident Fund Scheme, 1952, or of the Provident Funds of the 1952, or of the Provident Funds of the factories and other establishments factories and other establishments Fexempted by the appropriate Government exempted by the appropriate under section 17 of the Act, or in whose Government under section 17 of the Act, case exemption has been granted under or in whose case exemption has been paragraph 27 or 27-A of the Employees' granted under paragraph 27 or 27-A of Provident Fund Scheme, 1952 from the the Employees' Provident Fund Scheme, date of such membership; 1952 and whose pay on such date is less Gthan or equal to fifteen thousand rupees, from the date of such membership; (b) who has been a member of the ceased (b) who has been a member of the Employees' Family Pension Scheme, 1971 ceased Employees' Family Pension before the commencement of this Scheme Scheme, 1971 before the commencement from 16th November, 1995; of this Scheme from 16th November, 1995; G

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(c) who ceased to be a member of the Employees' Family Pension Scheme, 1971 between 1st April, 1993 and 15th November, 1995 and opts to exercise his option under Paragraph 7;”

(c) who ceased to be a member of the Employees' Family Pension Scheme, 1971 between 1st April, 1993 and 15th November, 1995 and opts to exercise his option under Paragraph 7; (d) who has been a member of the Employees' Provident Fund or of Provident Funds of factories and other establishments exempted by the appropriate Government under section 17 of the Act or in whose case exemption has been granted under Paragraph 27 or 27 A of the Employees' Provident Fund Scheme, 1952, on 15th November, 1995 but not being a member of the ceased Employees' Family Pension Scheme, 1971 opts to exercise his option under paragraph 7. Explanation. - An employee shall cease to be the member of Pension Fund from the date of attaining 58 years of age or from the date of vesting admissible benefits under the Scheme, whichever is earlier.”

12. Section 7 of the 1952 Act empowers the Central Governmentto amend the said scheme both prospectively and retrospectively, subjectto certain procedural compliances, as outlined in the said provision. Thisprovision specifies:- “7. Modification of scheme.—

(1) The Central Government may, by notification in the OfficialGazette, add to [amend or vary, either prospectively orretrospectively, the Scheme, the [Pension] Scheme or theInsurance Scheme, as the case may be].

[(2) Every notification issued under sub-section (1) shall belaid, as soon as may be after it is issued, before each Houseof Parliament, while it is in session, for a total period of thirtydays, which may be comprised in one session or in two ormore successive sessions, and if, before the expiry of thesession immediately following the session or the successivesessions aforesaid, both Houses agree in making anymodification in the notification, or both Houses agree thatthe notification should not be issued, the notification shallthereafter have effect only in such modified form or be of no A

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Aeffect, as the case may be; so, however, that any suchmodification or annulment shall be without prejudice to thevalidity of anything previously done under that notification.]”

13. The judgment of this Court in R.C. Gupta (supra) wasdelivered examining the provisions of paragraph 11 of the scheme as itBstood prior to issue of the 2014 notification. The changes brought by theamended provision altered the methodology of computing pensionablesalary, which ultimately would have an impact on the quantum of monthlypension. Instead of taking twelve months of average pay in the yearpreceding the date of a member’s exit from the pension fund, computationwas contemplated on the basis of average monthly pay drawn duringCthe contributory period of service in the span of 60 months preceding thedate of exit.

14. In the post amendment context, the maximum pensionablesalary was to be kept to Rs.15000/- per month, raising the earlier ceilingof Rs.6500/- per month. It was also provided that an existing memberDwho, at the option of the employer and employee as on 1[st] September2014, had been contributing on a salary exceeding Rs.6500/- per monthcould exercise fresh option jointly with the employer to continue to remainin the fund even if the salary went beyond Rs.15000/- per month and thepensionable salary for the existing member exercising such an optionEwas to be based on the higher salary.

15. As per paragraph 3(ii) of the pension scheme, the CentralGovernment was to contribute to the fund at the rate of 1.16 per cent ofthe pay of the members. Employees within the changed pension regimedrawing more than Rs.15000/- per month have to also contribute at theFrate of 1.16 per cent on salary exceeding Rs.15000/- as additionalcontribution each month under the amended provisions. Further, freshoption was to be exercised by the member within a period of six monthsfrom the 1[st] day of September 2014, which was extendable up to about6 months on sufficient cause shown by the member.

16. Under the post-2014 regime, the fourth proviso to sub-clauseG(4) of paragraph 11 specifies that if no option is exercised by a memberwithin the aforesaid period, it would be deemed that the concernedmember has not opted for contribution over the wage ceiling. In such acase, the contributions to the pension fund made beyond the wage limitin respect of such a member is to be diverted to the provident fundH

account of the member along with interest, as declared under theprovident fund scheme from time to time.

17. It was held in the case of R. C. Gupta (supra), dealing withpre-2014 position of the scheme that the dates or time-limit specified inclause 11(3) of the pension scheme were not cut-off dates. The saidtime-limit determined the eligibility of the employer and employee toexercise their option under the proviso to the said paragraph. It was alsoobserved in this judgment that a beneficial scheme ought not to be allowedto be defeated by refence to a cut-off date in a situation where theemployer was not following the ceiling limit of Rs.5000/- or Rs.6500/-and had deposited 12 per cent of the actual salary.

18. Main submission of the employees in support of the judgmentsunder appeal has been that there was no additional burden imposed onthe provident fund authorities or the Central Government if the earliersystem continued and no cut-off date was factored in, as entry into thehybrid regime of provident fund plus pension beyond the ceiling limitonly entailed switching of funds. The authorities had to remit the 8.33

per cent from the employer’s share of the contribution lying in theprovident fund corpus to the corpus of the pension fund. It has beenargued before us that the pattern of investment that was permissibleunder both the schemes were broadly the same and hence interestgenerated by such investment ought to correspond to in each situation.

19. The Division Bench of the Kerala High Court examined theimpact of the amendment to the pension scheme in respect of the followingclasses of pensioners or potential pensioners: - “(i) Employees who had exercised option under the provisoto para 11 (3) of the 1995 Scheme and continued to be inservice as on 1[st] September 2014.

(ii) Employees who had not exercised their option under theproviso to paragraph 11(3) of the 1995 Scheme and werecontinuing in service as on 1[st] September 2014.

(iii) Employees who had retired prior to 1[st] September 2014without exercising an option under paragraph 11(3) of the1995 Act scheme.

(iv) Employees who had retired prior to 1[st] September 2014after exercising of an option under the paragraph 11(3) ofthe 1995 Scheme.”

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A20. It was held by the Kerala High Court, following the judgmentof this Court in the case of R.C. Gupta (supra), that paragraph 11 of thepension scheme did not stipulate a cut-off date at all. Any such stipulation,in the opinion of the High Court, would have the effect of defeating thepurpose of a beneficial scheme. After the relevant date, that is 1[st]September 2014, on the question of capping the salary to Rs.15000/- perBmonth for continuing in the pension scheme, it was, inter-alia, held by theHigh Court:-

“33. As per the amendments, the maximum pensionable salaryhas been fixed at Rs.15,000/- thereby disentitling the personswho have contributed on the basis of their actual salaries toany benefits on the basis of the excess contributions made bythem. The said provision is arbitrary and cannot be sustained.The employees, who have been making contributions on thebasis of their actual salaries after submitting a joint optionwith their employers as required by the Pension Scheme, aredenied the benefits of their contributions by the saidamendments without any justification. Apart from the above,to cap the salary at Rs. 15,000/- for quantifying pension isabsolutely unrealistic. A monthly salary of Rs.15,000/- worksout only to about Rs.500/- per day. It is common knowledgethat, even a manual labourer is paid more than the saidamounts as daily wages. Therefore, to limit the maximum salaryat Rs.15,000/- for pension would deprive most of theemployees of a decent pension in their old age. Since thepension scheme is intended to provide succour to the retiredemployees, the said object would be defeated by capping thesalary. The duty of the trustees of the Fund is to administerthe same for the benefit of the employees - by wise investmentsand efficient management. They have no right to deny thepension legitimately due to them on the ground that the fundwould get depleted. The demand of additional payment of1.16% of their salaries exceeding Rs.15,000/- is unsustainablefor the reason that, Section 6A does not require the employeesto make any additional contribution to constitute the PensionFund. Nor does it empower the authorities to demandadditional contribution. In the absence of any statutorybacking, the said provision in the Pension Scheme is ultravires. The amendment in so far as it stipulates the average C

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monthly pay drawn over a span of 60 months preceding thedate of exit as the pensionable service is also arbitrary forthe reason that it deprives the employees of a substantialportion of the pension to which they would have been eligiblehad it not been for the amendment. The provision as it originallystood stipulated computation of pensionable salary on thebasis of the monthly pay drawn over a period of 12 monthsprior to their exit. The reason for the amendments as disclosedby the counter affidavit filed is that payment of pension onthe basis of the Scheme as it stood prior to the amendmentwould result in depletion of the Fund. Absolutely no materialor data to support the above contention has been placedbefore us. On the contrary, placing reliance on a news reportcarried by “The Hindu” newspaper on 17.8.2014, it iscontended by the petitioners that, a staggering amount ofRs.32,000 Crores of unclaimed amount is lying in variousinoperative accounts across the country, as unclaimed pensionas disclosed by the Central Provident Fund Commissioner atan interactive session with employees at Hyderabad. In theabsence of any material to support the contention that thefund is likely to be depleted, we reject the said contention.Apart from the above, there is no provision in the Act thatstipulates the pension payments to commensurate with theamounts actually remitted by an employee and his employer.It is also a fact that the administrators of the Fund invest theamounts and generate profit from such investments.”

21. The High Court made its assessment of ground realities onthe wage structures in the economy and found capping of Rs.15000/-per month as pensionable salary would deprive most of the employeesof decent pension in their old age.

22. As regards requirement of an employee to contribute 1.16 percent of their pay under the amended scheme, the High Court found thatthere is no statutory basis under which an employee can be made tomake additional contribution to the pension fund. On the aspect of alteringthe basis of calculation of average monthly pay, the High Court heldsuch alteration to be arbitrary as it deprived the employees of a substantialportion of the pension to which they would have been entitled to underthe scheme as it originally prevailed. On justification of the amendment ABC

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Aon potential depletion of fund, a point which has also been argued beforeus by the EPFO, it was observed by the High Court that there was nomaterial or data to support this contention taken by the fund organisation.The High Court also referred to the growing number of workforce inour country, which, as per this judgment, was constantly adding to thebase of the fund by accumulation to fund contribution. In paragraphs 37Band 38 of the judgment under appeal, the reasoning of the High Courtwas summarised:- “37. The stated objective of the amendments is to preventdepletion of the fund. The said apprehension is absolutelybaseless for the reasons stated above. The number of personsCwho are contributing to the Provident Fund as well as thePension Fund have only grown over the years. The work forcein our country would only grow further in the future. It has tobe stated here that in view of the increase in the number ofworkers over the years, the contributions would also grow.DThe phenomenon is only bound to continue in future.Therefore, even when payments of pension are made to theretired employees, the pension fund would continue to getreplenished with the contributions of the new entrants. Thesaid ongoing process would maintain the Fund in a stablecondition. If at all, a situation where the Fund base gets erodedEoccurs, the situation could be remedied at that time byenhancing the rates of contributions of persons contributingto the Fund through a legislative exercise. The attempt tomaintain the stability of the fund by reducing the pensionwould only be counter productive and would defeat the verypurpose of the enactment.

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38. As rightly contended by the counsel appearing for thepetitioners, the effect of the amendments to the Pension Schemeis to create different classes of pensioners on the basis of thedate, 1.9.2014, the date on which the amended Scheme came into force. Consequently, there would be -G

(i) employees who have exercised option under the proviso toparagraph 11(3) of the 1995 Scheme and continuing inservice as on 1.9.2014;

(ii) employees who have not exercised their option under theproviso to paragraph 11(3) of the 1995 Scheme, andHcontinuing in service as on 1.9.2014;

(iii) employees who have retired prior to 1.9.2014 withoutexercising an option under paragraph 11(3) of the 1995Scheme; (iv) employees who have retired prior to 1.9.2014after exercising the option under paragraph 11(3) of 1995Scheme. The rationale in so classifying the employees coveredby the Pension Scheme on the basis of the above date is notforthcoming. The object sought to be achieved is stated to beprevention of depletion of the Pension Fund, which cannotbe accepted as a justification to support the classification.Inasmuch as the statutory scheme is to make the Pension Fundensure to the benefit of the homogeneous class of the totalityof employees covered by the Provident Fund, a furtherclassification of the said class by formulating a Scheme isultra vires the power available to the Central Governmentunder Sections 5 and 7 of the EPF Act. Therefore, it has to beheld that, the impugned amendments are arbitrary, ultra viresthe EPF Act and unsustainable. For the foregoing reasons,the petitioners are entitled to succeed. The writ petitions areall allowed as follows:

i) The Employee’s Pension (Amendment) Scheme, 2014brought into force by Notification No. GSR. 609(E) dated22.8.2014 evidenced by Ext.P8 in W.P.(C) No. 13120 of 2015is set aside;

ii) All consequential orders and proceedings issued by theProvident Fund authorities/respondents on the basis of theimpugned amendments shall also stand set aside.

iii) The various proceedings issued by the Employees ProvidentFund Organisation declining to grant opportunities to thepetitioners to exercise a joint option along with otheremployees to remit contributions to the Employees PensionScheme on the basis of the actual salaries drawn by them areset aside.

iv) The employees shall be entitled to exercise the optionstipulated by paragraph 26 of the EPF Scheme without beingrestricted in doing so by the insistence on a date.

v) There will be no order as to costs.”

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A For these reasons, the High Court quashed the Employees’Pension (Amendment) Scheme 2014 sought to be brought into force bynotification no. G.S.R. 609(E) dated 22[nd] August 2014.

23. The first point on which argument has been made on behalf ofthe appellants before us is that the aforesaid amendment had been madeBin exercise of power under Section 7 of the 1952 Act read with entry 10of the III Schedule of the Act. Thus, the legislative authorisation is therefor modification of a scheme whether prospectively or retrospectively.Moreover, our attention has been drawn to paragraph 32 of the 1995scheme, which stipulates :- “32. Valuation of the Employees’ Pension Fund and reviewCof the rates of contributions and quantum of the pension andother benefits. - (1) The Central Government shall have anannual valuation of the Employees’ Pension Fund made by aValuer appointed by it:

Provided that it shall be open to the Central Government toDdirect a valuation to be made at such other times s it mayconsider necessary.

(2) At any time, when the Employees’ Pension Fund so permits,the Central Government may alter the rate of contributionspayable under this Scheme or the scale of any benefitEadmissible under this Scheme or the period for which suchbenefit may be given.”

Entry 10 of the III Schedule to the Act, which refers to mattersfor which provision may be made in the pension scheme, provides:- “10. The scale of pension and pensionary benefits and theFconditions relating to grant of such benefits to the employees.”

24. Stand of the appellants is that there has been no encroachmenton any vested legal right of existing members. It has been highlightedthat after the 2014 amendments, the option of the members to furtheropt to remain in the scheme beyond the ceiling limit has been takenGaway. But the existing option members who had chosen to contributebeyond the salary limit has been permitted to exercise fresh option tocontinue with such contribution upon payment of an additional 1.16 percent of their salary beyond the said ceiling.

25. In assailing the said judgments, it has also been contended onHbehalf of the appellants that the membership of the pension scheme may have become a vested right for those opting under paragraph 26(6) ofthe EPFS before amendment to paragraph 6 of the pension scheme.Those who were yet to exercise option under paragraph 26(6) could notclaim such vested right of membership to pension scheme. The omissionof proviso 3 to paragraph 11 of the pension scheme also did not affectthe membership of those who had already come within the scheme byexercising option under paragraph 26(6), but to remain in the schemebeyond the ceiling limit an existing option member had to exercise freshoption.

26. Submission of the appellants is that all the employees of anestablishment do not constitute a homogenous class. It is within the powerand authority of the Central Government to differentiate betweenemployees earning lower wages and those earning higher salary andoffer improved social benefits for those in the lower wage bracket.

27. Arguments have been advanced on two other features of thepost-amendment scheme. Legality of requirement of the employees whogo beyond the salary threshold to contribute to the pension scheme atthe rate of 1.16 per cent of their salary has been questioned. The otherpoint in controversy is that for existing pensioners also the basis ofcomputation of pensionable salary having changed, there could bereduction in the monthly pension. It is, however, contention of theappellants that the amendment had extended the period prescribed inparagraph 12(1) from 12 months prior to a member’s exit from the pensionscheme to 60 months. This, according to appellants, has been done toachieve a clearer picture of the pensionable salary to eliminate thepossibility of fluctuations in pay drawn in the last 12 months fordetermining the quantum of pension. Illustration has been given of manuallabourers and women who drawing low wages, who may suffer suchfluctuation on account of ill health, incapacitation, etc., and in the case ofsuch employees, if only 12 months’ pay is accounted for, they may getreduced pension.

28. On behalf of the employees it has been urged that the decisionof this Court in R.C. Gupta (supra) does not require any revisit as thisdecision has held good for almost six years. In support of this argument,following authorities have been relied upon:-

(i) Bengal Immunity Company Limited v. State of Biharand Others [(1955) 2 SCR 603]

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A(ii)Union of India and Another v. Raghubir Singh (Dead)by Lrs. Etc. [(1989) 2 SCC 754]

(iii) Keshav Mills Co. Ltd. v. Commissioner of IncomeTax Bombay North, Ahmedabad [(1965) 2 SCR 908]

(iv) Waman Rao and Others v. Union of India and OthersB[(1981) 2 SCC 362].

29. In the given context, however, this point may not hold good aswhat we are examining in this judgment is certain amendments to thescheme which were not before this Court based on which the judgmentof R.C. Gupta (supra) was delivered. In the said judgment, the provisionsCof law as it subsisted prior to issue of the amendment notification wasconsidered. Thus, the ratio of the four authorities referred to in thepreceding paragraph would not be applicable in the given context.

30. The employees have argued that under the law, there is norequirement of exercising second option. In this regard, our attentionDhas been drawn to paragraphs 3(1) and 3(2) of the scheme, which requiresremittance of a part of contribution of the employer to the providentfund scheme. The employees’ argument is that the obligation is only onthe employer to remit the sum from one fund to the other. There is noceiling limit and the remittance required to be made is of 8.33 per cent ofEthe employee’s pay. But this point also, in our opinion, does not aid theemployees. While paragraphs 3 and 6 of the scheme have laid downwhat the fund would be constituted of and who would be the membersof the pension scheme, paragraph 11, which is an integral part of thepension scheme, specifies the criteria for those who become mandatorymembers and, from among the existing members, who may be permittedFto exercise option to remain in the scheme in spite of drawing salarybeyond the ceiling limit. It is a fact that those who are covered by paragraph26(6) of the provident fund scheme automatically enters into the pensionscheme as well. But this provision cannot be held to have precluded theCentral Government from laying down conditions to remain eligible forGthe pension scheme and specify wage or salary ceiling for individualemployees beyond which the scheme may not operate. We also do notaccept the argument that the pension scheme considers employees as ahomogenous group and no distinction can be made among differentcategories of employees based on their monthly salary to determine forwhom the scheme shall operate in a particular manner. It is well withinHthe power and authority of the statutory authorities to reasonably classify different sets of employees and categorise them for the nature of benefitsthey might get from an existing scheme. In fact, the scheme, at itsinception was made applicable to those drawing wages upto Rs.5000/-.The provision relating to exercising option was introduced later, in theyear 1996.

31. On behalf of the employees, argument was also advancedagainst the claim of negative financial impact on the corpus in responseto the stand of the appellants that having a large scale of beneficiariesfrom higher salary earners may result in remitting asymmetrical sumsfrom the corpus to them as pension. In this regard, learned senior counselfor the appellants (Provident Fund Organisation and Union of India)have made distinction between the provident fund scheme and pensionscheme in their respective operation. While provident fund scheme entailsa one-time settlement in favour of the member, the pension schemecarries, by its very nature, benefits for an unspecified time, which has tobe based on actuarial calculation. This difference has been recognisedin the judgments of this Court in the cases of Otis Elevator Employees’Union S. Reg. and Ors. vs. Union of India & Others [(2003) 12SCC 68] and Pepsu Road Transport Corporation, Patiala vs.Mangal Singh & Others [(2011) 11 SCC 702]. In an actuarial reportrelied on by the appellants after delivery of the Kerala High Courtjudgment, the net liability of the fund is projected to be Rs.5,75,918.88/-crores for the pension fund, exclusive of the provident fund balance thatmight be transferred. This assessment has been made on 27[th] December2018 and the report has been annexed to the Rejoinder Affidavit of theappellants in the appeals arising out of SLP (C) Nos.8658-8659 of 2019filed on 20[th] March 2021 with I.A. No.43576 of 2021 at page 410 of thatdocument. This projection is based on assumption that every person willopt for higher contribution and statutory salary is restored to Rs.6500/-per month.

32. We find that the amendment was made in exercise of powerotherwise vested in the authority making such amendment and theamendments were made on the basis of certain relevant materials andnot whimsically. In this context, the scope of judicial scrutiny to test theconstitutionality of the amendment provisions becomes narrow. This isthe opinion of the Constitution Bench of this Court in the case of KrishenaKumar vs. Union of India and Others [(1990) 4 SCC 207]. In ourview, classification of the employees made by the authorities on thebasis of the salary drawn in the 2014 amendment meets the test of A

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Areasonable classification contemplated in Article 14 of the Constitutionof India. The newspaper report quoted in the Kerala High Court judgment,in our opinion, would not give an effective guidance as regards positionof the pension fund and it would be prudent for the Court leave suchdecisions to be made by the scheme framing body. This approach wouldbe in line with the reasoning of the Constitution Bench in the case ofBKrishena Kumar (supra). In the case of Mafatlal Group StaffAssociation and Others vs. Regional Commissioner ProvidentFund and Ors. [(1994) 4 SCC 58], it was held by a Coordinate Benchof this Court:- “10. …Merely because the employees who were the membersCof the Employees Provident Fund Scheme before March 1,1971 were given an option to become or not to becomemembers of the Family Pension Scheme, it does not followthat the employees who become members of the Provident FundScheme after March 1, 1971, and who are not given suchDoption are discriminated against…”

33. The Division Bench of the Kerala High Court, in coming to itsfinding that the amendment was arbitrary, mainly relied on variouseconomic factors. The reasoning of the Bench was based on macro-economic reasons like general increase in salary, addition to the base ofEthe fund and the negative impact on denial of pension benefits for alarge number of employees. The High Court rejected the argument basedon depletion of fund on the ground that over the years, more and morepersons are contributing to the provident fund and the corpus of the fundis growing. We are alive to the concern expressed by the High Court asregards impact on the economic stability of retired employees suddenlyFbeing deprived of pension. But, based on such macro-level socialdisparities, we do not think in exercise of judicial power we can requirethe State to operate a pension scheme in a particular manner. Thesefactors would be for the policy makers to examine and prescribe. Wecannot issue directions on the Central Government to work out statutoryGscheme in a particular fashion. So far as fixing of cut-off date isconcerned, the 2014 amendment specifically provides for that. In thecase of R.C. Gupta (supra), the wording of the scheme in paragraph11(3) was different. Thus, the ratio of that judgment cannot be applied tothe changed provision of the scheme. Fixing of cut-off date was consideredin the case of Mafatlal Group Staff Association (supra) and held to beH

permissible. We have quoted earlier the relevant passage from thatjudgment.

34. The case of Bank of Baroda and Another vs. G. Palani &Others [(2022) 5 SCC 612] was cited in support of the proposition thatpension is not a bounty but a right and such right cannot be taken awayretrospectively. In the context of the provisions which we are examiningin this judgment, existing members have been given option to remain inthe scheme even if their salary go beyond the ceiling limit. Thus, theright of such members to draw pension is protected. The other areawhere the pension amount may get impacted is on determination ofmonthly pension on the basis of altered computation method. But thisjudgment is not the authority for the proposition that pension amountcannot be altered at all. The factual basis of this judgment was that ajoint note/agreement in derogation of statutory regulations was givingretrospective effect. It was in that context the said decision was delivered.In the cases before us, amendment is contemplated of the scheme itself.

35. The requirement in the scheme for employee’s contribution tothe extent of 1.16 per cent for option members, in our opinion, is illegal.There is nothing in the 1952 Act which requires payment to the pensionfund by an employee. Section 6A of the Act also does not have any suchstipulation. Since the Act does not contemplate any contribution to bemade by an employee to remain in the scheme, the Central Governmentunder the scheme itself cannot mandate such a stipulation. What is to beconsidered here is that for the mandatory members, the CentralGovernment continues to contribute the requisite 1.16 per cent of theirsalary. For option members, additional contribution by them iscontemplated in order to remain in the scheme. In such a situation, in ouropinion, a legislative amendment of the Act would have been necessary,providing for contribution to be made by an employee. To that extent,the provision of the scheme requiring contribution by an individualemployee is ultra vires the parent act. At the same time, we cannotignore the fact that the pension amount to be paid has been calculatedon projections that the corpus would include the option-employees’additional contribution of 1.16 per cent. We also cannot mandate theCentral Government to contribute to a pension scheme, in absence of alegislative provision to that effect. It would be for the administrators toreadjust the contribution pattern within the scope of the statute and onepossible solution could be to raise the level of the employer’s contributionin the scheme. We shall, however, suspend the operation of this part of A

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Aour judgment for a period of six months so that the legislature mayconsider the necessity of bringing appropriate legislative amendment onthis count. For the aforesaid period, the scheme as it stands shall continue.Till such time, if no such legislative exercise is undertaken, the duty tocontribute 1.16 per cent of the salary shall apply on option members aswell. This contribution shall be adjusted depending on any amendmentBthat may be brought. For the period of six months, however, the optingemployees shall make payment of 1.16 per cent contribution as stop gapmeasure. In the event no amendment to the statute or the scheme ismade within such extended time, then the administrators of the fund willhave to operate the pension fund for the option members from out of theCexisting corpus.

36. The other aspect of the controversy involves changing themethod of computation of the pensionable salary. We have given thepoints and counter points articulated by the contesting parties pertainingto this feature of the controversy earlier in this judgment. In our opinion,Dthis change of methodology comes within the power of the CentralGovernment to modify a scheme under Section 7 of the 1952 Act readwith item 10 of the Schedule III to the Act as also paragraph 32 of thescheme. This alteration of computation is ancillary to determination ofscale of pension alongwith pensionary benefits and paragraph 32 of thepension scheme specifically authorises the Central Government to alterEthe rate of contribution payable under the Scheme or the scale of anybenefit admissible under the scheme. There is a reasonable basis foreffecting change in the computation methodology for determiningpensionable salary and we do not find any illegality or unconstitutionalityin effecting this amendment.

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37. We shall now address the question as to whether the membersfrom an exempted establishment under the 1952 Act would be entitledto the benefits of enrolling in the scheme beyond the ceiling limit. Wewould point out here that before us no argument has been advanced asregards members of the pension scheme of exempted establishments inGterms of paragraph 39 of the said scheme. Thus, in this judgment, weare not addressing the cases of that category of members. We find fromSection 17 (A) of the Act that the investment of the provident fund forthe trust fund are also to be as per the directions of the CentralGovernment. In quashing the circular dated 31[st] May 2017, the DelhiHigh Court has held that the employees of unexempted establishmentsH

and exempted establishments form a homogenous group. Section 6A ofthe Act also envisages coverage of employees of exemptedestablishments under Section 17(6) of the Act within the pension scheme.Section 17(6) of the Act stipulates: - “(6) Subject to the provisions of sub-section [(1C)] theemployer of an exempted establishment or of an exemptedemployee of an establishment to which the provisions of the[Pension] Scheme apply, shall, notwithstanding any exemptiongranted under sub-section (1) or sub-section (2), pay to the[Pension] Fund such portion of the employer’s contributionto its provident fund within such time and in such manner asmay be specified in the [Pension] Scheme.”

38. Further, Clause 1(3) of the pension scheme contemplateskeeping within its fold the establishments to which the 1952 Act applies.These establishments would include exempted establishments as well.The employees of exempted establishments are integrated into the pensionscheme and we are of the opinion that the employees of an exemptedestablishment should not be deprived of the benefit of getting option toremain in the pension scheme while drawing salary beyond the ceilinglimit, in situations where similarly situated employees of unexemptedestablishments can exercise such option. In the event the scheme isconstrued in a way which would exclude them, that would lead to artificialclassification of otherwise same categories of employees. Thus, thepension scheme ought to apply to the employees of the exemptedestablishments in the same manner as this scheme applies to theemployees of unexempted or regular establishments.

39. One of the arguments against their inclusion into the schemeby exercising option is that the corpus of the contribution for exemptedestablishments have been kept in separate coffers maintained by thetrust created for such purpose and not with the authorities specifiedunder the Act. Taking that factor into account, we are of the view that inorder to be entitled to the benefits of the pension fund, the employer andthe employee, simultaneously with exercising option in terms of the orderof this Court, shall also have to give an undertaking of transferring theemployers’ contribution at the stipulated rate maintained by the trusts,which shall be equivalent to and not lower than the sum which wouldhave been transferable, had such fund been maintained by the providentfund authorities. Such transfer shall take place, immediately after A

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Aexercise of such option, within such period as may be directed by theadministrators of the pension fund.

40. We shall now deal with argument of the appellants that novested legal right of the employees has been encroached upon by the2014 amendment. For this purpose, amended paragraph 11(4) needs toBbe analysed. The said paragraph 11(4) provides for extending the pensioncoverage in respect of individual employees drawing salary more thanRs. 15000/- per month. This paragraph however, is subject to twoconditions:-

(i) The first one is that to be eligible for the benefits of extendedCcoverage, the existing members as on 1[st] September 2014must contribute at the rate of 1.16 per cent on salaryexceeding Rs. 15,000/- per month.

ii)The second one is that a fresh option should be exercisedwithin a period of six months from the first day of SeptemberD2014. The scheme contemplates that those members of thefund who had exercised option to remain in the scheme asper the requirement of proviso to paragraph 11(3) of thescheme, as it stood prior to the 2014 amendment, would beable to give fresh option with the employer if their salarycross the ceiling limit. In respect of that provision, this CourtEin the Case of R.C. Gupta (supra) had held that the saidproviso did not contemplate a cut-off date.

41. So far as the first condition is concerned, we have expressedour views earlier in this judgment as regards legality of having such aprovision. In relation to the second condition, our opinion is that theFeligibility for enhancement cannot be restricted to those employees onlywho had exercised the option to remain in the scheme once their salarywent beyond the capping of Rs. 6500/- per month. As we have alreadydiscussed, in case of R.C. Gupta (supra), it has been specifically heldthat there was no cut-off date in proviso to paragraph 11(3) as it stoodGbefore the 2014 amendment. In our opinion, the interpretation given tothe proviso to paragraph 11(3) prior to 2014 amendment does not requireany reconsideration. We agree with the reasoning of the two-judge Benchof this Court on this point, as expressed in the said judgment. As therewas no cut-off date to be contemplated prior to the 2014 amendment,limiting the entitlement of enhanced pension coverage to those employeesHonly who had already exercised an option under Clause 11(3) of the unamended scheme would be contrary to the ratio of the decision of thisCourt held in the case of R.C. Gupta (supra). We are not holding thatno option was required to be exercised as per proviso to paragraph 11(3)of the scheme, as it stood prior to 2014 amendment. As held in the caseof R.C. Gupta (supra), there was no time-limit for exercising such option.

42. The dual option, as is contemplated in paragraph 11(4) of thepension scheme (post 2014 amendment), has to be merged into one. Inthe event the employer and employee jointly opt for coverage beyondthe salary limit of Rs. 15000/-, without giving an earlier option under theunamended Clause 11(3) of the pension scheme, they would not beautomatically excluded from their right to exercise option under paragraph11(4) of the scheme, post amendment.

43. The other condition for enhanced coverage relates to the datewithin which such fresh option is to be exercised by a member, which isstipulated to be within a period of six months from 1[st] September 2014.It would be legitimate to proceed on the basis that several members didnot exercise such option earlier because of the stand taken by theProvident Fund authorities that option under proviso to paragraph 11(3)of the scheme (prior to 2014 amendment) has to be exercised within aspecified date, which stand was negated in the decision of R.C. Gupta(supra). We are of the view that the time limit for coverage beyond theceiling amount should be extended by a further period of four monthsfrom today to enable all the members of the pension fund drawing morethan Rs.6500/- to exercise the joint option as contemplated in paragraph11(4) of the pension scheme (post 2014 amendment). Once such jointoption is exercised, the transfer of fund from the provident fund corpusto the pension fund shall be effected in terms of the scheme.

44. We accordingly hold and direct:-

(i) The provisions contained in the notification no. G.S.R.609(E) dated 22[nd] August 2014 are legal and valid. So faras present members of the fund are concerned, we haveread down certain provisions of the scheme as applicablein their cases and we shall give our findings and directionson these provisions in the subsequent sub-paragraphs.

(ii) Amendment to the pension scheme brought about by thenotification no. G.S.R. 609(E) dated 22[nd] August 2014 shallapply to the employees of the exempted establishments in A

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the same manner as the employees of the regularestablishments. Transfer of funds from the exemptedestablishments shall be in the manner as we have alreadydirected.

(iii) The employees who had exercised option under the provisoto paragraph 11(3) of the 1995 scheme and continued to bein service as on 1[st] September 2014, will be guided by theamended provisions of paragraph 11(4) of the pensionscheme.

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(iv) The members of the scheme, who did not exercise option,as contemplated in the proviso to paragraph 11(3) of theCpension scheme (as it was before the 2014 Amendment)would be entitled to exercise option under paragraph 11(4)of the post amendment scheme. Their right to exerciseoption before 1[st] September 2014 stands crystalised in thejudgment of this Court in the case of R.C. Gupta (supra).DThe scheme as it stood before 1[st] September 2014 did notprovide for any cut-off date and thus those members shallbe entitled to exercise option in terms of paragraph11(4) ofthe scheme, as it stands at present. Their exercise of optionshall be in the nature of joint options covering pre-amendedparagraph 11(3) as also the amended paragraph 11(4) ofEthe pension scheme.

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There was uncertainty as regards validity of the postamendment scheme, which was quashed by the aforesaidjudgments of the three High Courts. Thus, all the employeeswho did not exercise option but were entitled to do so butFcould not due to the interpretation on cut-off date by theauthorities, ought to be given a further chance to exercisetheir option. Time to exercise option under paragraph 11(4)of the scheme, under these circumstances, shall standextended by a further period of four months. We are givingthis direction in exercise of our jurisdiction under ArticleG142 of the Constitution of India.

Rest of the requirements as per the amended provision shallbe complied with.

(v) The employees who had retired prior to 1[st] September 2014without exercising any option under paragraph 11(3) of the H

THE EMPLOYEES PROVIDENT FUND ORGANISATION & ANR.ETC. v. SUNIL KUMAR B. & ORS. ETC. [ANIRUDDHA BOSE, J.]

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pre-amendment scheme have already exited from themembership thereof. They would not be entitled to thebenefit of this judgment.

(vi) The employees who have retired before 1[st] September 2014upon exercising option under paragraph 11(3) of the 1995scheme shall be covered by the provisions of the paragraphB11(3) of the pension scheme as it stood prior to theamendment of 2014.

(vii) The requirement of the members to contribute at the rateof 1.16 per cent of their salary to the extent such salaryexceeds Rs.15000/- per month as an additional contributionCunder the amended scheme is held to be ultra vires theprovisions of the 1952 Act. But for the reasons alreadyexplained above, we suspend operation of this part of ourorder for a period of six months. We do so to enable theauthorities to make adjustments in the scheme so that theadditional contribution can be generated from some otherDlegitimate source within the scope of the Act, which couldinclude enhancing the rate of contribution of the employers.We are not speculating on what steps the authorities willtake as it would be for the legislature or the framers of thescheme to make necessary amendment. For the aforesaidEperiod of six months or till such time any amendment ismade, whichever is earlier, the employees’ contribution shallbe as stop gap measure. The said sum shall be adjustableon the basis of alteration to the scheme that may be made.

(viii) We do not find any flaw in altering the basis for computationof pensionable salary.

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(ix) We agree with the view taken by the Division Bench in thecase of R.C. Gupta (supra) so far as interpretation of theproviso to paragraph 11(3) (pre-amendment) pensionscheme is concerned. The fund authorities shall implementthe directives contained in the said judgment within a periodof eight weeks, subject to our directions contained earlierin this paragraph.

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(x) The Contempt Petition (C) Nos.1917-1918 of 2018 andContempt Petition (C) Nos. 619-620 of 2019 in Civil Appeal H

1000SUPREME COURT REPORTS

ANos. 10013-10014 of 2016 are disposed of in the aboveterms.

45. All the appeals which we have heard simultaneously are allowedin the above terms and the judgments impugned are modified accordingly.The writ petitions brought by employees or their representatives shallBalso stand disposed of in the same terms.

46. Pending application(s), if any, shall also stand disposed of.

47. There shall be no order as to costs.

CNidhi Jain

(Assisted by : Shubhanshu Das, LCRA)

Appeals allowed.

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