Supreme Court Evokes its Order in Kerala HC ruling that Employees' Pension should be proportional to salary

Supreme Court Evokes its Order in Kerala HC ruling that Employees' Pension should be proportional to salary

Due to the directions issued by the Kerala High Court, the benefit would be granted upon employees retrospectively which as a result would create a great imbalance

The Supreme Court on 29 January 2021 evoked its order dismissing the Special Leave Petition filed against the Kerala High Court judgment which set aside Employees' Pension (Amendment) Scheme, 2014 that limited the maximum pensionable salary up to Rs 15,000 per month.

The three judges' bench comprising of Justices Uday Umesh Lalit, S. Hemant Gupta and Ravindra Bhat issued the Special Leave Petitions (SLPs) filed against the Kerala High Court judgment by Union of India and Employees Provident Fund Organization and listed the matter for a preliminary hearing on 25 February 2021.

It was contended by the Central Government that due to the directions issued by the Kerala High Court, the benefit would be granted upon employees retrospectively which as a result would create great imbalance.

The matrix in the case was that the Employees' Pension (Amendment) Scheme, 2014 had brought the following four key changes:

First, limited the maximum pensionable salary to Rs 15,000 per month. Prior to the amendment, though the maximum pensionable salary was only Rs 6,500 per month, the proviso to the said provision permitted an employee to be paid pension on the basis of the actual salary drawn by him provided contribution was remitted by him on the basis of the actual salary drawn by him preceded by a joint request made for such purpose jointly with his employer.

The said proviso has been omitted by the amendment thereby restricting the maximum pensionable salary at Rs 15,000. The Scheme has been amended further by a subsequent notification, the Employees' Pension (Fifth Amendment) Scheme, 2016 to provide that the pensionable salary for the existing members who prefer a fresh option, shall be based on the higher salary.

Second, it conferred an option on the existing members as on 1 September 2014 to submit a fresh option jointly with their employer to continue to contribute on salary exceeding Rs 15,000 per month. Upon such an option, the employee would have to make a further contribution at the rate of 1.16 per cent on the salary exceeding Rs 15,000 additionally. Such a fresh option would have to be exercised within a period of six months from 1 September 2014.

A power to condone the omission to exercise the fresh option within the said period of six months by a further period of six months is conferred on the Regional Provident Fund Commissioner. If no such option is made, the contribution already made in excess of the wage ceiling limit would be diverted to the Provident Fund Account, along with interest.

Third, it provided that the monthly pension shall be determined on pro-rata basis for pensionable services till 1 September 2014 at the maximum pensionable salary of Rs 6,500 and for the period thereafter at the maximum pensionable salary of Rs 15,000 per month.

Lastly, it provided for the withdrawal of the benefits where a member has not rendered the eligible service as required.

Following which the Kerala High Court, in October 2018, allowed the writ petitions filed by employees of various establishments covered by the provisions of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. Their grievance was with the changes brought about by the Employees' Pension (Amendment) Scheme, 2014, which drastically reduces the pension payable to them.

The Supreme Court on 1 April 2019, three judges bench comprising of the then Chief Justice of India Ranjan Gogoi, Justice Deepak Gupta and Justice Sanjiv Khanna at the threshold dismissed the SLPs filed by the Employees Provident Fund Organization observing that it does not find any merit.

Subsequently, post this dismissal, the Centre filed SLP against the Kerala High Court judgment and Employee Provident Fund Organization filed review petitions. When these cases were taken up last week, the Centre brought to the notice of the Court an order dated 21 December 2020 passed by another Division Bench of the High Court of Kerala by which the rightness of the earlier decision dated 12 October 2018 was questioned and the matter was referred to Full Bench of the High Court.

Central Government submitted that the effect of the impugned order of the High Court stood that the benefit would get conferred upon employees retrospectively which would lead to a great imbalance. The matter for a preliminary hearing has been listed on 25 February 2021.