The Supreme Court on Thursday reserved judgment in appeals filed by the Employees Provident Fund Organisation (EPFO) against a decision of the Kerala High Court setting aside amendments on “determination of pensionable salary” under the Employees Pension Scheme (EPS) of 1995 as “ultra vires”.
Appearing before the Bench led by Justice U.U. Lalit, senior advocate Aryama Sundaram and advocate Rohini Musa, for the EPFO, said the EPS would face a “complete collapse” if the Kerala High Court judgment was allowed to hold fort.
Mr. Sundaram said the High Court judgment would effectively mean that every private sector employee should be paid a pension irrespective of his salary limit. Every private sector employee would opt for pension and claim it based on the last drawn salary that yields 50% of the pensionable salary, despite the fact that he did not contribute to the fund.
“Even government employees’ government pension schemes do not yield 50% of their last drawn salary after 2004, since the scheme was repealed as unviable. They now get pension based only on their contribution. The anomaly therefore is that EPS, which is a contributory fund, is being burdened with rates of pension which even the budgeted pension schemes do not provide,” Mr. Sundaram argued.
Additional Solicitor General Vikramjit Bannerjee, for the government, submitted that the EPS was the largest surviving defined benefits scheme in the world. Many of such schemes have collapsed all over the world and others replaced by corpus-based pension schemes, he said.
Both Mr. Sundaram and Mr. Bannerjee submitted that the EPS should be allowed to survive as a “guaranteed benefit scheme only for poor workers”.
“The poor workers in EPS, who earn below the wage ceiling, are bidi rollers, construction workers, sanitation workers, manual labourers, plantation workers, brick kiln workers, miners, security guards, etc,” Mr. Sundaram contended.
Senior advocate Gopal Sankaranarayanan, for the pensioners and employees’ side, said the EPS was far from collapse. The scheme has been paying pension from the interest received from its corpus. Its “majestic” corpus lay intact and untouched.
“Let us be realistic, of all the people in the country, the EPFO comes and says that we do not have funds. They have not touched the corpus even once,” the senior lawyer submitted.
The dispute revolves around the controversial amendments made to Clause 11(3) of the EPS-1995. Challenges to the EPS amendments said they were skewed. The people who challenged the amendments came from all walks of life and work. They sought a more secure life with a decent pension.
In the earlier version of EPS-1995, the maximum pensionable salary cap was ₹6,500. However, members whose salaries exceeded this cap could opt, along with their employers, to contribute up to 8.33% of their actual salaries.
The amendments raised the cap from ₹6,500 to ₹15,000. But the amendments said only employees, who were existing EPS members as on September 1, 2014, could continue to contribute to the pension fund in accordance with their actual salaries. They were given a window of six months to opt for the new pension regime.
In a judgment in the R.C. Gupta case, the Supreme Court had said that a “beneficial scheme” like EPS-1995 “ought not to be allowed to be defeated by reference to a cut-off date like September 1, 2014.
Besides, the amendments created additional obligations for members whose salaries exceeded the ₹15,000 ceiling. They had to contribute at the rate of 1.16% of the salary in addition to their EPF contribution. Besides, these employees had to make a fresh option within six months. The amendments had also extended the period of calculation of average salary from 12 months to 60 months.