The Simplest Explanation to the EPS-95 Verdict of the Supreme Court
- Posted on November 10, 2022
- By Akta Yadav
- 85 Views
A landmark verdict by Honorable Supreme Court on EPS-95 was delivered on 4th November 2022. The judgement has left many stake holders high and dry.
Both the parties, to some extent may consider it a win for them and a bit of loss for both. The governing department, EPFO - Employees’ Provident Fund Organization, Ministry of Labour is reading the judgement word by word to understand what it has for them and what are the retrospective and prospective repercussions for its biggest stake holders viz. EPS-1995 Pensioners and its eligible members.
A plain reading of order dated 4th November, 2022 may, at the very outset, gives impression that the Applicant department has won the case. But its not that easy to reach at this conclusion. The landmark decision is historical on many aspects and has struck a unique balance safeguarding the interests of all the parties involved. In some aspects it is a win for both the parties and at the same time, by some measures it’s a big loss for both the parties.
The Simplest Explanation to the EPS-95 Verdict of the Supreme Court
The impact of Supreme Court judgement on Pension Fund and viability of pension scheme needs to be analyzed step by step. The complete decoding of the judgement is given hereunder: The fundamental pronouncement of this judgement is that the Central Government is right and within its Constitutional Authority to bring the 2014 Amendment.
And therefore, there is no question of treating that Amendment as Unconstitutional. This settles many questions being raised by the pensioners and employees. The Apex Court turned down the judgement of Kerala High Court which had delivered against the EPFO and Central Government by striking down the Amendment of 2014.
The Kerala High Court’s judgement on Amendment was thus dismissed by the Apex Court. So, what does that mean for the Employees and then for the EPFO? Lets see that in a detailed explanation.
The very first and foremost effect of this would be that the Para 11(4) which was inserted vide 2014 Amendment in the Employees Pension Scheme-1995, is now effective and fully constitutional and therefore its provisions will now be binding. What does the Amendment and specially this Para say?
Without going into complicated legal jargon the simple explanation to the provisions is given below:
First the pensionable salary would be raised from Rs 6,500 to Rs 15,000 per month. It means that effective from 01.09.2014, the basis for calculation of pensionable salary will be 15000 in place of existing 6500/-.
Secondly, only those employees will be eligible for membership of EPS whose joinig salary is aupto Rs 15000/-. Now this is the biggest point of this whole episode.
Those employees who join at a salary above Rs 15000/-they will be ab initio ineligible for the membership of the EPS-1995. Yes you heard it right.
The employees whose initial salary is above this they will not be able to claim membership of pension under EPS-95 after this judgement settled this ambiguity today.
The Third important provison of this Amendment was for those who were already members of EPS but have salary more than the cealing of Rs 15000/- per month.
This Amendment put an additional condition on them that they need to file an option with the concerned Regional PF Commissioner if they want to continue as member of the Pension Scheme and are ready to pay 1.6 percent of salary above ceiling which was earlier being paid by the Central Government.
The Government will continue to pay this 1.6 percent for those employees who fall within 15000/- ceiling of EPS-95. They were allowed a period of six months to file this option which was later extended and finally became infructuous on account of the Amendment being subjudice.
After expiry of the given time window the EPFO was not considering the option as admissible and therefore this added to the confused state of affairs for employees. This Amendment opened many fronts and previously closed issues, first on account of practicality. For the department it was a condition of inaction arising due to absence of any functionality to check the availability of the option of the employee when the monthly Challans were filed and contributions of members were deposited.
On the other hand there was a confusion in the employee and employer segment about auto inclusion in EPS on account of being member of PF.
There is a general understanding that if any employee is member of PF Scheme whereas the rule is not so. In simple words it can be said that if any employee is member of PF Scheme that does not make him a member of Pension Scheme unless he is eligible under the salary clause as explained above in the light of Para 11(4).
So this was, in a nutshell and simple language the explanation of the judgement on EPS-95 pronounced by the Supreme Court on 4th November,2022.
Some more insights from a considerate point of view are added hereunder. Hope the readers would like to read on the same in order to have a complete understanding of the effect of the judgement. For those who are interested in academic and legal aspects of the judgement a downloadable copy of the order dated 04.11.2022 is annexed to this article.
Is it a victory for both the parties or loss for both
To arrive on this conclusion let us first consider what was this case filed for by the Appellate party that is EPFO. The appeal was filed to challenge the previous order of the Apex Court which upheld the decision of Kerala High Court which struck down the 2014 Amendment in Pension Scheme. If we see this aspect then it is a win a for EPFO considering that the said Amendment has been upoheld as Constitutional by the Apex Court.
But, striking a lean balance the Court has also disagree with the EPFO on its position of closing the membership of Pension Scheme for those higher salary employees he could not file option under the revised provision of Para 11(4).
Grant a relaxation of to such employees the Court has directed that a period of Four months be given to such employees to file their option and the EPFO will be duty bound to accept that option of the employees for granting membership to them.
While reading the appeal filed by the EPFO it can be observed that the department appealed the court to uphold the 2014 amendments, to quash the Kerala High Court judgement on Amendment and finally to disallow new employees to file option for membership on salary above the ceiling of Rs 15000/-.Supreme-Court-Judgement-on-EPS-04-Nov-2022orDownload
Against these three the Apex Court was pleased to consider the first two appeals but did not agree to the third appeal of the department.
Now it is to be seen how the department goes about implementing this judgement because during the pronouncement the Court has also given freedom to EPFO to assess the liabilities and modify the scheme accordingly making it economically viable for the department to be able to pay pensions to persons making additional contributions and without compromising those employees who fall in the sector of eligibility for Pension Fund Membership. The Court has, thus granted EPFO a liberty to modify rates of contribution and benefits both.
No burden on employee for 1.16 PC:
The Apex Court has outrightly rejected EPFO’s Contention for asking the employees to pay 1.16 percent of their salary contributed above the ceiling of Rs 15000/-However without modigying the enabling Act itself the burden of paying 1.16 percent for Pension can not imposed on the employees because there is nothing in the EPF and MP Act 1952 which may be used to force the employees to pay this extra burden for their pension.
The Bench, made it clear that the larger social security is the subject for consideration of the Parliament and the question is not open for scrutiny of the Courts if the law or delegated law is in accordance with any Act or Statute passed by the Parliament.
The present case is a rare example of maintaining that thin line of jurisdiction and authority wherein the Apex Court has though agreed with the Kerala High Court on the concerns of social security for a larger number of workers, but then, the former steered clear off the line which needs to be respected when it comes to Policy Formulation and implementation of the same. This way the Honorable Supreme court upheld the decision of the government and said that there is no question of treating that Amendment as Unconstitutional.
However the genuine conerns of the Kerala High Court which were duly acknowledged by the Apex Court also, stand on a firm ground considering the need of Universal Social Security.
The fact that the upper limit of Rs 15000/- per month salary should not be used to make any employee ineligible for his right to pension and which may be considered by the Honorable Courts as a denial from the Right to Life which has been envisaged as a Fundmental Right in Indian Cosntitution under Article 21 which carries a very wide and liberal explanation.
Though this is a win for EPFO on merely Technical grounds but not moral grounds. Considering this half baked win the departement and the Government now has its moral responsbility to draft some good Policy for Pension which may ensure Universal Social Security and not merely targetting a segment.
Then only the elaborate and wide scope of the Fundamental Right under Article 21 will be materialized in the form of Right to Life which should also include a decent and respectable life after retirement.