CIRCULAR No.02/2019 To All Members of the Association Off : 26613091 / 26607167 42103360 / 26761877 Email : kea@kea.co.in Web : www.kea.co.in KARNATAKA EMPLOYERS' ASSOCIATION NO.74, 2 nd FLOOR, SHANKARA ARCADE, VANIVILAS ROAD, BASAVANAGUDI BENGALURU - 560 004 Reg. No. TU 507 / 20-3-1962 Date : 02-01-2019 Additional Pension on the basis of Contribution over and above Wage Limit of either Rs.5,000/- or Rs.6,500/- per Month. 1. The Association is receiving a number of queries on the basis of the judgment of the Supreme Court in the case of R.C.Gupta and others Vs Regional Provident Fund Commissioner, Employees Provident Fund Organization in Civil Appeal No.10013-10014/2016 decided on 4.10.2016 (reported in 2017 (3LLN-548). 2. The queries relate to the claim for additional Pension on the basis of the contribution made by the members over and above wage limit of either Rs.5,000/- or Rs.6,500/- per month. The queries are f rom the establishments which are exempted and also from un-exempted establishments. 3. The Government of India inserted Section 6A and Section 6B to the EPF Act by way of amending the Act which authorized the Central Government to frame Employees' Pension Scheme for providing superannuation or retiring pension. 4. The Central Government notified Employees' Pension Scheme 1995 on 16.11.1995 and all the members of the EPF Scheme were required to exercise their option to join the scheme within a period of 6 months i.e., upto 15.5.1996. However, before the expiry of the said option period the Employees' Pension Scheme was amended effective from 16.3.1996. The condition to exercise the option within 6 months as notified in the original scheme was deleted beside making other amendments. 5. When the original scheme was notified on 16.11.1995 the wage ceiling was Rs.5000/- for determining the pensionable salary and it was raised to Rs.6500/- per month w.e.f 1.6.2001. Consequent to this enhancement there were two patterns for determining the pensionable salary. One based on the wage ceiling of Rs. 6,500/- per month and Another based on higher salary exceeding the wage limit of
Rs.6,500/- per month for which higher salary exceeding the wage ceiling are to be madein the pension fund on 16.11.1995. Whereas the amended scheme guaranteed pensionary benefit to the employees already covered under the original scheme. 6. In the above back ground R.C.Gupta and others who have been contributing to the PF on the salary over and above the statutory limit and demanded enhanced pension benefit. 7. They contended that original scheme was given vide publicity and was circulated by the Provident Fund Organization, but when the amendment was carried out in the original scheme it was neither published nor the Petitioners were aware of the same. Under these circumstances some of the officers of the Himachal Pradesh Tourism Development Corporation who had been contributing to the Provident Fund over and above Rs. 6,500/- but were remitting the contribution towards the pension fund only on salary of Rs.6500/- per month made a representation to the Provident Fund Department and stated that they may be permitted to contribute on higher wages to the Pension Fund also. 8. The Provident Fund Department clarified that employer and employee can exercise option to contribute to the pension fund on salary exceeding the wage ceiling on two occasions. Immediately on and from the date of commencement of the scheme i.e., 16.11.1995. Immediately on and from the date the salary exceeded the statutory limit of Rs.6,500/- the then prevailing limit. 9. The PF Department further clarified that it is clear that the establishment is required to remit the contribution on the salary over and above the statutory limit from the month in which the salary crossed that limit and not from any later date. Accordingly, rejected the request to contribute on higher wages to the pension fund. 10. R C Gupta & Others challenged the order of PF Authority rejecting their claim by filing writ petitions before Himachal Pradesh High Court Shimla. The High Court allowed the Writ Petitions and observed as under: "To appreciate the rival contentions of the parties on meticulous examination, I find it from the record that right from the very inception, the employees who were covered under the Act aforesaid, had been contributing on the full salary of that time. This fact also stands admitted in para-10 of the reply filed by the 4th respondent, wherein it is clearly mentioned that the amendment dated 28.2.1996 to the Employees' Pension Scheme, 1995, remained unnoticed by their Corporation and the Employees Provident Fund Organization who was administering the scheme did not invite the revised options for contribution on full salary beyond the wage limit from the employees through their employers- Corporation, consequent to the said amendment. However, subsequently, when it was brought to their notice, they took up the matter with the Employees Provident Fund
Organization for allowing the contribution on the full salary beyond the wage limit, which was deposited from the very inception of the Scheme i.e., on 16.11.1995 (Annexure P-1). Against the above fact situation, the employees of the Corporation cannot be faulted for the inaction of 3rd respondent or any instrumentally of the State and whereas the 4th respondent on coming to know about the amendment in the Scheme deposited its share right from the inception of the Scheme. Therefore, the lapse of the respondents would cost dearer to the employees covered under the benevolent legislation without any lapse on their part. Therefore, the respondents are hereby directed to re-calculate and re-adjust the directly deposited amount of employers' share contribution under the appropriate Head of Accounts of 'Pension Fund Account' and 'Provident Fund Account' from the wage limit from the date of enforcement of the Pension Scheme in the year 1995, as per the subsequent amendment carried out in the year 1996 (Annexure P-2 referred above). However, it is made clear that these directions are only for the benefits of the petitioners in the above mentioned petition in peculiar facts and circumstances and shall not be treated as a precedent." 11. It may be noted here that the single judge has categorically held that the decision will be applicable only to the Petitioner and implication of such observation is that others who are not a party to the Petition cannot take advantage of the decision. 12. The PF Department filed an intra court appeal against the orders of the single judge in LPA No.441/2012. The Division Bench of the High Court allowed the Appeal and set aside the order passed by the Single Judge. 13. The Petitioners R.C. Gupta and others filed a Special Leave Petition before the Hon'ble Supreme Court. Special Leave was granted and appeal was admitted as Civil Appeal Nos.10013-10014 of 2016. 14. The Hon'ble Supreme Court allowed the Appeal and set aside the orders of the Division Bench of the High Court by Judgement dated: 4.10.2016 and observed as under; "We do not see how exercise of option under paragraph 26 of the Provident Fund Scheme can be construed to estop the employees from exercising a similar option under paragraph 11 (3) If both the employer and the employee opt for deposit against the actual salary and not the ceiling-amount, exercise of option under paragraph 26-of the Provident Scheme is inevitable. Exercise of the option under paragraph 26 (6) is a necessary precursor to the exercise of option under Clause 11 (3). Exercise of such option, therefore, would not foreclose the exercise of a further option under Clause 11 (3) of the Pension Scheme unless the circumstances warranting such foreclosure are clearly indicated. The above apart in a situation where the deposit of the employer's share at 12% has been on the actual salary and not the ceiling amount, we do not see how the Provident Fund
Commissioner could have been aggrieved to file the L.P.A. before the Division Bench of the High Court. All that the Provident Fund Commissioner is required to do in the case is an adjustment of accounts which in turn would have benefitted some of the employees. At best what the Provident Commissioner could do and which we permit him to do under the present order is to seek a return of all such amounts that the concerned employees may have taken or withdrawn from their Provident Fund Account before granting them the benefit of the proviso to Clause 11 (3) of the Pension Scheme. Once such a return is made in whichever cases such return is due, consequential benefits in terms of this order will be granted to the said employees." 15. Paragraph 26(6) of the EPF Scheme stipulate that an officer not below the rank of the Asst. Provident Fund Commissioner may on the joint request in writing of any employee of a factory or other establishment to which the scheme applies and his employer, enroll such employee as a member or allow him to contribute more than Rs.6,500/- of his pay per month if he is already member of the fund and thereupon such employee shall be entitled to the benefits and shall be subject to the condition of the fund, provided that employer gives an undertaking in writing that he shall pay the administrative charges payable and shall comply with all statutory provisions in respect of such employee. It must be noted that paragraph- 26(6) of the Provident Fund Scheme did not stipulate any time limit for exercising the option to contribute to the Provident Fund on higher salary. 16. Paragraph 11(3) of the Pension Scheme stipulates that the maximum pensionable salary shall be limited to Rs.6500/- per month. Provided that if at the option of the employer and the employee contribution paid on salary exceeding Rs.6500/- per month from the date of commencement of this scheme or from the date salary exceeds Rs. 6,500/- whichever is later and 8.33% share of the employers thereof is remitted in to the pension fund, and pensioners salary shall be based on such higher salary. 17. The Judgment of the Supreme Court is based on the above two paragraphs. The single judge of HP High Court had specifically held that the decision shall be applicable only to the Petitioners. The Supreme Court decision does not impose any restriction or condition as to the applicability of the judgment. 18. The issue was examined by the Provident Fund department and after obtaining permission from the Ministry of Labour, Govt. of India, have advised its field functionaries as under: "The Hon'ble Apex Court in SLP No. 33032-33033 of 2015 observed that the reference to the date of commencement of the Scheme or the date on which the salary exceeds the ceiling limit are dates from which the option exercised are to be reckoned with for calculation of pensionable salary. The said dates are not cut-off dates to determine the eligibility of the employer-employee to indicate their option under the proviso
to Clause 11(3) of the pension Scheme. It has further been observed that a beneficial Scheme, ought not to be allowed to be defeated by reference to a cut-off date, particularly, in a situation where (as in the present case) the employer had deposited 12% of the actual salary and not 12% of the ceiling limit of Rs.5000/- or Rs.6500/- per month, as the case may be. In a situation where the deposit of the employer's share at 12% has been on the actual salary and not the ceiling amount, the Provident Fund Commissioner could seek a return of all such amounts that the concerned employees may have taken or withdrawn from their Provident Fund Account before granting them the benefits of the proviso to Clause 1(3) of the Pension Scheme. Once such a return is made whichever cases such return is due, consequential benefits in terms of this order will be granted to the said employees. Thus a member contributing to the Provident Fund on the wages exceeding the statutory ceiling or who had contributed to the Provident Fund on the wages exceeding the Statutory ceiling cannot be debarred from exercising the option to contribute on such higher wages to the pension fund. (Copy of the order of Hon'ble Supreme Court enclosed). Accordingly, a proposal was sent to MOL&E to allow members of the Employees' Pension Scheme, 1995 who had contributed on higher wages exceeding the statutory wage ceiling of Rs.6500/- in the Provident Fund to divert 8.33% of the salary exceeding Rs.6500/- to the pension fund with up to date interest as desired under EPF Scheme, 1952, from time to time to get the benefit of pension on higher salary on receipt of joint option of the employer and employee. The MOL&E vide letter dated 16.03.2017 has conveyed its approval to allow members of the Employees' Pension Scheme, 1995, who had contributed on higher wages exceeding the statutory wage ceiling of Rs.6500/- in the Provident Fund to divert 8.33% of the salary exceeding Rs.6500/- to the Pension Fund with up to date interest as declared under EPF Scheme, 1952 from time to time to get the benefit of pension on higher salary on receipt of joint option of the employer and employee". 19. The department also has accepted the judgment of the Hon'ble Supreme Court. The Supreme Court has only interpreted paragraph 26(6) of the EPF Scheme and also paragraph 11(3) of the Pension Scheme. The implication of the above judgment is as under: If the employees have retired prior to 01.09.2014 and have already withdrawn their provident fund and also drawing pension and while in service they had contributed to the provident fund over and above the salary limit for coverage under the PF, in the event they would like to draw higher pension, they should repay the extent of 8.33% of the contribution which they were making over and above the statutory limit to the pension fund along with interest at the rate of 12% and
the provident fund department would accept the same and pay additional pension. The department is also permitting the pensioners to calculate the amount which has to be refunded to the department along with interest and also to calculate the pension payable to them on account of contribution to the pension fund over and above the statutory limit from the date on which they have been drawing pension and they remit only the difference, if any. If the employees have retired from the service prior to 01.09.2014 and have not withdrawn their provident fund and are not availing the pension also, the department itself would make necessary adjustment as they have already contributed over and above the statutory limit and the funds are available with the PF department itself. The above arrangement is not applicable to the exempted Trust. Some of the members of the exempted Trust have challenged the direction of the EPF department that the Supreme Court decision is not applicable to the exempted Trust as the PF contribution over and above the statutory limit had also been remitted to the respective Trust and only the contribution up to the statutory limit had been remitted to the pension fund. The PF department have filed an application for transfer of petitions pending before the different High Courts to the Supreme Court. The matter is thus sub judice with regard to the members of the exempted Trusts. 20. Subsequently, the Head office of the EPFO issued another direction by letter dated 31.05.2017 and directed the Field Officers as under: "Approval to comply with the order of the Hon'ble Supreme Court in the matter of Shri. R.C Gupta and others is only in respect of the provident fund and pension members whose accounts are maintained by EPFO and whose P.F Contribution on higher wages has been received by EPFO. All the appellate employees in the aforesaid case before the Hon'ble Supreme Court were from un-exempted establishment i.e., an establishment making P.F. Contribution in the statutory PF managed by EPFO. The Employer's contribution of 12% under the Act in respect of the said employees was on actual salary and not on the ceiling limit of either Rs. 5,000/- or Rs. 6500/- Exercise of option under Para 26 (6) of the EPF Scheme, 1952 is a precursor to exercise of option under proviso to clause 11 (3) of the EPF Scheme and contribution on full salary was received in the statutory Provident Fund. Employers pension scheme remittances are being made by the establishments and not by the exempted trusts. As such if establishments with exempted trusts are allowed to make balance remittances on full salary to the Employees' Pension Scheme afresh, the same will have to be considered for un-exempted establishments also. It is not contemplated in the judgment. In the case of exempted establishment, the Provident Fund and Pension Fund are managed by separate legal entities. The Provident
Fund is managed by EPFO. As such, adjustment of contribution from Provident Fund of Pension Account as contemplated in the judgement is not possible. The matter was placed in the 40th PEIC meeting. As decided in the 40th meeting of the PEIC the matter will be placed before the CBT. In the interim, it is advised that no member of EPS, 95 whose contribution on full salary has not been received in the account of the EPFO at the respective periods of contribution, shall be eligible for the benefits contemplated in the judgment as per the aforesaid Hon'ble Supreme Court order". 21. In terms of the above the EPFO, took a view that the judgment of Supreme Court in the case of R.C. Gupta is applicable only to the employees of the un-exempted establishments which were remitting contributions to the Provident fund as well as pension fund to the Provident fund department itself. 22. The circular dated 31.05.2017 of the EPFO was challenged by one of the employees of A.P. State Road Transport Corporation which is one of the exempted establishments. The Hon'ble AP High Court in W.P. Nos. 33804 of 2012 and 32038, 33091, 33094 of 2013 decided on 24.09.2018 has held that the judgment of Supreme Court referred to above is applicable to the exempted establishments also and directed the Employees Provident Fund Organisation to work out the amount of pension payable to petitioners based on the actual contribution made by them over and above ceiling of Rs.6500/- prescribed. 23. The members of the EPFO who have been contributing to the PF over and above the statutory limit of Rs. 5000 or Rs.6500 as the case may make claim for payment of enhanced pension in terms of the above judgments. for KARNATAKA EMPLOYERS' ASSOCIATION sd/- (B.C. PRABHAKAR) PRESIDENT