REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE/ORIGINAL/INHERENT JURISDICTION

Civil Appeal Nos………………. of 2022

(Arising out of the Special Leave Petition (C) Nos. 8658­8659
of 2019)

THE EMPLOYEES PROVIDENT FUND

ORGANISATION & ANR. ETC. ….APPELLANT(S)

VERSUS

SUNIL KUMAR B. & ORS. ETC. ….RESPONDENT(S)

WITH

Civil Appeal Nos……………….. of 2022

(Arising out of Special Leave Petition (C) Nos. 16721­16722 of
2019)

Civil Appeal No……………….. of 2022

(Arising out of Special Leave Petition (C) No. 3289 of 2021)

Civil Appeal No……………….. of 2022

(Arising out of Special Leave Petition (C) No. 3287 of 2021)

Civil Appeal No……………….. of 2022

(Arising out of Special Leave Petition (C) No. 1701 of 2021)

Civil Appeal No……………….. of 2022

(Arising out of Special Leave Petition (C) No. 8547 of 2021)

Civil Appeal Nos……………….. of 2022

(Arising out of Special Leave Petition (C) Nos.15063­15064 of
2022 @ Diary No.46219 of 2019)

Civil Appeal No……………….. of 2022

(Arising out of Special Leave Petition (C) No. 1366 of 2021)
Signature Not Verified

Digitally signed by
NIRMALA NEGI
Date: 2022.11.04
18:02:41 IST
Reason:
Civil Appeal No……………….. of 2022
(Arising out of Special Leave Petition (C) No. 2465 of 2021)

1 | Page
 Civil Appeal No……………….. of 2022
(Arising out of Special Leave Petition (C) No. 3290 of 2021)

Civil Appeal No……………….. of 2022

(Arising out of Special Leave Petition (C) No. 1738 of 2021)

Writ Petition (C) No.318 of 2022, Writ Petition (C) No.1218 of

2020, Writ Petition (C) No.1332 of 2020, Writ Petition (C)
No.1312 of 2019, Writ Petition (C) No.875 of 2019, Writ Petition
(C) No.832 of 2019, Writ Petition (C) No.601 of 2019, Writ
Petition (C) No.500 of 2019, Writ Petition (C) No.512 of 2019,
Writ Petition (C) No.466 of 2019, Writ Petition (C) No.86 of 2021,
Writ Petition (C) No.1356 of 2021, Writ Petition (C) No.1379 of
2021, Writ Petition (C) No.767 of 2021, Writ Petition (C) No.477
of 2021, Writ Petition (C) No.414 of 2021, Writ Petition (C)
No.1134 of 2018, Writ Petition (C) No.390 of 2019, Writ Petition
(C) No.511 of 2019, Writ Petition (C) No.1459 of 2020, Writ
Petition (C) No.349 of 2019, Writ Petition (C) No.372 of 2018,
Writ Petition (C) No.360 of 2018, Writ Petition (C) No.233 of
2018, Writ Petition (C) No.141 of 2018, Writ Petition (C) No.118
of 2018, Writ Petition (C) No.250 of 2018, Writ Petition (C)
No.406 of 2018, Writ Petition (C) No.368 of 2018, Writ Petition
(C) No.393 of 2018, Writ Petition (C) No.395 of 2018, Writ
Petition (C) No.371 of 2018, Writ Petition (C) No.374 of 2018,
Writ Petition (C) No.385 of 2018, Writ Petition (C) No.367 of
2018, Writ Petition (C) No.369 of 2018, Writ Petition (C) No.411
of 2018, Writ Petition (C) No.466 of 2018, Writ Petition (C)
No.269 of 2019, Writ Petition (C) No.327 of 2019, Writ Petition
(C) No.352 of 2019, Writ Petition (C) No.69 of 2018, Writ Petition
(C) No.804 of 2018, Writ Petition (C) No.594 of 2018, Writ
Petition (C) No.884 of 2018, Writ Petition (C) No.778 of 2018,
Writ Petition (C) No.874 of 2018, Writ Petition (C) No.1149 of
2018, Writ Petition (C) No.1167 of 2018, Writ Petition (C)
No.1430 of 2018, Writ Petition (C) No.1433 of 2018, Writ Petition
(C) No.1428 of 2018, Writ Petition (C) No.380 of 2018, Writ

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Petition (C) No.498 of 2022, Contempt Petition (C) Nos.1917­
1918 of 2018 in Civil Appeal Nos.10013­10014 of 2016 and
Contempt Petition (C) Nos.619­620 of 2019 in Civil Appeal
Nos.10013­10014 of 2016

JUDGMENT

ANIRUDDHA BOSE, J.

Leave granted.

2. In this judgment, we shall deal with the legality of certain

amendments and modifications made by the Central Government to

the Employees’ Pension Scheme, 1995 (“1995 Scheme”). Such

scheme has been made in pursuance of, inter­alia, Section 6A of the

Employees’ Provident Funds and Miscellaneous Provisions Act, 1952

(“the Act”). Such changes, inter­alia, are sought be effected in

paragraphs 3, 6, 11, 12 and 14 of the 1995 scheme. The Act

originally did not provide for any pension scheme and Section 6A

was introduced to the said Act by way of an amendment made in

1995. The amendment of 1995 contemplated formulation of a

scheme for employees’ pension and the pension fund was to

comprise of deposit of 8.33 per cent of the employers’ contribution

made towards provident fund corpus as per the prevailing Statue.

Paragraph 11 of the scheme dealt with determination of pensionable

salary. At that point of time, maximum pensionable salary was

3 | Page
Rs.5000/­ and this sum had been enhanced subsequently to

Rs.6500/­. Pensionable salary was raised to Rs.15000/­ by a

notification dated 22nd August 2014 [numbered G.S.R. 609 (E)],

which was to be effective from 1 st September 2014. This notification

brought certain other modifications in the scheme mainly restricting

its coverage and we shall discuss these modifications 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 & Others vs. Union of India (UOI) Represented by the

Secretary to Govt. of India Ministry of Labour & Department of

Employment and Others [in Writ Petition (C) No. 13120 of 2015], a

Division Bench of the Kerala High Court in its judgment delivered on

12th October 2018 set aside the Employees’ Pension Amendment

(Scheme), 2014 conceived in G.S.R. 609 (E). The Delhi High Court in

its judgment delivered on 22nd May 2019 in the case of Bhartiya

Khadya Nigam Karamchari Sangh and Anr. vs. Union of India

and Ors. [in Writ Petition (C) No. 5678 of 2018] followed the view

expressed by the Kerala High Court and quashed a circular issued

by the provident fund authorities on 31st May 2017 precluding

exempted establishments from the benefits of higher pension. In a

decision delivered on 28th August 2019 in the case of Union of India

4 | Page
and Others vs. Jale Singh and Others [in D.B. Special Appeal Writ

No. 436 of 2019] a Division Bench of the Rajasthan High Court 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 2021 and SLP

(C) No. 3287 of 2021 are directed against the aforesaid judgment of

the Rajasthan High Court and a subsequent decision of a Bench of

equal strength delivered on 24th September 2019 in the same line.

The appeals originating from SLP (C) Nos. 15063­15064 of 2022 are

against the 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 following the case of Bhartiya Khadya Nigam Karamchari

Sangh (supra) have been assailed. In another judgment delivered by

the same Bench 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] on the same day, i.e. 12th October 2018, the aforesaid

notification of 22nd August 2014 was invalidated. That judgment is

under challenge in the appeals in connection with SLP (C) Nos.

16721­16722 of 2019. In a contempt action brought before the

Kerala High Court by aspiring beneficiaries of the pension scheme for

implementation of the directions issued in the judgment dated 12 th

October 2018, certain directions have been issued by the Kerala High

5 | Page
Court. The judgment to that effect delivered on 6 th November 2020 is

impugned in SLP (C) No. 8547 of 2021.

4. Fifty­four writ petitions have been filed by the employees

themselves or on their behalf under Article 32 of the Constitution of

India seeking invalidation of the notification dated 22 nd August 2014.

The writ petitioners are members of both exempted and unexempted

establishments. We shall address these writ petitions as well in this

judgment, as they involve the same questions of law. We find that

notices are yet to be issued in W.P. (C) No. 1356 of 2021, W.P. (C) No.

1379 of 2021, 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 respondents have participated in addressing us on these

points. As such, these writ petitions shall also be dealt with in this

judgment. We have also heard the intervenors, most of whom

support the employees. In addition, there are contempt petitions

(Contempt Petition (C) Nos. 1917­1918 of 2018 and Contempt

Petition (C) No. 619­620 of 2019) in which implementation of a

judgment of this Court in the case of R.C. Gupta and Others vs.

Regional Provident Fund Commissioner, Employees Provident

Fund Organisation and Other [(2018) 14 SCC 809] delivered on 4 th

October 2016 has been asked for. This judgment dealt with the

question of entitlement of members of the pension scheme, whose

6 | Page
pensionable salary exceeded Rs.6500/­ per month to exercise option

in terms of proviso to paragraph 11 (3) of the scheme. In this

judgment, a Division Bench of this Court repelled the contention of

the provident fund authorities that the said proviso contemplated

exercise of option within a specified time. The said proviso has been

omitted by the amendment of 2014. Rs.6500/­ was the maximum

pensionable salary prior to 1st September 2014. We shall discuss

this judgment in greater detail later.

5. With effect from 16th March 1996, the proviso was added to

paragraph 11(3) of the scheme giving an option to the employer and

employee for contribution on salary exceeding the aforesaid ceiling of

Rs.6500/­, (which was Rs.5000/­ per month prior to 8th October

2001) to retain the right to pension as per the scheme. 8.33 per cent

of employer’s contribution of salary of an employee out of the

deductible amount towards provident fund had to be remitted to the

pension fund. Stand of the authorities was that there were certain

restrictions as regards the time for exercising such option. A set of

employees had approached the provident fund authorities much

beyond such perceived specified date, mostly on the eve of their

retirement, seeking to be included in the pension scheme. The point

urged by them was that the amendment of 1996 was not within their

knowledge, the same not having been widely publicised. The

7 | Page
provident fund authorities had rejected their plea. One set of

employees successfully brought action before a Single Judge of the

High Court of Himachal Pradesh. Their right to exercise such option

beyond the time of their salary exceeding the pensionable limit was

in question. According to the authorities, that was the cut­off limit.

The Division Bench of the High Court, however, accepted the stand

of the provident fund authorities holding that paragraph 11(3) of the

pension scheme, as it prevailed then, stipulated a cut­off limit. The

matter ultimately came to this Court and in the case of R.C. Gupta

(supra), a Division Bench of this Court accepted the employees’

stand and, inter­alia, held:­

“7. Reading the proviso, we find 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 cut­off dates to determine the eligibility
of the employer­employee to indicate their option
under the proviso to Clause 11(3) of the Pension
Scheme. A somewhat similar view that has been
taken by this Court in a matter coming from the
Kerala High Court [Union of India v. A. Majeed Kunju,
Writ Appeal No. 1135 of 2012, order dated 5­3­2013
(Ker)] , wherein Special Leave Petition (C) No. 7074 of
2014 filed by the Regional Provident Fund
Commissioner was rejected by this Court by order
dated 31­3­2016 [Regl. Provident Fund Commr. v. A.
Majeed Kunju, 2016 SCC OnLine SC 1744, wherein it
was directed: “SLPs (C) Nos. 7074­76, 7107­108,
7224 of 2014 and 697 of 2016 Heard the learned
counsel for the parties and perused the relevant
material. We do not find any legal and valid ground

8 | Page
for interference. The special leave petitions are
dismissed SLPs (C) Nos. 19954 and 33032­33 of 2015
List these special leave petitions on 26­4­2016. As
prayed for, liberty is granted to file additional
documents.”]. A beneficial scheme, in our considered
view, ought not to be allowed to be defeated by
reference to a cut­off 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.

8. xxx xxx xxx

9. We do not see how exercise of option under Para

26 of the Provident Fund Scheme can be construed to
estop the employees from exercising a similar option
under Para 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
Para 26 of the Provident Scheme is inevitable.
Exercise of the option under Para 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.

10. 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 LPA 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
benefited 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 employees
concerned 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

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 cases such return is due, consequential benefits in
terms of this order will be granted to the said
employees.”

6. Further modification to the scheme, as we have already indicated,

came on 22nd August 2014 to be effective from 1st September 2014.

Paragraph 11 of the scheme, before such modification by G.S.R. No.

609 (E) of 22nd August 2014 was introduced, and subsequent to the

said G.S.R. becoming operational, read:­

Before Modification After Modification

11.Determination of 11. Determination of
Pensionable Salary. ­ (1) Pensionable Salary. ­ (1)
The pensionable The pensionable salary
salary shall be the average shall be the average
monthly pay drawn in any monthly pay drawn in any
manner including on piece manner including on piece
rate basis during rate basis during
contributory period of contributory period of
service in the span of 12 service in the span of sixty
months preceding the date months preceding the date
of exit from the membership of exit from the membership
of the Employees’ Pension of the Pension Fund and
Fund. the pensionable salary
Provided that if a member shall be determined on pro­
was not in receipt of full rata ∙basis for the
pay during the period of pensionable service up to
twelve months preceding the 1st day of September,
the day he ceased to be the 2014, subject to a
member of the Pension maximum of six thousand
Fund, the average of and five hundred rupees
previous 12 months full pay per month, and for the
drawn by him during the period thereafter at the
period for which maximum of fifteen
contribution to the pension thousand rupees per month
fund was recovered, shall :
be taken into account as Provided that if a member
pensionable salary for was not in receipt of full

10 | P a g e
calculating pension. 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
(2) If during the said span the period for which
of 12 months there are non­ contribution to the pension
contributory periods of fund was recovered, shall
service including cases be taken into account as
where the member has pensionable salary for
drawn salary for a part of calculating pension.
the month, the total wages
during the 12 months span (2) If during the said span
shall be divided by the of 60 months there are non­
actual number of days for contributory periods of
which salary has been service including cases
drawn and the amount so where the member has
derived shall be multiplied drawn salary for a part of
by 30 to work out the the month, the total wages
average monthly pay. during the 60 months span
shall be divided by the
(3) The maximum actual number of days for
pensionable salary shall be which salary has been
limited to Rupees Six drawn and the amount so
thousand five hundred per derived shall be multiplied
month. by 30 to work out the
Provided that if at the average monthly pay.
option of the employer and
employee, contribution paid (3) The maximum
on salary exceeding Rupees pensionable salary shall be
six thousand and five limited to fifteen thousand
hundred per month from the rupees per month.
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
remitted into the Pension (4) The existing members as
Fund, pensionable salary on the 1st day of

11 | P a g e
shall be based on such September, 2014, who at
higher salary. the option of the employer
and employee, had been
contributing on salary
exceeding six thousand and
five hundred rupees per
month, may on a fresh
option to be exercised
jointly by the employer and
employee continue to
contribute on salary
exceeding fifteen thousand
rupees per month and the
pensionable salary for the
existing members who
prefer such fresh option
shall be based on the
higher salary:
Provided that the aforesaid
members have to contribute
at the rate of 1.16 per cent.
on salary exceeding fifteen
thousand rupees as an
additional contribution from
and out of the contributions
payable by the employees
for each month under the
provisions of the Act or the
rules made thereunder:
Provided further that the
fresh option shall be
exercised by the member
within a period of six
months from the 1st day of
September, 2014:
Provided also that the
period specified in the
second proviso may, on
sufficient cause being
shown by the member, be
extended by the Regional
Provident Fund
Commissioner for a further

12 | P a g e
 period not exceeding six
months:
Provided also if no option is
exercised by the member
within such period
(including the extended
period), it shall be deemed
that the member has not
opted for contribution over
wage ceiling and the
contributions to the Pension
Fund made over the wage
ceiling in respect of the
member shall be diverted to
the Provident Fund account
of the member along with
interest as

7. The legality of the modified scheme was questioned in different

writ petitions in different High Courts. The Bench decisions of the

High Courts of Kerala, Rajasthan and Delhi went in favour of the

employees. The appeals which we shall be dealing with in this

judgment arise out of the decisions of the said High Courts. We

shall mainly be addressing the judgment of the Division Bench of the

Kerala High Court delivered on 12th October 2018 [in Writ Petition (C)

No. 13120 of 2015] which sustained the employees’ contentions and

invalidated the notification of 22nd August 2014. The Division

Benches of the Rajasthan and Delhi High Court followed the ratio of

the decision in the case of R. C. Gupta (supra) broadly on the same

reasoning forming foundation of the judgment of the Kerala High

Court. The petitions for special leave to appeal filed by the Employees

13 | P a g e
Provident Fund Organization (“EPFO”) [SLP (Civil) Nos. 8658­59 of

2019] assailing the judgment of the Division Bench of the Kerala

High Court was initially dismissed by a Coordinate Bench of this

Court on 1st April 2019. In SLP (C) Nos. 16721­16722 of 2019, the

Union of India also appealed against the same judgment. A Review

Petition was filed by the EPFO in respect of the order dated 1 st April

2019 dismissing their Special Leave Petition. On 12 th July 2019, this

Court directed listing of the SLPs filed by the Union of India along

with the Review Petitions in open Court. On 29 th January 2021, this

Court allowed 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 Employees Provident Fund Organisation has no locus standi to

maintain these appeals. This objection is technical in nature and

having regard to the fact that we are also hearing writ petitions

challenging the legality of the 2014 amendments, we do not consider

it necessary to dilate on this issue. Moreover, in the appeals arising

out of SLP (C) Nos.16721­16722 of 2019, the Union of India is the

appellant. Since the amendment made by the Central Government

has been quashed, the locus of Union of India remains undisputed.

8. The pension scheme was conceived by way of introduction of

Section 6A to the 1952 Act, under Act 25 of 1996, with effect from

16th November 1995. The said Section stipulates: ­

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“6A. Employees’ Pension Scheme —
(1) The Central Government may, by notification in the
Official Gazette, frame a scheme to be called the
Employees’ Pension Scheme for the purpose of
providing for—
(a) superannuation pension, retiring pension or
permanent total disablement pension to the
employees of any establishment or class of
establishments to which this Act applies; and
(b) widow or widower’s pension, children pension or
orphan pension payable to the beneficiaries of such
employees.
(2) Notwithstanding anything contained in section 6,
there shall be established, as soon as may be after
framing of the Pension Scheme, a Pension Fund into
which there shall be paid, from time to time, in respect
of every employee who is a member of the Pension
Scheme,—
(a) such sums from the employer’s contribution under
section 6, not exceeding eight and one­third per cent,
of the basic wages, dearness allowance and retaining
allowance, if any, of the concerned employees, as
may be specified in the Pension Scheme;
(b) such sums as are payable by the employers of
exempted establishments under sub­section (6) of
section 17;
(c) the net assets of the Employees' Family Pension
Fund as on the date of the establishment of the
Pension Fund;
(d) such sums as the Central Government may, after
due appropriation by Parliament by law in this behalf,
specify.
(3) On the establishment of the Pension Fund, the
Family Pension Scheme (hereinafter referred to as the
ceased scheme) shall cease to operate and all assets
of the ceased scheme shall vest in and shall stand
transferred to, and all liabilities under the ceased
scheme shall be enforceable against, the Pension
Fund and the beneficiaries under the ceased scheme
shall be entitled to draw the benefits, not less than
the benefits they were entitled to under the ceased
scheme, from the Pension Fund.

15 | P a g e
 (4) The Pension Fund shall vest in and be
administered by the Central Board in such manner as
may be specified in the Pension Scheme.
(5) Subject to the provisions of this Act, the Pension
Scheme may provide for all or any of the matters
specified in Schedule III.
(6) The Pension Scheme may provide that all or any of
its provisions shall take effect either prospectively or
retrospectively on such date as may be specified in
that behalf in that Scheme.
(7) A Pension Scheme, framed under sub­section (1),
shall be laid, as soon as may be after it is made,
before each House of Parliament, while it is in
session, for a total period of thirty days which may be
comprised in one session or in two or more successive
sessions, and if, before the expiry of the session
immediately following the session or the successive
sessions aforesaid, both Houses agree in making any
modification in the scheme or both Houses agree that
the scheme should not be made, the scheme shall
thereafter have effect only in such modified form or be
of no effect, as the may be; so, however, that any
such modification or annulment shall be without
prejudice to the validity of anything previously done
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

otherwise requires,—
[(kA) “Pension Fund” means the Employees’ Pension
Fund established under sub­section (2) of section 6A;]
[(kB) “Pension Scheme” means the Employees’
Pension Scheme framed under sub­section (1) of
section 6A;]”

10. The pension scheme was framed in terms of Section 6A of the

Act and brought into operation by G.S.R. 748(E) dated 16 th November

16 | P a g e
1995. The crucial paragraph, so far as these proceedings are

concerned, is paragraph 11 thereof. We have already quoted this

paragraph. The quantum of pension is to be fixed as per the formula

specified in paragraph 12 of the scheme, which contemplates, inter­

alia, superannuation pension for a member of the Scheme after

service of 10 years and retiring on attaining the age of 58 years. Sub­

clause (2) of paragraph 12 as sought to be amended by the 2014

amendment stipulates the methodology of computation of monthly

member’s pension. Sub­clauses (1) and (2) of this paragraph are

reproduced below:­

“12. Monthly Member's Pension. ­ (1) A member shall

be entitled to : ­
(a) superannuation pension if he has rendered eligible
service of 10 years or more and retires on attaining
the age of 58 years;
(b) early pension, if he has rendered eligible service of
10 years or more and retires or otherwise ceases to be
in the employment before attaining the age of 58
years.
12 (2). In the case of a new entrant, the amount of
monthly superannuation pension or early pension, as
the case may be, shall be computed in accordance
with the following factors, namely:­
Monthly member’s pension= Pensionable Salary x
Pensionable Service
70
Provided that the members’ monthly pension shall be
determined on a pro­rata basis for the pensionable
service up to the 1st day of September, 2014 at the
maximum pensionable salary of six thousand and five
hundred rupees per month and for the period
thereafter at the maximum pensionable salary of
fifteen thousand rupees per month.”

17 | P a g e
11. The initial entry into the pension scheme is contemplated in

paragraph 26(6) of Employees Provident Funds Scheme, 1952 read

with paragraph 6 of the pension scheme. Paragraph 6 of the pension

scheme as it stood prior to the amendment of 22 nd August 2014 and

thereafter reads:­

Before 22nd August 2014 After 22nd August 2014

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

18 | P a g e
 commencement of this Scheme from 16th
Scheme from 16th November, November, 1995;
1995;
(c) who ceased to be a
member of the Employees'
(c) who ceased to be a Family Pension Scheme,
member of the Employees' 1971 between 1st April,
Family Pension Scheme, 1993 and 15th November,
1971 between 1st April, 1993 1995 and opts to exercise
his option under Paragraph
and 15th November, 1995
7;
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 Government to

amend the said scheme both prospectively and retrospectively,

19 | P a g e
subject to certain procedural compliances, as outlined in the said

provision. This provision specifies:­

“7. Modification of scheme.—

(1) The Central Government may, by notification in the
Official Gazette, add to [amend or vary, either
prospectively or retrospectively, the Scheme, the
[Pension] Scheme or the Insurance Scheme, as the
case may be].
[(2) Every notification issued under sub­section (1)
shall be laid, as soon as may be after it is issued,
before each House of Parliament, while it is in
session, for a total period of thirty days, which may
be comprised in one session or in two or more
successive sessions, and if, before the expiry of the
session immediately following the session or the
successive sessions aforesaid, both Houses agree in
making any modification in the notification, or both
Houses agree that the notification should not be
issued, the notification shall thereafter have effect
only in such modified form or be of no effect, as the
case may be; so, however, that any such modification
or annulment shall be without prejudice to the validity
of anything previously done under that notification.]”

13. The judgment of this Court in R.C. Gupta (supra) was delivered

examining the provisions of paragraph 11 of the scheme as it stood

prior to issue of the 2014 notification. The changes brought by the

amended provision altered the methodology of computing pensionable

salary, which ultimately would have an impact on the quantum of

monthly pension. Instead of taking twelve months of average pay in

the year preceding the date of a member’s exit from the pension fund,

computation was contemplated on the basis of average monthly pay

20 | P a g e
drawn during the contributory period of service in the span of 60

months preceding the date of exit.

14. In the post amendment context, the maximum pensionable

salary was to be kept to Rs.15000/­ per month, raising the earlier

ceiling of Rs.6500/­ per month. It was also provided that an existing

member who, at the option of the employer and employee as on 1 st

September 2014, had been contributing on a salary exceeding

Rs.6500/­ per month could exercise fresh option jointly with the

employer to continue to remain in the fund even if the salary went

beyond Rs.15000/­ per month and the pensionable salary for the

existing member exercising such an option was to be based on the

higher salary.

15. As per paragraph 3(ii) of the pension scheme, the Central

Government was to contribute to the fund at the rate of 1.16 per cent

of the pay of the members. Employees within the changed pension

regime drawing more than Rs.15000/­ per month have to also

contribute at the rate of 1.16 per cent on salary exceeding

Rs.15000/­ as additional contribution each month under the

amended provisions. Further, fresh option was to be exercised by the

member within a period of six months from the 1 st day of September

2014, which was extendable up to about 6 months on sufficient

cause shown by the member.

21 | P a g e
16. Under the post­2014 regime, the fourth proviso to sub­clause

(4) of paragraph 11 specifies that if no option is exercised by a

member within the aforesaid period, it would be deemed that the

concerned member has not opted for contribution over the wage

ceiling. In such a case, the contributions to the pension fund made

beyond the wage limit in respect of such a member is to be diverted to

the provident fund account of the member along with interest, as

declared under the provident fund scheme from time to time.

17. It was held in the case of R. C. Gupta (supra), dealing with pre­

2014 position of the scheme that the dates or time­limit specified in

clause 11(3) of the pension scheme were not cut­off dates. The said

time­limit determined the eligibility of the employer and employee to

exercise their option under the proviso to the said paragraph. It was

also observed in this judgment that a beneficial scheme ought not to

be allowed to be defeated by refence to a cut­off date in a situation

where the employer 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 judgments

under appeal has been that there was no additional burden imposed

on the provident fund authorities or the Central Government if the

earlier system continued and no cut­off date was factored in, as entry

into the hybrid regime of provident fund plus pension beyond the
22 | P a g e
ceiling limit only entailed switching of funds. The authorities had to

remit the 8.33 per cent from the employer’s share of the contribution

lying in the provident fund corpus to the corpus of the pension fund.

It has been argued before us that the pattern of investment that was

permissible under both the schemes were broadly the same and

hence interest generated by such investment ought to correspond to

in each situation.

19. The Division Bench of the Kerala High Court examined the

impact of the amendment to the pension scheme in respect of the

following classes of pensioners or potential pensioners: ­

“(i) Employees who had exercised option under the

proviso to para 11 (3) of the 1995 Scheme and
continued to be in service as on 1st September 2014.
(ii)Employees who had not exercised their option
under the proviso to paragraph 11(3) of the 1995
Scheme and were continuing in service as on 1 st
September 2014.

(iii) Employees who had retired prior to 1st September

2014 without exercising an option under paragraph
11(3) of the 1995 Act scheme.

(iv) Employees who had retired prior to 1 st September

2014 after exercising of an option under the
paragraph 11(3) of the 1995 Scheme.”

20. It was held by the Kerala High Court, following the judgment of

this Court in the case of R.C. Gupta (supra), that paragraph 11 of the

pension scheme did not stipulate a cut­off date at all. Any such

23 | P a g e
stipulation, in the opinion of the High Court, would have the effect of

defeating the purpose of a beneficial scheme. After the relevant date,

that is 1st September 2014, on the question of capping the salary to

Rs.15000/­ per month for continuing in the pension scheme, it was,

inter­alia, held by the High Court:­

“33. As per the amendments, the maximum

pensionable salary has been fixed at
Rs.15,000/­ thereby disentitling the persons
who have contributed on the basis of their
actual salaries to any benefits on the basis of
the excess contributions made by them. The
said provision is arbitrary and cannot be
sustained. The employees, who have been
making contributions on the basis of their actual
salaries after submitting a joint option with their
employers as required by the Pension Scheme,
are denied the benefits of their contributions by
the said amendments without any justification.
Apart from the above, to cap the salary at Rs.
15,000/­ for quantifying pension is absolutely
unrealistic. A monthly salary of Rs.15,000/­
works out only to about Rs.500/­ per day. It is
common knowledge that, even a manual
labourer is paid more than the said amounts as
daily wages. Therefore, to limit the maximum
salary at Rs.15,000/­ for pension would deprive
most of the employees of a decent pension in
their old age. Since the pension scheme is
intended to provide succour to the retired
employees, the said object would be defeated by
capping the salary. The duty of the trustees of
the Fund is to administer the same for the
benefit of the employees ­ by wise investments

24 | P a g e
and efficient management. They have no right to
deny the pension legitimately due to them on the
ground that the fund would get depleted. The
demand of additional payment of 1.16% of their
salaries exceeding Rs.15,000/­ is unsustainable
for the reason that, Section 6A does not require
the employees to make any additional
contribution to constitute the Pension Fund. Nor
does it empower the authorities to demand
additional contribution. In the absence of any
statutory backing, the said provision in the
Pension Scheme is ultra vires. The amendment
in so far as it stipulates the average monthly
pay drawn over a span of 60 months preceding
the date of exit as the pensionable service is
also arbitrary for the reason that it deprives the
employees of a substantial portion of the
pension to which they would have been eligible
had it not been for the amendment. The
provision as it originally stood stipulated
computation of pensionable salary on the basis
of the monthly pay drawn over a period of 12
months prior to their exit. The reason for the
amendments as disclosed by the counter
affidavit filed is that payment of pension on the
basis of the Scheme as it stood prior to the
amendment would result in depletion of the
Fund. Absolutely no material or data to support
the above contention has been placed before us.
On the contrary, placing reliance on a news
report carried by “The Hindu” newspaper on
17.8.2014, it is contended by the petitioners
that, a staggering amount of Rs.32,000 Crores
of unclaimed amount is lying in various
inoperative accounts across the country, as
unclaimed pension as disclosed by the Central
Provident Fund Commissioner at an interactive

25 | P a g e
 session with employees at Hyderabad. In the
absence of any material to support the
contention that the fund is likely to be depleted,
we reject the said contention. Apart from the
above, there is no provision in the Act that
stipulates the pension payments to
commensurate with the amounts actually
remitted by an employee and his employer. It is
also a fact that the administrators of the Fund
invest the amounts and generate profit from
such investments.”

21. The High Court made its assessment of ground realities on the

wage structures in the economy and found capping of Rs.15000/­ per

month as pensionable salary would deprive most of the employees of

decent pension in their old age.

22. As regards requirement of an employee to contribute 1.16 per

cent of their pay under the amended scheme, the High Court found

that there is no statutory basis under which an employee can be

made to make additional contribution to the pension fund. On the

aspect of altering the basis of calculation of average monthly pay, the

High Court held such alteration to be arbitrary as it deprived the

employees of a substantial portion of the pension to which they would

have been entitled to under the scheme as it originally prevailed. On

justification of the amendment on potential depletion of fund, a point

which has also been argued before us by the EPFO, it was observed

26 | P a g e
by the High Court that there was no material or data to support this

contention taken by the fund organisation. The High Court also

referred to the growing number of workforce in our country, which, as

per this judgment, was constantly adding to the base of the fund by

accumulation to fund contribution. In paragraphs 37 and 38 of the

judgment under appeal, the reasoning of the High Court was

summarised:­

“37. The stated objective of the amendments is to

prevent depletion of the fund. The said apprehension
is absolutely baseless for the reasons stated above.
The number of persons who are contributing to the
Provident Fund as well as the Pension Fund have
only grown over the years. The work force in our
country would only grow further in the future. It has
to be stated here that in view of the increase in the
number of workers over the years, the contributions
would also grow. The phenomenon is only bound to
continue in future. Therefore, even when payments of
pension are made to the retired employees, the
pension fund would continue to get replenished with
the contributions of the new entrants. The said
ongoing process would maintain the Fund in a stable
condition. If at all, a situation where the Fund base
gets eroded occurs, the situation could be remedied
at that time by enhancing the rates of contributions of
persons contributing to the Fund through a legislative
exercise. The attempt to maintain the stability of the
fund by reducing the pension would only be counter
productive and would defeat the very purpose of the
enactment.
38. As rightly contended by the counsel appearing for
the petitioners, the effect of the amendments to the
Pension Scheme is to create different classes of
pensioners on the basis of the date, 1.9.2014, the
date on which the amended Scheme came into force.
Consequently, there would be ­
27 | P a g e
(i) employees who have exercised option under the
proviso to paragraph 11(3) of the 1995 Scheme and
continuing in service as on 1.9.2014;
(ii) employees who have not exercised their option
under the proviso to paragraph 11(3) of the 1995
Scheme, and continuing in service as on 1.9.2014;
(iii) employees who have retired prior to 1.9.2014
without exercising an option under paragraph 11(3)
of the 1995 Scheme; (iv) employees who have retired
prior to 1.9.2014 after exercising the option under
paragraph 11(3) of 1995 Scheme. The rationale in so
classifying the employees covered by the Pension
Scheme on the basis of the above date is not
forthcoming. The object sought to be achieved is
stated to be prevention of depletion of the Pension
Fund, which cannot be accepted as a justification to
support the classification. Inasmuch as the statutory
scheme is to make the Pension Fund ensure to the
benefit of the homogeneous class of the totality of
employees covered by the Provident Fund, a further
classification of the said class by formulating a
Scheme is ultra vires the power available to the
Central Government under Sections 5 and 7 of the
EPF Act. Therefore, it has to be held that, the
impugned amendments are arbitrary, ultra vires the
EPF Act and unsustainable. For the foregoing
reasons, the petitioners are entitled to succeed. The
writ petitions are all allowed as follows:
i) The Employee's Pension (Amendment) Scheme,
2014 brought into force by Notification No. GSR.
609(E) dated 22.8.2014 evidenced by Ext.P8 in W.P.
(C) No. 13120 of 2015 is set aside;
ii) All consequential orders and proceedings issued
by the Provident Fund authorities/respondents on
the basis of the impugned amendments shall also
stand set aside.
iii) The various proceedings issued by the Employees
Provident Fund Organisation declining to grant
opportunities to the petitioners to exercise a joint
option along with other employees to remit
contributions to the Employees Pension Scheme on
the basis of the actual salaries drawn by them are
set aside.

28 | P a g e
 iv) The employees shall be entitled to exercise the
option stipulated by paragraph 26 of the EPF Scheme
without being restricted in doing so by the insistence
on a date.
v) There will be no order as to costs.”

For these reasons, the High Court quashed the Employees’

Pension (Amendment) Scheme 2014 sought to be brought into force

by notification no. G.S.R. 609(E) dated 22nd August 2014.

23. The first point on which argument has been made on behalf of

the appellants before us is that the aforesaid amendment had been

made in exercise of power under Section 7 of the 1952 Act read with

entry 10 of the III Schedule of the Act. Thus, the legislative

authorisation is there for modification of a scheme whether

prospectively or retrospectively. Moreover, our attention has been

drawn to paragraph 32 of the 1995 scheme, which stipulates :­

“32. Valuation of the Employees' Pension Fund

and review of the rates of contributions and
quantum of the pension and other benefits. ­ (1)
The Central Government shall have an annual
valuation of the Employees' Pension Fund made by a
Valuer appointed by it:
Provided that it shall be open to the Central
Government to direct a valuation to be made at such
other times s it may consider necessary.
(2) At any time, when the Employees' Pension Fund
so permits, the Central Government may alter the
rate of contributions payable under this Scheme or
the scale of any benefit admissible under this
Scheme or the period for which such benefit may be
given.”

29 | P a g e
 Entry 10 of the III Schedule to the Act, which refers to matters

for which provision may be made in the pension scheme, provides:­

“10. The scale of pension and pensionary benefits

and the conditions relating to grant of such benefits
to the employees.”

24. Stand of the appellants is that there has been no encroachment

on any vested legal right of existing members. It has been highlighted

that after the 2014 amendments, the option of the members to

further opt to remain in the scheme beyond the ceiling limit has been

taken away. But the existing option members who had chosen to

contribute beyond the salary limit has been permitted to exercise

fresh option to continue with such contribution upon payment of an

additional 1.16 per cent of their salary beyond the said ceiling.

25. In assailing the said judgments, it has also been contended on

behalf of the appellants that the membership of the pension scheme

may have become a vested right for those opting under paragraph

26(6) of the EPFS before amendment to paragraph 6 of the pension

scheme. Those who were yet to exercise option under paragraph 26(6)

could not claim such vested right of membership to pension scheme.

The omission of proviso 3 to paragraph 11 of the pension scheme also

did not affect the membership of those who had already come within

the scheme by exercising option under paragraph 26(6), but to

30 | P a g e
remain in the scheme beyond the ceiling limit an existing option

member had to exercise fresh option.

26. Submission of the appellants is that all the employees of an

establishment do not constitute a homogenous class. It is within the

power and authority of the Central Government to differentiate

between employees earning lower wages and those earning higher

salary and offer improved social benefits for those in the lower wage

bracket.

27. Arguments have been advanced on two other features of the post­

amendment scheme. Legality of requirement of the employees who go

beyond the salary threshold to contribute to the pension scheme at

the rate of 1.16 per cent of their salary has been questioned. The

other point in controversy is that for existing pensioners also the

basis of computation of pensionable salary having changed, there

could be reduction in the monthly pension. It is, however, contention

of the appellants that the amendment had extended the period

prescribed in paragraph 12(1) from 12 months prior to a member’s

exit from the pension scheme to 60 months. This, according to

appellants, has been done to achieve a clearer picture of the

pensionable salary to eliminate the possibility of fluctuations in pay

drawn in the last 12 months for determining the quantum of pension.

Illustration has been given of manual labourers and women who

31 | P a g e
drawing low wages, who may suffer such fluctuation on account of ill

health, incapacitation, etc., and in the case of such employees, if only

12 months’ pay is accounted for, they may get reduced pension.

28. On behalf of the employees it has been urged that the decision

of this Court in R.C. Gupta (supra) does not require any revisit as

this decision 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 Bihar

and Others [(1955) 2 SCR 603]

(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 Income Tax

Bombay North, Ahmedabad [(1965) 2 SCR 908]

(iv) Waman Rao and Others v. Union of India and Others

[(1981) 2 SCC 362].

29. In the given context, however, this point may not hold good as

what we are examining in this judgment is certain amendments to

the scheme which were not before this Court based on which the

judgment of R.C. Gupta (supra) was delivered. In the said judgment,

the provisions of law as it subsisted prior to issue of the amendment

notification was considered. Thus, the ratio of the four authorities

32 | P a g e
referred to in the preceding paragraph would not be applicable in the

given context.

30. The employees have argued that under the law, there is no

requirement of exercising second option. In this regard, our attention

has been drawn to paragraphs 3(1) and 3(2) of the scheme, which

requires remittance of a part of contribution of the employer to the

provident fund scheme. The employees’ argument is that the

obligation is only on the employer to remit the sum from one fund to

the other. There is no ceiling limit and the remittance required to be

made is of 8.33 per cent of the employee’s pay. But this point also, in

our opinion, does not aid the employees. While paragraphs 3 and 6 of

the scheme have laid down what the fund would be constituted of

and who would be the members of the pension scheme, paragraph

11, which is an integral part of the pension scheme, specifies the

criteria for those who become mandatory members and, from among

the existing members, who may be permitted to exercise option to

remain in the scheme in spite of drawing salary beyond the ceiling

limit. It is a fact that those who are covered by paragraph 26(6) of the

provident fund scheme automatically enters into the pension scheme

as well. But this provision cannot be held to have precluded the

Central Government from laying down conditions to remain eligible

for the pension scheme and specify wage or salary ceiling for

33 | P a g e
individual employees beyond which the scheme may not operate. We

also do not accept the argument that the pension scheme considers

employees as a homogenous group and no distinction can be made

among different categories of employees based on their monthly

salary to determine for whom the scheme shall operate in a particular

manner. It is well within the power and authority of the statutory

authorities to reasonably classify different sets of employees and

categorise them for the nature of benefits they might get from an

existing scheme. In fact, the scheme, at its inception was made

applicable to those drawing wages upto Rs.5000/­. The provision

relating to exercising option was introduced later, in the year 1996.

31. On behalf of the employees, argument was also advanced

against the claim of negative financial impact on the corpus in

response to the stand of the appellants that having a large scale of

beneficiaries from higher salary earners may result in remitting

asymmetrical sums from the corpus to them as pension. In this

regard, learned senior counsel for the appellants (Provident Fund

Organisation and Union of India) have made distinction between the

provident fund scheme and pension scheme in their respective

operation. While provident fund scheme entails a one­time

settlement in favour of the member, the pension scheme carries, by

its very nature, benefits for an unspecified time, which has to be

34 | P a g e
based on actuarial calculation. This difference has been recognised in

the judgments of this Court in the cases of Otis Elevator Employees’

Union S. Reg. and Ors. vs. Union of India & Others [(2003) 12 SCC

68] and Pepsu Road Transport Corporation, Patiala vs. Mangal

Singh & Others [(2011) 11 SCC 702]. In an actuarial report relied on

by the appellants after delivery of the Kerala High Court judgment,

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 that

might be transferred. This assessment has been made on 27 th

December 2018 and the report has been annexed to the Rejoinder

Affidavit of the appellants in the appeals arising out of SLP (C)

Nos.8658­8659 of 2019 filed on 20th March 2021 with I.A. No.43576

of 2021 at page 410 of that document. This projection is based on

assumption that every person will opt for higher contribution and

statutory salary is restored to Rs.6500/­ per month.

32. We find that the amendment was made in exercise of power

otherwise vested in the authority making such amendment and the

amendments were made on the basis of certain relevant materials

and not whimsically. In this context, the scope of judicial scrutiny to

test the constitutionality of the amendment provisions becomes

narrow. This is the opinion of the Constitution Bench of this Court in

the case of Krishena Kumar vs. Union of India and Others [(1990)
35 | P a g e
4 SCC 207]. In our view, classification of the employees made by the

authorities on the basis of the salary drawn in the 2014 amendment

meets the test of reasonable classification contemplated in Article 14

of the Constitution of India. The newspaper report quoted in the

Kerala High Court judgment, in our opinion, would not give an

effective guidance as regards position of the pension fund and it

would be prudent for the Court leave such decisions to be made by

the scheme framing body. This approach would be in line with the

reasoning of the Constitution Bench in the case of Krishena Kumar

(supra). In the case of Mafatlal Group Staff Association and Others

vs. Regional Commissioner Provident Fund and Ors. [(1994) 4 SCC

58], it was held by a Coordinate Bench of this Court:­

“10. …Merely because the employees who were the

members of the Employees Provident Fund Scheme
before March 1, 1971 were given an option to become
or not to become members of the Family Pension
Scheme, it does not follow that the employees who
become members of the Provident Fund Scheme after
March 1, 1971, and who are not given such option are
discriminated against…”

33. The Division Bench of the Kerala High Court, in coming to its

finding that the amendment was arbitrary, mainly relied on various

economic factors. The reasoning of the Bench was based on macro­

economic reasons like general increase in salary, addition to the base

of the fund and the negative impact on denial of pension benefits for

36 | P a g e
a large number of employees. The High Court rejected the argument

based on depletion of fund on the ground that over the years, more

and more persons are contributing to the provident fund and the

corpus of the fund is growing. We are alive to the concern expressed

by the High Court as regards impact on the economic stability of

retired employees suddenly being deprived of pension. But, based on

such macro­level social disparities, we do not think in exercise of

judicial power we can require the State to operate a pension scheme

in a particular manner. These factors would be for the policy makers

to examine and prescribe. We cannot issue directions on the Central

Government to work out statutory scheme in a particular fashion. So

far as fixing of cut­off date is concerned, the 2014 amendment

specifically provides for that. In the case of R.C. Gupta (supra), the

wording of the scheme in paragraph 11(3) was different. Thus, the

ratio of that judgment cannot be applied to the changed provision of

the scheme. Fixing of cut­off date was considered in the case of

Mafatlal Group Staff Association (supra) and held to be permissible.

We have quoted earlier the relevant passage from that judgment.

34. The case of Bank of Baroda and Another vs. G. Palani &

Others [(2022) 5 SCC 612] was cited in support of the proposition

that pension is not a bounty but a right and such right cannot be

taken away retrospectively. In the context of the provisions which we

37 | P a g e
are examining in this judgment, existing members have been given

option to remain in the scheme even if their salary go beyond the

ceiling limit. Thus, the right of such members to draw pension is

protected. The other area where the pension amount may get

impacted is on determination of monthly pension on the basis of

altered computation method. But this judgment is not the authority

for the proposition that pension amount cannot be altered at all. The

factual basis of this judgment was that a joint note/agreement in

derogation of statutory regulations was giving retrospective 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 to

the 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 pension fund by an employee. Section 6A of the Act also does not

have any such stipulation. Since the Act does not contemplate any

contribution to be made by an employee to remain in the scheme, the

Central Government under the scheme itself cannot mandate such a

stipulation. What is to be considered here is that for the mandatory

members, the Central Government continues to contribute the

requisite 1.16 per cent of their salary. For option members,

additional contribution by them is contemplated in order to remain in

38 | P a g e
the scheme. In such a situation, in our opinion, 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 individual

employee is ultra vires the parent act. At the same time, we cannot

ignore the fact that the pension amount to be paid has been

calculated on projections that the corpus would include the option­

employees’ additional contribution of 1.16 per cent. We also cannot

mandate the Central Government to contribute to a pension scheme,

in absence of a legislative provision to that effect. It would be for the

administrators to readjust the contribution pattern within the scope

of the statute and one possible solution could be to raise the level of

the employer’s contribution in the scheme. We shall, however,

suspend the operation of this part of our judgment for a period of six

months so that the legislature may consider the necessity of bringing

appropriate legislative amendment on this count. For the aforesaid

period, the scheme as it stands shall continue. Till such time, if no

such legislative exercise is undertaken, the duty to contribute 1.16

per cent of the salary shall apply on option members as well. This

contribution shall be adjusted depending on any amendment that

may be brought. For the period of six months, however, the opting

employees shall make payment of 1.16 per cent contribution as stop

39 | P a g e
gap measure. In the event no amendment to the statute or the

scheme is made within such extended time, then the administrators

of the fund will have to operate the pension fund for the option

members from out of the existing corpus.

36. The other aspect of the controversy involves changing the

method of computation of the pensionable salary. We have given the

points and counter points articulated by the contesting parties

pertaining to this feature of the controversy earlier in this judgment.

In our opinion, this change of methodology comes within the power of

the Central Government to modify a scheme under Section 7 of the

1952 Act read with item 10 of the Schedule III to the Act as also

paragraph 32 of the scheme. This alteration of computation is

ancillary to determination of scale of pension alongwith pensionary

benefits and paragraph 32 of the pension scheme specifically

authorises the Central Government to alter the rate of contribution

payable under the Scheme or the scale of any benefit admissible

under the scheme. There is a reasonable basis for effecting change in

the computation methodology for determining pensionable salary and

we do not find any illegality or unconstitutionality in effecting this

amendment.

37. We shall now address the question as to whether the members

from an exempted establishment under the 1952 Act would be

40 | P a g e
entitled to the benefits of enrolling in the scheme beyond the ceiling

limit. We would point out here that before us no argument has been

advanced as regards members of the pension scheme of exempted

establishments in terms of paragraph 39 of the said scheme. Thus, in

this judgment, we are not addressing the cases of that category of

members. We find from Section 17 (A) of the Act that the investment

of the provident fund for the trust fund are also to be as per the

directions of the Central Government. In quashing the circular dated

31st May 2017, the Delhi High Court has held that the employees of

unexempted establishments and exempted establishments form a

homogenous group. Section 6A of the Act also envisages coverage of

employees of exempted establishments under Section 17(6) of the Act

within the pension scheme. Section 17(6) of the Act stipulates: ­

“(6) Subject to the provisions of sub­section [(1C)]

the employer of an exempted establishment or of
an exempted employee of an establishment to
which the provisions of the [Pension] Scheme
apply, shall, notwithstanding any exemption
granted under sub­section (1) or sub­section (2),
pay to the [Pension] Fund such portion of the
employer’s contribution to its provident fund
within such time and in such manner as may be
specified in the [Pension] Scheme.”

38. Further, Clause 1(3) of the pension scheme contemplates

keeping within its fold the establishments to which the 1952 Act

applies. These establishments would include exempted

41 | P a g e
establishments as well. The employees of exempted establishments

are integrated into the pension scheme and we are of the opinion that

the employees of an exempted establishment should not be deprived

of the benefit of getting option to remain in the pension scheme while

drawing salary beyond the ceiling limit, in situations where similarly

situated employees of unexempted establishments can exercise such

option. In the event the scheme is construed in a way which would

exclude them, that would lead to artificial classification of otherwise

same categories of employees. Thus, the pension scheme ought to

apply to the employees of the exempted establishments in the same

manner as this scheme applies to the employees of unexempted or

regular establishments.

39. One of the arguments against their inclusion into the scheme by

exercising option is that the corpus of the contribution for exempted

establishments have been kept in separate coffers maintained by the

trust created for such purpose and not with the authorities specified

under the Act. Taking that factor into account, we are of the view

that in order to be entitled to the benefits of the pension fund, the

employer and the employee, simultaneously with exercising option in

terms of the order of this Court, shall also have to give an

undertaking of transferring the employers’ contribution at the

stipulated rate maintained by the trusts, which shall be equivalent to

42 | P a g e
and not lower than the sum which would have been transferable, had

such fund been maintained by the provident fund authorities. Such

transfer shall take place, immediately after exercise of such option,

within such period as may be directed by the administrators of the

pension fund.

40. We shall now deal with argument of the appellants that no

vested legal right of the employees has been encroached upon by the

2014 amendment. For this purpose, amended paragraph 11(4) needs

to be analysed. The said paragraph 11(4) provides for extending the

pension coverage in respect of individual employees drawing salary

more than Rs. 15000/­ per month. This paragraph however, is

subject to two conditions:­

(i) The first one is that to be eligible for the benefits of

extended coverage, the existing members as on 1 st

September 2014 must contribute at the rate of 1.16 per

cent on salary exceeding Rs. 15,000/­ per month.

ii) The second one is that a fresh option should be exercised

within a period of six months from the first day of

September 2014. The scheme contemplates that those

members of the fund who had exercised option to remain in

the scheme as per the requirement of proviso to paragraph

43 | P a g e
 11(3) of the scheme, as it stood prior to the 2014

amendment, would be able to give fresh option with the

employer if their salary cross the ceiling limit. In respect of

that provision, this Court in the Case of R.C. Gupta (supra)

had held that the said proviso did not contemplate a cut­off

date.

41. So far as the first condition is concerned, we have expressed

our views earlier in this judgment as regards legality of having such

a provision. In relation to the second condition, our opinion is that

the eligibility for enhancement cannot be restricted to those

employees only who had exercised the option to remain in the

scheme once their salary went beyond the capping of Rs. 6500/­ per

month. As we have already discussed, in case of R.C. Gupta (supra),

it has been specifically held that there was no cut­off date in proviso

to paragraph 11(3) as it stood before the 2014 amendment. In our

opinion, the interpretation given to the proviso to paragraph 11(3)

prior to 2014 amendment does not require any reconsideration. We

agree with the reasoning of the two­judge Bench of this Court on this

point, as expressed in the said judgment. As there was no cut­off

date to be contemplated prior to the 2014 amendment, limiting the

entitlement of enhanced pension coverage to those employees only

who had already exercised an option under Clause 11(3) of the

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unamended scheme would be contrary to the ratio of the decision of

this Court held in the case of R.C. Gupta (supra). We are not holding

that no 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 case of R.C. Gupta (supra), there was no time­limit for

exercising such option.

42. The dual option, as is contemplated in paragraph 11(4) of the

pension scheme (post 2014 amendment), has to be merged into one.

In the event the employer and employee jointly opt for coverage

beyond the salary limit of Rs. 15000/­, without giving an earlier

option under the unamended Clause 11(3) of the pension scheme,

they would not be automatically excluded from their right to exercise

option under paragraph 11(4) of the scheme, post amendment.

43. The other condition for enhanced coverage relates to the date

within which such fresh option is to be exercised by a member,

which is stipulated 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 did not exercise such option earlier because of the

stand taken by the Provident Fund authorities that option under

proviso to paragraph 11(3) of the scheme (prior to 2014 amendment)

has to be exercised within a specified date, which stand was negated

45 | P a g e
in the decision of R.C. Gupta (supra). We are of the view that the

time limit for coverage beyond the ceiling amount should be

extended by a further period of four months from today to enable all

the members of the pension fund drawing more than Rs.6500/­ to

exercise the joint option as contemplated in paragraph 11(4) of the

pension scheme (post 2014 amendment). Once such joint option is

exercised, the transfer of fund from the provident fund corpus to 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 22nd August 2014 are legal and valid. So

far as present members of the fund are concerned, we

have read down certain provisions of the scheme as

applicable in their cases and we shall give our findings

and directions on these provisions in the subsequent

sub­paragraphs.

(ii) Amendment to the pension scheme brought about by

the notification no. G.S.R. 609(E) dated 22 nd August

2014 shall apply to the employees of the exempted

establishments in the same manner as the employees

of the regular establishments. Transfer of funds from

46 | P a g e
 the exempted establishments shall be in the manner as

we have already directed.

(iii) The employees who had exercised option under the

proviso to paragraph 11(3) of the 1995 scheme and

continued to be in service as on 1st September 2014,

will be guided by the amended provisions of paragraph

11(4) of the pension scheme.

(iv) The members of the scheme, who did not exercise

option, as contemplated in the proviso to paragraph

11(3) of the pension 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 exercise option before 1st September 2014

stands crystalised in the judgment of this Court in the

case of R.C. Gupta (supra). The scheme as it stood

before 1st September 2014 did not provide for any cut­

off date and thus those members shall be entitled to

exercise option in terms of paragraph11(4) of the

scheme, as it stands at present. Their exercise of

option shall be in the nature of joint options covering

47 | P a g e
 pre­amended paragraph 11(3) as also the amended

paragraph 11(4) of the pension scheme.

There was uncertainty as regards validity of the post

amendment scheme, which was quashed by the

aforesaid judgments of the three High Courts. Thus, all

the employees who did not exercise option but were

entitled to do so but could not due to the interpretation

on cut­off date by the authorities, ought to be given a

further chance to exercise their option. Time to exercise

option under paragraph 11(4) of the scheme, under

these circumstances, shall stand extended by a further

period of four months. We are giving this direction in

exercise of our jurisdiction under Article 142 of the

Constitution of India.
Rest of the requirements as per the amended provision

shall be complied with.

(v) The employees who had retired prior to 1 st September

2014 without exercising any option under paragraph

11(3) of the pre­amendment scheme have already

exited from the membership thereof. They would not be

entitled to the benefit of this judgment.

48 | P a g e
(vi) The employees who have retired before 1st September

2014 upon exercising option under paragraph 11(3) of

the 1995 scheme shall be covered by the provisions of

the paragraph 11(3) of the pension scheme as it stood

prior to the amendment of 2014.

(vii) The requirement of the members to contribute at the

rate of 1.16 per cent of their salary to the extent such

salary exceeds Rs.15000/­ per month as an additional

contribution under the amended scheme is held to be

ultra vires the provisions of the 1952 Act. But for the

reasons already explained above, we suspend operation

of this part of our order for a period of six months. We

do so to enable the authorities to make adjustments in

the scheme so that the additional contribution can be

generated from some other legitimate source within the

scope of the Act, which could include enhancing the

rate of contribution of the employers. We are not

speculating on what steps the authorities will take as it

would be for the legislature or the framers of the

scheme to make necessary amendment. For the

aforesaid period of six months or till such time any

amendment is made, whichever is earlier, the

49 | P a g e
 employees’ contribution shall be as stop gap measure.

The said sum shall be adjustable on the basis of

alteration to the scheme that may be made.

(viii) We do not find any flaw in altering the basis for

computation of pensionable salary.

(ix) We agree with the view taken by the Division Bench in

the case of R.C. Gupta (supra) so far as interpretation

of the proviso to paragraph 11(3) (pre­amendment)

pension scheme is concerned. The fund authorities

shall implement the directives contained in the said

judgment within a period of eight weeks, subject to our

directions contained earlier in this paragraph.

(x) The Contempt Petition (C) Nos.1917­1918 of 2018 and

Contempt Petition (C) Nos. 619­620 of 2019 in Civil

Appeal Nos. 10013­10014 of 2016 are disposed of in

the above terms.

45. All the appeals which we have heard simultaneously are

allowed in the above terms and the judgments impugned are

modified accordingly. The writ petitions brought by employees

50 | P a g e
or their representatives shall also 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.

. . . . . . . . . . . . . . . . . . . . . CJI.
(UDAY UMESH LALIT)

. . . . . . . . . . . . . . . . . . . . . J.
(ANIRUDDHA BOSE)

. . . . . . . . . . . .. . . . . . . . . . J.
(SUDHANSHU DHULIA)

NEW DELHI;
November 04, 2022

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