International Workers Employed In India Must Contribute to Employees' Provident Fund : Delhi High Court
The Delhi High Court recently (November 4) ruled that international workers employed in Indian companies, who are not covered by a social security scheme in their home country, must enroll in and contribute to the Employees' Provident Fund. The court rejected claims that this requirement was discriminatory or unconstitutional.
The bench of Chief Justice Devendra Kumar Upadhyaya and Justice Tushar Rao Gedela noted that the Central Government has the power under the Employees' Provident Funds and Miscellaneous Provisions Act to extend the scheme to international workers. The court said this ensures social security for all employees and fulfills India's international treaty obligations.
It observed, "So far as the submission of the petitioner that substituted paragraph 69 (of the notification) as is applicable to foreign employees is unreasonable, we may only observe that paragraph 83 in the Scheme has been added to implement India's international treaty obligations and entering into an international treaty is a sovereign prerogative, and therefore, if such a provision is struck down, that will amount to taking away the legal basis for entering into and applying the SSA."
The petitions were filed by Spice Jet Ltd and LG Electronics India Pvt. Ltd. They challenged notifications issued by the Employees' Provident Fund Organisation (EPFO) on October 1, 2008 and September 3, 2010 that applied the provident fund scheme to international workers. The rules defined international workers as foreign nationals employed in India or Indian employees working abroad under social security agreements.
They also allowed withdrawal of funds only after retirement at age 58 or in case of permanent incapacity. The petitioners argued this was unreasonable for employees who typically stay in India for only a few years.
The petitioners also argued that the rules were discriminatory. They said Indian employees earning above Rs. 15,000 per month were exempt from contributing, while international workers had no such exemption. Spice Jet also challenged demand notices and summons issued in 2011 and 2012 for non-compliance.
The EPFO argued that foreign employees work in India for shorter periods, so requiring contributions did not impose economic hardship. They said the classification was intended to achieve the social security objectives of the law.
The court upheld the notifications and rejected the petitions. It said, "Mandating the foreign employees to become member of the scheme/fund irrespective of the monthly pay they draw and requiring only those Indian employees to become member of the fund/scheme who are drawing pay below Rs.15,000/- a month, has a rationale based on the economic duress which is caused to the Indian employees, if they are mandated to contribute to the fund/scheme irrespective of quantum of salary they draw, which is absent in case of the foreign employees for the reason that they come to India for employment for shorter period of 2 to 5 years."
The court also disagreed with a previous Karnataka High Court ruling that had struck down similar provisions, noting that it did not consider the economic impact on Indian employees. The High Court dismissed the petitions and directed the EPFO to reinitiate any pending proceedings in compliance with the law, ensuring that they are concluded within a reasonable time.
Case Title: Spice Jet v Union of India
Case Number: W.P.(C) 2941/2012
For Petitioners: Advocates Atul Sharma, Abhilasha Sharma and Dipan Sethi for Spice Jet; Senior Advocate Sudhir Nandrajog with Advocates Rishi Awasthi, Amit Awasthi and Piyush Vatsa for LG.
For Respondents: Advocates Manisha Agrawal Narain, Vikram Jetly, Shreya Jetly, Nipun Jain and Ananya Arora for Union of India; Advocate Siddharth with Advocates Amit Kumar, Prateek Goyal, and Harshit Manwani for EPFO.