Condition For Exemption From PF Scheme Can't Be Invoked To Deny EPS Pension : Madras High Court Quashes EPFO Circular

Justice R Vijayakumar noted that the organisation was exempted under the Provident Fund Scheme and was governed by its Trust Rules. The court also noted that the establishment was governed under the Statutory Pension Scheme and the benefits under the scheme could not be denied to the employees citing the Trust Rules.

“the Trust rules framed under the Employees' Provident Fund Scheme cannot be cited to deny the benefits under the Employees' Pension Scheme. Admittedly, the 5th respondent establishment has not been exempted under the Employees' Pension Scheme as contemplated under Rule 39 of the said scheme. The conditions for the exemption granted to the PF Scheme cannot be invoked to deny the benefits to an employee under the Statutory Pension Scheme. The conditions imposed while granting exemption to one scheme cannot be kalideoscoped into another scheme for which no exemption has been granted under the statute,” the court said.

The court was hearing a batch of pleas filed by former employees of Bharat Heavy Electricals Limited (BHEL). BHEL was an exempted establishment under the Employees' Provident Fund Scheme. As per the Trust Rules, under which the establishment was being governed, the employer and the employees had agreed for payment of contribution to the Provident Fund on the actual wages instead of ceiling wage. When the employees filed a joint option application seeking higher pension based upon higher contribution, the EPFO rejected the same on the ground that the Trust Rules of the establishment did not permit it. Against this, the present plea was filed.

The petitioners argued that the Trust Rules were applicable only to the Provident Fund Scheme and could not be cited as a legal embargo for conferring benefits under the Employees' Pension Scheme especially when no exemption was provided under the Pension Scheme. It was argued that the employer and the employee were already exercising joint option under Employees' Provident Fund Scheme and were remitting contribution on actual wages rather than ceiling wages. Thus, the petitioner argued that it was only a matter of adjustment of accounts, which would in fact be beneficial to the employees.

On the other hand, on behalf of EPFO it was argued that the establishment was an exempted establishment and the employer and employee had mutually agreed that the employer's contribution would not exceed the ceiling limit as per the Trust Rules. It was argued that merely because no exemption had been granted to the establishment under the Pension Scheme, it could not permit the employer and the employee to violate the Trust Rules. it was also argued that before exercising the joint option, the petitioner employees had exited from the membership by withdrawing the entire provident fund amount from their accounts. Thus, the organisation argued that there was no possibility of transfer of funds from the Trust to the EPFO for crediting it to the Pension Scheme.

The court noted that as per Paragraph 27AA of the scheme, any amendment to the scheme, which is beneficial to the employees that the existing rules would be made applicable to them automatically pending formal amendment of the Rules of the trust.

The court noted that a lesser amount was being credited to the Pension Scheme only because there was no exercise of joint-option. The court thus noted that the EPFO's stand, that the Trust Rules prohibited the remittance was factually incorrect, especially when the beneficial rules would be automatically available to the employees without formal amendment of the Trust Rules.

The court also rejected the respondent's plea that higher remittance would cause financial loss. The court noted that the funds were to be remitted by the concerned employees and thus there was no financial loss.

Highlighting that the EPFO circular could not be against the order of the Supreme Court, the court set aside the same. The court also directed the respondent organisation to accept any joint option application made by the employees. Further, the court also said that on payment of differential contribution amount by the employees, higher pension would be disbursed to them from the succeeding month of remittance.

Counsel for Petitioners: Mr. G. Srinivasan

Counsel for Respondents: Mr. D. Kesevan, Mr. N. Dilip Kumar, Mr. M. Raghuvaran Gopalan

Case Title: D Chandirasegar and Others v. Union of India and Others

Citation: 2025 LiveLaw (Mad) 308

Case No: W.P(MD)Nos.29573 to 29578 of 2024