Delhi High Court: In a petition challenging paragraph 83 of the Employees’ Provident Fund Scheme, 1952 (‘scheme’), which mandates provident fund contributions in respect of ‘international workers’, the Division Bench of *Devendra Kumar Upadhyaya, C.J. and Tushar Rao Gedela, J, held that the contractual or fixed-term nature of expatriate employment did not dilute entitlement to social security benefits during the period of employment in India. Accordingly, the Court upheld the validity of para 83 of the scheme and dismissed the writ petition.
Background
The petitioner, SpiceJet Ltd., challenged the constitutional validity and interpretation of paragraph 83 of the scheme, which governs provident fund contributions in respect of ‘international workers.’ The challenge arose in the context of expatriate pilots employed by the airline, who were engaged under fixed-term contracts and paid salaries substantially higher than the statutory wage ceiling applicable to domestic employees.
Under para 83 of the scheme, an ‘international worker’ is required to make provident fund contributions on actual wages, without the benefit of the wage ceiling, unless exempted under a social security agreement. The Employees’ Provident Fund Organisation (‘EPFO’) issued demands requiring SpiceJet to deposit employer and employee contributions calculated on the full salary paid to such expatriate pilots.
SpiceJet contended that the provision resulted in hostile discrimination between Indian and international workers, imposed an excessive financial burden on employers, and failed to account for the contractual and temporary nature of expatriate employment in the aviation sector. It was argued that the classification was arbitrary, violated Articles 14 and 19(1)(g) of the Constitution, and lacked a rational nexus with the object of the Employee Provident Fund and Miscellaneous Provisions Act, 1952 (‘EPF Act’).
Per contra, the respondents submitted that para 83 was introduced to ensure parity with international social security norms, prevent avoidance of statutory contributions through foreign employment structures, and fulfil India’s reciprocal obligations under bilateral social security agreements
Analysis, Law and Decision
The Court undertook a detailed examination of the legislative framework of the EPF Act and the scheme with particular emphasis on the introduction and scope of para 83, which governs provident fund obligations in respect of ‘international workers.’ The Court noted that para 83 was introduced pursuant to India’s increasing engagement with cross-border employment and bilateral social security agreements, with the object of ensuring that such employees are not excluded from social security benefits during their employment in India.
Addressing the petitioner’s challenge under Article 14, the Court held that international workers constitute a distinct and well-defined class, separate from domestic employees governed by the statutory wage ceiling. The differentiation was found to be based on an intelligible differentia, namely, the cross-border nature of employment, mobility of the workforce, and the likelihood of such employees exiting the Indian social security framework upon completion of their tenure. The Court further held that the requirement of contributions on actual wages bears a direct and rational nexus with the object of the EPF Act, which is to provide meaningful social security coverage and prevent circumvention of statutory obligations through foreign employment arrangements.
The Court rejected the petitioner’s contention that the absence of a wage ceiling for international workers rendered the provision arbitrary or excessive. It observed that the EPF Scheme is a welfare legislation and that the determination of contribution thresholds falls squarely within the domain of legislative and policy discretion. The Court emphasised that provident fund contributions are deferred social security benefits, not a tax or levy, and therefore cannot be assailed merely on the ground of financial impact on employers.
In examining the argument under Article 19(1)(g), the Court held that the obligation to make provident fund contributions does not constitute an unreasonable restriction on the right to carry on business. Statutory compliance with labour welfare measures is an inherent incident of conducting business in a regulated economy. The Court further observed that employers who choose to engage expatriate personnel at higher remuneration levels cannot subsequently seek exemption from welfare obligations on grounds of cost or contractual arrangements.
The Court also addressed the petitioner’s submission that expatriate pilots were engaged on fixed-term contracts and were therefore not similarly situated to permanent domestic employees. Rejecting this argument, the Court held that the duration or contractual nature of employment does not dilute the entitlement of an employee to social security protection during the period of service. The Court noted that para 83 expressly contemplates coverage of international workers for the duration of their employment in India, subject only to exemptions arising from operative social security agreements.
The Court further accepted the respondents’ submission that para 83 serves to align domestic law with India’s international obligations and prevents regulatory arbitrage, whereby employers might otherwise structure employment contracts to avoid provident fund contributions. Such alignment, the Court held, is a legitimate state objective and reinforces the constitutionality of the provision.
In light of the above, the Court concluded that para 83 of the scheme does not suffer from arbitrariness, discrimination, or lack of proportionality. The provision was found to be consistent with the objectives of the EPF Act and within the permissible bounds of legislative classification.
Accordingly, the Court dismissed the writ petition, upholding the constitutional validity and enforceability of paragraph 83 of the Scheme. It was held that employers are liable to make provident fund contributions in respect of international workers on the basis of actual wages, without application of the statutory wage ceiling, unless exempted under an applicable social security agreement.
[Spice Jet v. Union of India, 2025 SCC OnLine Del 8271, decided on 4-11-2025]
*Judgment Authored by: Chief Justice Devendra Kumar Upadhyaya
Advocates who appeared in this case :
For the Petitioner: Sudhir Nandrajog, Senior Advocate, Atul Sharma, Abhilasha Sharma, Dipan Sethi, Rishi Awasthi, Amit Awasthi, Piyush Vatsa, Advocates
For the Respondent: Manisha Agrawal Narain, Vikram Jetly, CGSCs, Siddharth, SC for EPFO, Nipun Jain, Ananya Arora, Amit Kumar, Prateek Goyal, Harshit Manwani, Shreya Jetly, Advocates