Disclaimer: This has been reported after the availability of the order of the Court and not on media reports so as to give an accurate report to our readers.
Karnataka High Court: In a batch of writ petitions, filed by either associations of the employees of exempted establishments under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, or the employees of such establishments, quashment of order passed by Assistant Provident Fund Commissioner rejecting the joint options/applications for higher pension based on actual wages exceeding the wage ceiling was sought and a Single Judge Bench of Anant Ramanath Hegde, J., held that such rejections were unsustainable in law and directed the Employee’ Provident Fund Organisation (EPFO) to accept the joint options and extend the benefit of higher pension in accordance with the Employees’ Pension Scheme, 1995 (Pension Scheme).
Background
In the present case, some petitioners retired after 1 September 2014, but none retired before that date. Therefore, all petitioners were existing members of both the Provident Fund Scheme and the Pension Scheme as on 1 September 2014.
The employees were members of Provident Fund Trusts maintained by their respective exempted establishments. Both employers and employees contributed to the provident fund maintained by these Trusts. The employees claimed that contributions to the provident fund were made on their actual wages, that is, wages exceeding the statutory wage ceiling.
However, contributions to the pension fund were made only on capped pensionable wages and not on actual wages exceeding the ceiling. The petitioners contended that although they intended to contribute to the pension fund on actual wages, the Provident Fund Organisation (PFO) did not permit such contribution.
The PFO rejected the applications/joint options filed by the petitioners for higher pension on two grounds:
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The Trust Rules of exempted establishments did not permit contribution to the pension fund on actual wages.
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The employees had not contributed to the pension fund on higher wages before 1 September 2014.
In certain cases, applications were also rejected solely because the employees belonged to exempted establishments.
Aggrieved, the petitioners approached the High Court.
Issues and Analysis
Whether employees of exempted establishments could claim higher pension under Para 11(4), Pension Scheme after 1 September 2014?
Considering the petitioner’s contention that they had contributed to the provident fund on actual wages and therefore were entitled to exercise the joint option for higher pension, the Court stated that R.C. Gupta v. EPFO, (2018) 14 SCC 809 (R.C. Gupta case) recognised the right of employees who contributed to the provident fund on actual wages to exercise the joint option for higher pension, even if they had not contributed to the pension fund on higher wages before 1 September 2014. The Court further specified the Supreme Court had clarified that employees who had not exercised the earlier option under Para 11(3) were still entitled to exercise the option under Para 11(4).
Therefore, the Court held that employees who were members of the Pension Scheme as on 1 September 2014 and had contributed to the provident fund on actual wages were entitled to exercise the joint option for higher pension, subject to fulfilment of other eligibility conditions.
Whether Trust Rules of exempted establishments can prevent employees from claiming higher pension?
Considering the respondents argument that the Trust Rules applicable to exempted establishments did not permit contribution to the pension fund on wages exceeding the statutory ceiling, the Court held that the statutory right available under the Pension Scheme, could not be defeated by the provisions of the Trust Rules and that Paras 11(3) and 11(4), Pension Scheme expressly permit employees and employers to exercise a joint option for contribution on actual wages.
The Court further observed that Para 39, Pension Scheme allows exemption only if the alternative Pension Scheme is at least equally beneficial to employees. Therefore, where the Pension Scheme permits higher contribution on actual wages, Trust Rules cannot take away that right.
The Court stated that only in situations where the employer and employee refused to transfer the necessary funds from the provident fund to the pension fund could the benefit be denied, otherwise, the absence of a specific provision in the Trust Rules would not defeat the employee’s claim.
Whether contribution to the Provident Fund on actual wages was sufficient to claim higher pension?
The Court took into account the respondent’s argument that employees could claim higher pension only if they had contributed to the pension fund on actual wages before 1 September 2014 and held that the contribution to the provident fund on actual wages was sufficient to entitle employees to seek higher pension.
Placing reliance on R.C. Gupta (supra) and EPFO v. Sunil Kumar B., (2023) 12 SCC 701, the Court further observed that prior contribution to the pension fund on higher wages was not mandatory.
Whether the Scheme was applicable on exempted establishments?
The Court noted that with regards to some petitioners, the applications for higher pension were rejected solely because the petitioners belonged to exempted establishments and found the reasoning unsustainable.
The Court stated that the Sunil Kumar case clearly held that the 2014 amendment applies equally to employees of exempted and unexempted establishments, thus, the said rejection of applications showed non-application of mind by the authorities. Accordingly, the Court quashed the rejection orders.
Whether financial burden on the PFO can be a ground to deny higher pension entitlement?
Considering the contention of the respondents that allowing higher pension claims would create a huge financial burden on the PFO and would require financial support from the Union of India.
The Court held that financial burden could not be a ground to deny a statutory benefit and entitlement to pension should be determined according to the Employees’ Provident Fund Act, 1952, and the Pension Scheme. Further, the Court stated that if employees satisfied the legal requirements, the benefit could not be denied merely because it would increase financial liability.
Decision
Thus, the Court quashed the orders rejecting the applications for higher pension and directed the EPFO to accept the joint options exercised by employers and employees.
The Court further directed the EPFO recalculate the pension based on actual wages and disburse the revised pension accordingly. It directed the authorities to reconsider the applications in accordance with law in cases where applications had been rejected solely because the petitioners belonged to exempted establishments.
The Court stated that the entire process was to be completed within 90 days.
[Bharath Earth Movers Employees Assn. v. Union of India, 2026 SCC OnLine Kar 2945, decided on 30-4-2026]
Advocates who appeared in this case:
For the Petitioner in lead matter: Harish Narasappa, Senior Counsel, Yathish S, Advocate and Varun M R., Advocate
For the Respondent: Nayanatara B G, CGSC, B V Vidyulatha, Adv. and N S Narasimha Swamy, Adv