Karnataka High Court upholds amendments to EPF pension scheme, rejects pensioners’ challenge

The writ petition, brought by the EPF Pensioners Welfare Federation, challenged notifications dated 15 June 2007, 9 June 2008 and 26 September 2008 amending the Employees’ Pension Scheme, 1995, principally on the grounds that they reduced pension benefits and violated Articles 14, 16, 21 and 300-A of the Constitution.

In the connected appeal, the EPF authorities challenged a Single Judge’s order holding that retired employees were entitled to have their pensions determined under the unamended paragraphs 12(3) and 12(5) of the Scheme.

The Division Bench considered the validity and effect of the amendments, as well as the Single Judge’s ruling on accrued pension rights.

1. Whether the 2007 and 2008 notifications amending the 1995 Scheme were ultra vires, unconstitutional or otherwise liable to be quashed.

2. Whether employees who retired before the 15 June 2007 notification had an accrued right to pension calculated under the unamended paragraphs 12(3) and 12(5).

3. Whether the Single Judge was correct to direct that the retired employees’ pensions be considered under those unamended provisions.

Section 6A of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 authorises the Central Government to frame the Employees’ Pension Scheme, while Section 7 authorises it to amend the Scheme prospectively or retrospectively, subject to the prescribed parliamentary procedure.

The Court applied the principle in Bhagat Ram Sharma v. Union of India, AIR 1988 SC 740, that substitution of a provision ordinarily repeals the existing text and replaces it with the substituted provision.

It also relied on Employees Provident Fund Organisation v. Neelkumar B., AIR 2022 SC 5634, which recognises the Central Government’s authority to modify the Scheme and limits judicial review of policy choices, while permitting scrutiny of whether an amendment has a reasonable basis.

Paragraph 32(2) of the 1995 Scheme permits alteration of contributions or benefits; the Court held that this power is not conditional on an annual valuation under paragraph 32(1).

The Court found that the 15 June 2007 substitution of paragraph 12 operated retrospectively and that the petitioners had not established a basis to invalidate the amendments merely because they could reduce benefits in particular cases.

It accepted the view that the 2007 amendment clarified the operation of the earlier pension provisions, and noted that an illustration concerning one hypothetical employee did not establish that the 2008 amendments were invalid as a whole.

Applying Neelkumar B., the Court declined to review the policy choices by reference to asserted macroeconomic effects or individual outcomes, absent a demonstrated lack of reasonable basis or constitutional violation.

In the appeal, the Single Judge had treated retirement before the amendment as sufficient to preserve entitlement under the former provisions, without addressing the legal effect of substitution or the nature of the asserted accrued right; the Division Bench held that approach erroneous.

The writ appeal was partly allowed, and the Single Judge’s finding that the employees were entitled to pension under the unamended paragraphs 12(3) and 12(5) was set aside.