The Hon’ble High Court of Karnataka struck down the introduction of para 83 of Employees’ Provident Fund Scheme and para 43A of Employees’ Pension Scheme, as unconstitutional and arbitrary. These provisions, introduced by the Union of India via notification dated 01.10.2008, applied to international workers.
On writ Petitions seeking to declare para 83 of the EPF Scheme and para 43A of the Pension Scheme, as unconstitutional, the Hon’ble High Court noted that the aims and objects of introducing para 83 of the EPF Scheme is to protect the Indian employees going abroad to work from being subjected to the social security and the retirement clause of their host country which are prejudicial to their interest and to motivate these countries for entering into such agreements with India and to make it happen to provide for reciprocal treatment to the nationals of these countries while they work in India.
The Karnataka High Court ruled that para 83 of the EPF Scheme, as subordinate legislation, cannot exceed the scope of the EPF & MP Act, 1952. It criticized the unlimited threshold for international workers while Indian workers face a Rs. 15,000 monthly ceiling, finding para 83 incompatible, arbitrary, unconstitutional, and ultra vires. Consequently, para 43A of the EPF Scheme was also struck down.
The Hon’ble Court ruled that para. 83 of the EPF Scheme, as subordinate legislation, cannot travel beyond the scope of the EPF & MP Act, 1952. It criticized the unlimited threshold for international workers while Indian workers face a Rs. 15,000 monthly ceiling, finding para 83 incompatible, arbitrary, unconstitutional, and ultra vires. Consequently, para 43A of the EPF Scheme was also struck down.
The Court further took note of the scenario that an Indian employee working in a foreign country with SSA who is a member of EPF & MP Act, 1952 continues to contribute on meager sum of Rs.15,000/- whereas, a foreign worker from SSA country, without a certificate of coverage, is made to contribute PF on his entire salary although both are by definition of international workers. The Court stated that the Government of India is unable to substantiate any nexus with the object sought to be achieved, para 83 is clearly discriminatory in treating the international workers of Indian origin and foreign origin differently and thus violative of Article 14 of the Constitution of India.
Hence, the Court struck down the introduction of para 83 of EPF Scheme and held that the distinction in the amount of contribution between an employee going to a non- SSA country and an employee from a non-SSA country coming to India is clearly discriminatory and violative of Article 14.
Stone Hill Education Foundation v. Union of India
[2024] 162 taxmann.com 292 (Karnataka)
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