Seminar on The Legal Implications of 3 Landmark Supreme Court Decisions under The E.P.F. & M.P. Act, Pension Act and Impact on Other Related Labour Enactments

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Event Details

Seminar on The Legal Implications of 3 Landmark Supreme Court Decisions under The E.P.F. & M.P. Act, Pension Act and Impact on Other Related Labour Enactments - May 11, 2019

A.   R.P.F.C. V/S. Vivekananda Vidyamandir, Surya Roshni & Ors.
     (I) Interpretation of the Terms “Basic Wages” and “Allowances”
     (ii) Allowances that can Attract P.F. Contributions
B.   Modern Transportation Consultation Services Pvt. Ltd. on “Excluded Employee”.
C.   E.P.F.O. V/S. P. Sunil Kumar & Ors. on Employees Pension Scheme.
D. Related Legal Implications, Immediate & Long Term, on Laws Relating to Minimum Wages, Employee's Pension, Bonus, Gratuity.

A.   R.P.F.C. V/s. Vivekananda Vidyamandir, Surya Roshni & Ors.

(i)     Interpretation of the terms “Basic Wages” and “Allowances”

(ii)    Allowances that can attract P.F. Contributions

Employers are aware of the continued insistence by the E.P.F. authorities during the last several years to include various allowances for PF deductions. The splitting of ‘emoluments’, have been objected during routine inspections and challenged in Courts. Conflicting judicial views led to diverse interpretations from the PF Tribunals as well as from various High Courts.

The Apex Court has relied on the principal tests that were followed in Bridge and Roof Company, namely, (i) is the amount universally, necessarily and ordinarily paid to all employees across the board? and, (ii) Whether it is payable in all the concerns as an industrial practice?

It is proposed to discuss this landmark judgment that dealt with the 5 Appeals relating to various allowances and to understand the juristic rationale behind the inclusion or exclusion of various allowances in respect of the scope of “basic wages” and their consequent PF liability. The allowances that were examined by the apex Court ranged inter alia from special allowance, HRA, travelling allowance, canteen / lunch allowance, conveyance, “Management allowance”, allowances for medical, education, night shift, special holidays and CCA.

Consequent to the sea change in the circumstances and the lack of congruency between the facts and the judicial observations, the following issues emerge regarding the liability of the employer: 

a.    The wider implications of “Basic wages” defined in Section 2(b) of the E.P.F. Act.

b.    “Allowances”: Criteria for inclusion for P.F. contributions.

c.    H.R.A. payments under statutes like The Maharashtra Minimum H.R.A. Act or The West Bengal Workmen’s H.R.A. Act: Whether attract PF.

d.   Position with regard to ‘Special Allowance’ in CTC.

e.    Precautions when restructuring wages.

f.     Effect of long term wage settlements specifying that certain allowances are agreed not to be considered for P.F.

g.   Default in P.F. payments on part of coded vendors and other contractors.

h.   Arrears of retrospective dues including interest and damages would be payable, besides criminal prosecution. 

i.     International Workers where no ceiling is applicable.

j.     Claims for past P.F. contributions of employees/heirs in cases of terminations/resignations retirement/death.     


B.   Modern Transportation Consultation Services Pvt. Ltd. on “Excluded Employee”

In a significant judgment in Modern Transportation Consultation vs. Central Provident Fund Commissioner, EPFO the Supreme Court, held that in order to be treated as an “excluded employee” defined in Clause (i) of Para 2(f) the EPF Scheme, 1952 the employee should have been a member of the Fund under the EPF Scheme, 1952 and not of any other scheme. The apex Court, while upholding the decision of the Division Bench of the Calcutta High Court, clarified that where an employee who was earlier a member of any other Scheme but later on joins an establishment covered under the EPF Scheme he would be entitled to the membership of the Fund created under the Scheme of 1952.  The judgment assumes importance for employers with regard to PF compliance considering the practice widely prevalent these days of employing retired personnel as retainers on spells of temporary duration.


C.   E.P.F.O. V/s. P. Sasikumar & Ors. – On Employees’ Pension Scheme

The Supreme dismissed, in limine, an SLP filed by the Employees’ Provident Fund Office against the judgment of the Division Bench of the Kerala High Court that quashed the Employees Pension (Amendment) Scheme, 2014. The High Court, inter-alia, held that the provision capping the maximum pensionable salary at Rs.15,000/-, thereby disentitling persons who have contributed on the basis of actual salaries to any benefit on the basis of excess contribution voluntarily made by them is arbitrary and cannot be sustained. It further held that reducing pension amounts to maintain the stability of the Fund would defeat the very purpose of the enactment.      


D.   Related legal implications, immediate & long term, on laws relating to Minimum Wages, Gratuity, Employees’ Pension Fund, bonus, gratuity
Minimum Wages Act, 1948 & CTC :
  •   What then are the legal rights of the employer in the exercise of his managerial rights and discretion when determining the wage structure?

  •   What precautions would he need to take in rationalising the existing wage structure of his employees considering the concept of “allowances”? 

  •   Is the definition of ‘wages’ in the Minimum Wages Act in pari materia and in sync with the definition of “basic wages” used in the E.P.F. Act.?


Payment of Gratuity Act, 1972 :

An allowance that legally partakes the character of ‘basic wages’ under Section 2(b) of the E.P.F. & M.P. Act, 1952 can reach  out for inclusion not just in the computation of minimum wages but has far reaching long range implications in the computation of retiral benefits such as gratuity, pension benefits, superannuation. The term ‘basic wages’ has to be understood in the statute such as the E.P.F. & M.P. Act, 1952 where it has been defined and elaborated and the extension by implication of a same or similar term appearing in other statutes.   


Employees’ Pension Scheme :

The judgment will have an effect on the pension payable under The Employees’ Pension Scheme due to the definition therein of “pay” in Section 2(xiii) which includes “basic wages” and Section 12 which relates to the determination of pensionable salary. The claims of several    employees/heirs that were settled can be reopened due to the inevitable retrospective operation of the decision.

  •   Mr. K.M. Naik, Senior Advocate High Court and Senior Counsel, Tata Services Ltd.

  •   Mr. Lancy D’Souza, Advocate High Court and Advisor – Legal, Bombay Chamber

Garden View, Taj Lands End, Mumbai, Bandstand,

Bandra (West), Mumbai – 400050

Chetna Surti
Tel : 4910 0228, 98926 86418

Prashant Bais
Tel : 6120 0210, 99677 05312
Participation Fee :   
Members  Rs. 5000 + 18% GST
Non-Members  Rs. 5500 + 18% GST

Bank Details for NEFT

Account No.




Bank Name

DCB Bank

Branch Address

Mahim (024), Mumbai

Cheque /Demand Draft should be drawn in favor of “BOMBAY CHAMBER OF COMMERCE AND INDUSTRY”.


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