New Delhi: Expatriates working in Indian companies are required to become members of the Employees' Provident Fund Organisation (EPFO) and accordingly contribute to the fund irrespective of their incomes, the Delhi High Court ruled on Tuesday.
Upholding the constitutional validity of various amendments to Employees Provident Funds and Miscellaneous Provisions Act 1952 and the Centre's 2008 and 2010 notifications mandating international workers of an Indian firm to contribute to the Employees' Provident Fund (EPF), the court said these international workers will be allowed to withdraw the full amount in EPF only on their retirement from service at any time after reaching 58 years or because of permanent and total incapacity for work due to some infirmity as mandated.
The court ruling is seen as a major setback for expatriates who come to work in India for shorter duration of 2 to 5 years, unlike their Indian counterparts who are required to contribute to the fund only if they are drawing pay below ₹15,000 per month. The issue is compounded by the fact that almost all foreign staff employed by Indian firms have left the country and their share of contribution will also have to be borne by their employers here, said legal experts.
Terming the classification between two set of employees as reasonable, a division bench comprising Chief Justice Devendra Kumar Upadhyaya and Justice Tushar Rao Gedela accepted the government's stand that international workers were a class apart from domestic employees as they contribute to the scheme for their short stay in India unlike domestic employees who contribute throughout their employment, and hence international workers do not suffer economic duress of contributing to the scheme throughout their service.
"The classification made was reasonable and it also has an object sought to be achieved that the purpose of mandating an employee to be a member of 1952 scheme was to provide social security," the court said.
While upholding the EPFO's communications asking SpiceJet and LG Electronics India to deposit provident fund and other dues in respect of their international workers, the court rejected the airline's petition challenging summons issued by EPFO in 2012 that required it to give evidence and produce all the relevant records for determination of PF and related dues payable for international workers employed by it. The court also rejected a similar letter issued to LG Electronics by the EPFO.
While the Delhi HC's judgement is on similar lines with that of the Bombay High Court, the Karnataka HC has held to the contrary. The case is bound to reach the Supreme Court for its authoritative view now due to divergent views.
Even the two companies are considering the implications and are likely to move the SC, according to legal sources.
"The entire basis of amendment to the scheme is implementation to certain treaties with countries who have similar provision for social security. And under the Constitution of India, this amendment could not be implemented as treaties have not been ratified by Parliament," said Atul Sharma, counsel for Spicejet. He said this issue also needs consideration by the court.
The companies had asserted that this classification between foreign and Indian employees was discriminatory.
Upholding the constitutional validity of various amendments to Employees Provident Funds and Miscellaneous Provisions Act 1952 and the Centre's 2008 and 2010 notifications mandating international workers of an Indian firm to contribute to the Employees' Provident Fund (EPF), the court said these international workers will be allowed to withdraw the full amount in EPF only on their retirement from service at any time after reaching 58 years or because of permanent and total incapacity for work due to some infirmity as mandated.
The court ruling is seen as a major setback for expatriates who come to work in India for shorter duration of 2 to 5 years, unlike their Indian counterparts who are required to contribute to the fund only if they are drawing pay below ₹15,000 per month. The issue is compounded by the fact that almost all foreign staff employed by Indian firms have left the country and their share of contribution will also have to be borne by their employers here, said legal experts.
Terming the classification between two set of employees as reasonable, a division bench comprising Chief Justice Devendra Kumar Upadhyaya and Justice Tushar Rao Gedela accepted the government's stand that international workers were a class apart from domestic employees as they contribute to the scheme for their short stay in India unlike domestic employees who contribute throughout their employment, and hence international workers do not suffer economic duress of contributing to the scheme throughout their service.
"The classification made was reasonable and it also has an object sought to be achieved that the purpose of mandating an employee to be a member of 1952 scheme was to provide social security," the court said.
While upholding the EPFO's communications asking SpiceJet and LG Electronics India to deposit provident fund and other dues in respect of their international workers, the court rejected the airline's petition challenging summons issued by EPFO in 2012 that required it to give evidence and produce all the relevant records for determination of PF and related dues payable for international workers employed by it. The court also rejected a similar letter issued to LG Electronics by the EPFO.
While the Delhi HC's judgement is on similar lines with that of the Bombay High Court, the Karnataka HC has held to the contrary. The case is bound to reach the Supreme Court for its authoritative view now due to divergent views.
Even the two companies are considering the implications and are likely to move the SC, according to legal sources.
"The entire basis of amendment to the scheme is implementation to certain treaties with countries who have similar provision for social security. And under the Constitution of India, this amendment could not be implemented as treaties have not been ratified by Parliament," said Atul Sharma, counsel for Spicejet. He said this issue also needs consideration by the court.
The companies had asserted that this classification between foreign and Indian employees was discriminatory.
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