Classification Is Reasonable: Delhi High Court Rejects Pleas Challenging Applicability Of EPF Scheme To International Workers

The Delhi High Court has dismissed the Writ Petitions challenging the applicability of the Employees’ Provident Fund Scheme, 1952 (EPF Scheme) to the ‘International Workers’, subject to certain modifications in the scheme.

Spice Jet Ltd. and LG Electronic India Private Limited approached the Court, seeking quashing of the notification issued by the Central Government under Section 5 read with Section 7(1) of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (EPF Act).

A Division Bench comprising Chief Justice Devendra Kumar Upadhyaya and Justice Tushar Rao Gedela held, “… in our considered opinion, the classification made by inserting and later on substituting Para 83 in the principal scheme, is reasonable, and it also has an object sought to be achieved in the sense that the purpose of mandating an employee to be a member of a fund/scheme under the Act is to provide social security. In case all the Indian employees irrespective of the amount of pay they draw per month, are mandated to become the member of the Scheme/Fund, they will be subjected to harsh economic duress for the reason they will be required to contribute to the Scheme/Fund throughout their period of employment which generally will be much large as compared to the length of employment of foreign employees in an Indian establishment, which normally is 2 to 5 years.”

The Bench said that the classification, which has resulted on account of introduction of Para 83 in the principal Scheme, satisfies the test of permissible classification, and therefore, the same cannot be said to be violative of Article 14 of the Constitution of India.

Senior Advocate Sudhir Nandrajog and Advocate Atul Sharma represented the Petitioners, while CGSC Manisha Agrawal Narain and Vikram Jetly represented the Respondents.

Challenge

By the notification dated October 1, 2008 issued under Section 5 read with Section 7(1) of EPF Act, the Central Government inserted paragraph 83 in the EPF Scheme, whereby the Scheme was made applicable to the ‘International Workers’ subject to certain modifications in the said Scheme. There were two notifications which were put to challenge in the Petitions. These notifications provided that the Scheme shall apply to ‘International Workers’ with certain modifications and by inserting paragraph 83 in the Scheme, special provisions were made in respect of ‘International Workers’.

As a result of insertion of paragraph 83, the term ‘Excluded Employee’ in respect of ‘International Workers’ has been defined to mean an employee who is contributing to Social Security Programme of his country of origin either as citizen or resident with whom India has entered into a Social Security Agreement (SSA) on reciprocal basis and is enjoying the status of detached worker.

Issues

The following two issues emerged for consideration and adjudication –

a. Whether distinction made by introduction of paragraph 83 of the Scheme between foreign employees working in Indian establishment and domestic employees, inasmuch as that the foreign employees have been mandated to contribute under the Scheme irrespective of the amount of pay per month they draw whereas only those domestic employees are mandated to contribute to the scheme who are drawing pay up to Rs.15,000/- per month, is without any reasonable basis and hence such classification is impermissible being violative of Article 14 of the Constitution of India?

b. Whether newly inserted paragraph 69 of the Scheme introduced by inserting paragraph 83 in the Scheme vide impugned notifications is arbitrary and unreasonable as it permits withdrawal of the amount standing to the credit of a foreign employee in the Fund only on retirement from service in the establishment at any time after he attains the age of 58 years though such an employee comes to India for serving the establishment for shorter duration of 2 to 5 years?

Reasoning

The High Court in view of the above challenge, observed, “As a matter of fact, mandating the foreign employees to become member of the scheme/fund irrespective of the monthly pay they draw and requiring only those Indian employees to become member of the fund/scheme who are drawing pay below Rs.15,000/- a month, has a rationale based on the economic duress which is caused to the Indian employees, if they are mandated to contribute to the fund/scheme irrespective of quantum of salary they draw, which is absent in case of the foreign employees for the reason that they come to India for employment for shorter period of 2 to 5 years.”

The Court noted that the Constitutional protection as enshrined in Article 14 is applicable to the foreign nationals as well for the reason that the phrase occurring in Article 14 is not “the citizen”; rather it is “any person” and thus, even the foreign nationals enjoy under Article 14 of the Constitution the equality before law and equal protection of laws within the territory of India.

“Having said that, we may observe that right of equality as enunciated by Article 14 of the Constitution of India, is subject to reasonable classification, which is permissible provided such classification has an intelligible differentia and is based on some rationale. We have already held above that the classification which results on account of introduction of paragraph 83 in the principal Scheme has a reasonable basis, and therefore, the submission on behalf of the petitioner that Article 14 of the Constitution of India applies to foreign nationals as well, does not serve the cause of the petitioner in this petition”, it added.

The Court also enunciated that any State action to meet the challenge based on Article 14 of the Constitution has to satisfy the test that classification under challenge is based on some intelligible differentia and it has a rational basis with the object sought to be achieved.

“So far as the submission of the petitioner that substituted paragraph 69 as is applicable to foreign employees is unreasonable, we may only observe that paragraph 83 in the Scheme has been added to implement India’s international treaty obligations and entering into an international treaty is a sovereign prerogative, and therefore, if such a provision is struck down, that will amount to taking away the legal basis for entering into and applying the SSA”, it remarked.

Conclusion

The Court further said that it is unable to find any good ground to observe that substituted paragraph 69 of the Scheme, as introduced by paragraph 83 by means of the impugned notifications, suffers from any illegality which warrants striking down the provision.

“For the reasons given above, we conclude that the challenge to the impugned notifications dated 01.10.2008 and 03.09.2010, whereby paragraph 83 was introduced and later on substituted, fails. As regards the challenge to the letter dated 14.03.2011 and summons dated 15.03.2012, the same also fails, for the reason that we have already upheld the validity of paragraph 83 of the Scheme”, it concluded.

Accordingly, the High Court dismissed the Writ Petitions.

Cause Title- Spice Jet Ltd. v. Union of India and Anr. (Neutral Citation: 2025:DHC:9670-DB)

Appearance:

Petitioners: Senior Advocate Sudhir Nandrajog, Advocates Atul Sharma, Abhilasha Sharma, Dipan Sethi, Rishi Awasthi, Amit Awasthi, and Piyush Vatsa.

Respondents: CGSC Manisha Agrawal Narain, Vikram Jetly, SC Siddharth, Advocates Nipun Jain, Ananya Arora, Amit Kumar, Prateek Goyal, Harshit Manwani, and Shreya Jetly.

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