AZB & Partners recently represented Metro Cash & Carry India Private Limited before the Karnataka High Court (‘High Court’) in a writ petition challenging the validity of Paragraph 83 of the Employees’ Provident Funds Scheme, 1952 (‘PF Scheme’) and Paragraph 43-A of the Employees’ Pension Scheme, 1995 (‘Pension Scheme’) (collectively ‘Impugned Provisions’). After a detailed hearing in the batch of writ petitions, the High Court by way of its judgment dated April 25, 2024, has struck down the Impugned Provisions as unconstitutional.

Pursuant to an amendment to the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (‘EPF Act’) by the Union of India, the Impugned Provisions were introduced as special provisions for international workers. The Impugned Provisions inter alia required an international worker to make contributions to the funds irrespective of the salaries that they drew (whereas a domestic worker is only required to make contributions to the funds if their salary does not exceed INR 15,000 (approx. USD 180) per month). Further, the process for withdrawal of contributions were more arduous and impractical for an international worker.

The High Court struck down the Impugned Provisions as being arbitrary, unconstitutional, and violative of Article 14 of the Constitution of India on the following grounds, inter alia:

i.    There is no commonality in the objects of the EPF Act and the Impugned Provisions and subordinate legislation cannot run beyond the parameters of the parent act;

ii.  The Impugned Provisions are discriminatory as they have baselessly classified the following groups: (a) a domestic worker and international worker; and (b) an international worker from a country with which India does not have any social security agreement and an international worker from a country with which India has a social security agreement. There being no rational basis for such classification, the Impugned Provisions are unconstitutional; and

iii.  Article 14 of the Constitution of India is applicable to non-citizens and therefore, the law must be enforced and administered equally amongst those who are equal.

A direct consequence of the judgment is that all orders passed by the Employees’ Provident Fund Organisation seeking higher contributions under the Impugned Provisions in so far as international workers are concerned, have effectively been quashed. Also, international workers are to be viewed at par with domestic workers in so far as contributions under the EPF Act are concerned. Additionally, companies and international workers who have made contributions in furtherance to the Impugned Provisions, now have the right to claim a refund of the excess amount which was paid under the Impugned Provisions.