Excluded employee under EPF Act/Scheme 1952-Supreme Court explains the Law

Excluded employee under EPF Act/Scheme 1952-Supreme Court explains that employee who withdraw accumulations from GPF/ other Funds not covered in the definition

ABCAUS Case Law Citation:
ABCAUS 2845 (2019) (03) SC

The basic question that arose for determination in the instant case was as to whether the retired employees of Railways, who had withdrawn all the superannuation benefits, including full amount of accumulations in their provident fund accounts, are to be treated as “excluded employees” in terms of Paragraph 2(f) of the Scheme of 1952?

If to be treated as “excluded employees”, the said retired employees of Railways, on being re-employed by the appellants, may not be required to join the EPF Fund created under the Scheme of 1952 and consequently, the appellants may not be obliged to make any contribution in that regard. 

The appellant was Private Limited Company, engaged in manning the Captive Railway System of the a Corporation and it was their case that their only connection with the Corporation had been a contract to supply the personnel for manning the cabins and gates on the railway-road; and they were receiving the remuneration for supplying the aforesaid personnel, who were retired employees of the Indian Railways and were engaged on a lump sum honorarium basis.

The Hon’ble Supreme Court observed that in the framework of the Scheme of 1952, exclusion is provided to an employee who had been a member of the Fund and had withdrawn full amount of his accumulations.

However it was noted that the basic contention urged in this matter on behalf of the appellants is that the persons engaged by them had been the members of General Provident Fund while working as the employees of Railways and had withdrawn the full amount of accumulations in GPF and were, therefore, to be treated as “excluded employees”.

The Hon’ble Supreme Court pointed out that the determiner “the”, as occurring in Paragraph 2(f) as also Paragraph 69 before the expression “Fund” makes it clear that the reference therein is only to the Fund which is created under the Scheme of 1952 and it is not a general reference to any Fund. Thus, to be covered under the expression “excluded employee”, the employee must be such who was a member of the Fund established under the Scheme of 1952 and who had withdrawn full amount of his accumulations in the said Fund on retirement from service after attaining the age of 55 years.

The Hon’ble Supreme Court opined that on the plain interpretation, there is no doubt that the retired Railway employees, who had withdrawn their accumulations in General Provident Fund or any other Fund of which they were members, could not have been treated as “excluded employees” for the purpose of the Scheme of 1952 for the reason that such a withdrawal had not been from the Fund established under the Scheme of 1952.

The Hon’ble Supreme Court summarised the framework and setup of the Scheme of 1952. The Court explained that the concept remains plain and clear that if a person is member of the Fund created thereunder i.e., under the Scheme of 1952 and withdraws all his accumulations therein, he may not be obliged to be a member of the same Fund under the Scheme of 1952 over again and could be treated as an “excluded employees”.

However, such is not the relaxation granted in relation to an employee who was earlier a member of any other Fund but later on joins such an establishment where he would be entitled to membership of the Fund created under the Scheme of 1952.

This framework of the provisions and stipulations appears to be best serving the interest of employees, while providing them with continued financial security. Therefore, we find no reason to take any view different than the one taken by the Division Bench of the High Court in this case.

The Hon’ble Supreme Court held that the Division Bench of the High Court had rightly rejected the contention of appellants that every employee, who had withdrawn full amount from any provident fund, should be treated as an “excluded employee”.

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