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PETITIONER: MAFATLAL  GROUP  STAFF ASSN.

       Vs.

RESPONDENT: REGL.  COMMR.  P.F.

DATE OF JUDGMENT30/03/1994

BENCH: JEEVAN REDDY, B.P. (J) BENCH: JEEVAN REDDY, B.P. (J) KULDIP SINGH (J) BHARUCHA S.P. (J)

CITATION:  1994 AIR 2271            1994 SCC  (4)  58  JT 1994 (3)   133        1994 SCALE  (2)420

ACT:

HEADNOTE:

JUDGMENT: The Judgment of the Court was delivered by B.P. JEEVAN REDDY, J.- Leave granted in SLPS. 2.   For the sake of convenience, we shall take up the facts in  Civil  Appeal No. 5158 of 1993 as  illustrative  of  the facts  in  all the matters since they  are  all  practically similar. Civil Appeal No. 5158 of 1993 3.   In  this appeal preferred against the judgment  of  the Bombay  High  Court, the validity of the  Employees’  Family Pension Scheme is called in question.  The writ petition was initially  allowed by a learned Single Judge of  the  Bombay High Court on the ground that the Scheme violates the  equal protection  clause  in  Article 14 of  the  Constitution  of India.  On appeal being preferred by the Regional  Provident Fund  Commissioner,  however,  the  Division  Bench  took  a contrary view.  It upheld the validity of the Scheme. 4.   With  a  view  to provide certain  terminal  and  other benefits  to  the employees engaged in factories  and  other establishments, Parliament enacted the Employees’  Provident Funds  and  Miscellaneous  Provisions Act,  1952.   The  Act provides  inter  alia for framing of  "Employees’  Provident Fund Schemes".  A certain percentage of the monthly wages of the workers is deducted and credited to the said Fund.   The employer  is also made liable to contribute an equal  amount to the Fund.  The employee-member of the Fund is entitled to withdraw  the full amount to his credit in the Fund  on  his retirement  or termination of service, as the case  may  be. He  can  also  draw  advances out of  the  Fund  in  certain situations like illness, marriage or 61 education of children and so on.  But there were many  cases in which the amount payable, on the death of an employee, to his wife and minor children was too small to be of any  help to  them  particularly where an employee died within  a  few

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years  of his employment.  With a view to  provide  longterm payments  (Pension) to the widow or minor children  in  such cases, Parliament thought of creating a Family Pension  Fund Scheme.   For this purpose, it introduced Section 6-A  (read with Schedule III) and certain other provisions in the  Act, by the Amendment Act 16 of 1971.  Section 6-A empowered  the Central Government to frame a scheme called "the  Employees’ Family  Pension Scheme" to provide family pension  and  life assurance benefits to the employees of any establishment  or class  of  establishments  to which the  Act  applied.   The Statement of Objects and Reasons leading to the introduction of  the  Family Pension Fund Scheme throws  light  upon  the objectives  and  purposes sought to be achieved by  the  new Scheme:               "The  Coal  Mines  Provident  Fund  and  Bonus               Scheme Act, 1948 and the Employees’  Provident               Fund Act, 1952 provides for the institution of               provident  funds for employees in coal  mines,               factories and other establishments.  Provident               Fund is an effective old age and  survivorship               benefit  but when the employee happens to  die               prematurely,   the   accumulations   to    the               Provident   Fund  are  too  small  to   render               adequate  and  long-term  protection  to   his               family.   With  a view to  providing  longterm               financial   security   to  the   families   of               industries  employees  in the event  of  their               premature death, it is proposed to introduce a               Family Pension Fund for the employees  covered               under  the  two Acts, and to create  a  Family               Pension  Fund for this purpose by diverting  a               portion  of the employer’s and the  employee’s               contribution  to the Provident Fund, to  which               will  be added a contribution by  the  Central               Government.  Out of the fund so set up, it  is               proposed  to pay Family Pension at  prescribed               scales  to the survivors of employees who  die               while  in service before reaching the  age  of               superannuation." 5.   Sub-section  (2) of Section 6-A provides for  diversion of a portion of the contributions made by the employees  and employers  to the Provident Fund under Section 6 of the  Act to  the Pension Fund.  It also provides for contribution  by the  Government  of  an  amount  equal  to  the   employee’s contribution  to the Pension Fund.  The Fund thus has a  new element contribution by the State.  The Family Pension  Fund Scheme came into force on and from 1-3-1971. 6.  Clause 3 of the Scheme framed by the Central  Government under  Section 6-A provides that every person who becomes  a member  of the Employees’ Provident Fund Scheme on or  after 1-3-1971  shall automatically become a member of the  Family Pension Fund Scheme.  So far as the existing members of  the Employees’  Provident  Fund are concerned, the  clause  gave them an option to come under the Family Pension Scheme or to stay  out.   Such an option was not given to  employees  who became members of the Employees’ Provident Fund on or  after 1-3-1971  and this 62 distinction   forms   the  basis  for   the   complaint   of discrimination made by the writ petitioner-appellants. 7. The Family Pension Scheme provides  broadly speaking  for three benefits to its members, viz" (a)  Family  pension  (pension  payable to  widow  or  minor children  on the death of employee before attaining the  age

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of 60 years); (b)  Life assurance benefits [clause 31 of the Scheme]; and (c)  Retirement-cum-withdrawal  benefits [clause 32  of  the Scheme.] 8.  Clause 34-D of the Scheme provides for valuation of  the Fund  by  a valuer appointed by the  Central  Government  at intervals  of  three years.  Basing on such  valuation,  the Central  Government  "may alter the  rate  of  contributions payable  under  this  Scheme or the  scale  of  any  benefit admissible  under this Scheme or the period for  which  such benefit may be given".  In other words, the clause  provides for periodic review of the working of the Scheme and in case any  surplus  is  found,  its benefit  is  extended  to  the employees  in one of the three ways mentioned in Clause  34- D(2).   Sub-clause  (2) of Clause 34-D no doubt  places  the said matter in the discretion of the Central Government  but it  goes  without  saying that such  discretion  has  to  be exercised in a fair manner keeping in view all the  relevant circumstances and contingencies.  Before the Division  Bench of  the High Court, it was not disputed that the Scheme  was being  reviewed  from time to time and  additional  benefits conferred  upon  its members pursuant to such  review.   The benefits so extended were referred to in detail in para  (9) of the affidavit-in-reply filed by the Commissioner on 3-12- 1984.  It was stated in the said affidavit that on the death of a member-employee, his widow gets a pension @ Rs 400  per month for the first seven years and thereafter @ Rs 200  per month  for her life or until she remarries, as the case  may be. 9.   The  learned  Single Judge allowed  the  writ  petition holding  the  Pension Scheme to be  discriminatory  for  the reason  that it did not provide for an option  to  employees who  became members of the Provident Fund after  1-3-197  1, while  giving  such  an option to  the  employees  who  were members  of  the Provident Fund as on the  said  date.   The learned  Judge  also made some  observations  regarding  the meagreness  of  the return to the members of the  Scheme  as compared  to  their contribution.  On appeal,  however,  the Division   Bench,  in  an  elaborate   and   well-considered judgment,  disagreed with the learned Single Judge  on  both the points. 10.  We are unable to see any substance in the complaint  of discrimination.  Rule 3 of the Pension Scheme reads :               "Membership  of  the  Family  Pension   Fund.-               Subject  to subparagraph (3) of  paragraph  1,               this Scheme shall apply to every employee               (a)   who  becomes a member of the  Employees’               Provident  Fund  or  of  Provident  Funds   of               factories  and other  establishments  exempted               under  Section 17 of the Act on or  after  the               1st day of March 1971;               63               (b)   who has been a member of the  Employees’               Provident Fund or Provident Fund of  factories               and   other  establishments   exempted   under               Section  17 of the Act immediately before  the               commencement  of  this  Scheme  and  opts   to               exercise his option under paragraph 4 :               Provided that an employee who attains the  age               of more than 59 years on the date on which  he               would,  but  for  this  proviso,  have  become               eligible for membership or have been  required               to become a member of this Scheme shall not be               eligible for membership under this Scheme." Merely  because  the employees who were the members  of  the

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Employees’  Provident Fund Scheme before March 1, 1971  were given  an option to become or not to become members  of  the Family Pension Scheme, it does not follow that the employees who become members of the Provident Fund Scheme after  March 1,   197  1,  and  who  are  not  given  such   option   are discriminated   against.   Here  is  a   beneficial   social legislation  conceived  with the intention  of  providing  a safety  net to the families of deceased employees  a  safety net to prevent such families from sinking into the depths of poverty  and  misery.  Instead of welcoming it, we  find  it rather  curious  that  it  is being  attacked  by  the  very employees  for  whose benefit it is devised.   We  certainly agree that any oddities and crudities in the working of  the Scheme  should  be attacked and exposed with a view  to  set them  right, but to attack the very scheme, in our  opinion, is not called for.  Be that as it may, we find no  substance in   the  said  attack.   Here  is  a  Scheme  newly   being introduced.   Those who come after the introduction  of  the Scheme  do  become members but those who  were  already  the members of the Provident Fund are free to become members  of the  Pension Fund or not.  This is not an uncommon  feature. Both  of  them  represent  two  distinct  categories.    The reliance  on  the decision of this Court in D.S.  Nakara  v. Union of India’ is misplaced.  That was a case where a class of  retired  employees  was sought to  be  deprived  of  the benefit of liberalised pension rules on the only ground that they had retired prior to a particular date.  Here, in  this case,  no  one is being deprived of the benefit of  the  new Scheme.   All that the option means is that if any  employee who is already a member of the Provident Fund Scheme  thinks that, having regard to the number of years of service put in by  him and/or for other reasons, it is not  beneficial  for him  to  join the Family Pension Scheme, he  can  stay  out. While  judging the validity of such Schemes one  should  not pick  out  an  individual  instance   not  representing  the generality of the situation  and make it the basis.  One has to  take an overall view, i.e., whether it is beneficial  to the  class  concerned  as a whole or not.   The  Scheme,  as already stated, is in the nature of an Insurance Scheme.  An employee  who  dies early in service, his family  stands  to gain  on a long-term basis while another member  who  serves out his full service tenure may not stand to gain that much. But  one thing is clear, no one may get back less than  what he  has contributed.  As we shall presently point out,  that is  precisely the case of the respondents and we are  making necessary directions 1  (1983) 1 SCC 305: AIR 1983 SC 130 64 to ensure that.  It must be remembered that the monies meant for  Family Pension Scheme are diverted from  the  Provident Fund   Scheme,  which  represents  equal  contributions   of employees  and employers, to which amount is added an  equal contribution by the Government.  The Government  contributes because the Scheme serves a social purpose.  No one can  say that each and every employee must get back not only what  he contributes  but also the contributions of the employer  and the  Government  put together.  This is just  not  possible. Who  is  to  care for the widows or minor  children  of  the deceased  employees  (employees dying before  retirement  or before  attaining  the age of 60 years) and  wherefrom  that money is to come if each employee insists upon receiving the total   of   his,  the  employer’s  and   the   Government’s contribution.  We are, therefore, of the opinion that if one keeps  in mind the aforesaid basic features of  the  Scheme, all  objections  to  its desirability  and  validity  appear

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groundless.   It may also be mentioned that the decision  in D.S.  Nakaral  has been explained in  a  later  Constitution Bench decision in Krishena Kumar v. Union of India2 as  also by  a Division Bench in State of W.B. v. Ratan Behari  Dey3. We,  therefore, agree with the Division Bench of the  Bombay High  Court  that  the complaint of  discrimination  by  the appellant-petitioners is wholly unsustainable. 11.  Now  coming to the other question, which happens to  be the  main contention urged before us, the reasoning  of  the counsel  for the appellants runs thus : The manner in  which the  Family  Pension Scheme is being operated is  in  effect prejudicial  to the employee-members.  The amount  collected from the employees is far more than the benefit provided  to them.   The  deductions are being made on the basis  of  the present  emoluments of the industrial employees  while,  for the  purpose of calculating the pension and other  benefits, the emoluments in force in 1971 are taken as the basis, with the  result that while the contribution of the employees  is substantially high, the return to them and their families is negligible.  Certain facts and particulars from the judgment of the learned Single Judge are brought to our notice and on that   basis   it  is  contended  that   while   the   total contributions (employers’, employees’ and Government) to the Pension  Fund  was Rs 142 crores in the  year  1983-84  upon which interest of Rupees sixty crores was earned during that year,  the  disbursements on account of the  three  benefits provided  for  by the said Scheme totalled to  Rupees  seven crores  only.   Certain statements are placed before  us  to show  how  much an employee drawing a monthly salary  of  Rs 1000  would  contribute to the Fund over a period  of  forty years  and how much does he get out of it by way of  several benefits on his retirement or death.  From these figures, it is  sought to be established that the return is too low  and bears   no  relation  to  the  amount  contributed  by   the employees.  In short, the argument is that the scheme is not really to the benefit of the employees but has operated as a deprivation.  The appellants rely upon a report made by  the Pension and Provident Fund 2 (1990) 4 SCC 207 3 (1993) 4 SCC 62: 1993 SCC (L&S) 1123 : (1993) 25 ATC  574: (1993) 3 Scale 343 65 Manager  of  the  Grindlay’s Bank  who, it  is  stated,  was appointed  by the respondents to examine the working of  the Pension  Fund   in 1985, wherein it is stated inter  alia  : "Currently,  contribution is paid at a rate of three  and  a half  per  cent of pay.   Accordingly,  actual  contribution exceeds   actuarial  by  0.44%  of  pay  ...  although   the contribution income has increased, corresponding increase in pension has not taken place.... This would partially explain the huge accumulation of fund." The report opined that  "the amount  of contribution paid to the fund by a member  should at  all  times be regarded as members’ property.   At  least this would be returned on exit of a member whether it is  by way  of  death  benefit or by  survival  benefit.   We  have already  ensured  bigger benefits on death by way  of  widow pension   and  life  assurance  benefit  that   contribution warrants.   Therefore, survival benefit would be  an  amount equal  to  return of contribution with a realistic  rate  of interest." Certain other recommendations are also made. 12.  The facts and figures and particulars furnished by  the petitioners  are  disputed by the learned  counsel  for  the respondents.  The  respondents have  furnished  a  statement (Annexure-A) showing the number of subscribers and     the number  of pensioners from the year 1971-72 to 1991-92.  The

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said      statement  shows that while in 1971-72,  when  the Family Pension Fund      Scheme originated, the total number of subscribers was 9.34 lakhs and there      were         no pensioners, the situation has changed dramatically by  1991- 92   while  the number of subscribers has gone up to  136.68 lakhs, the number of          pensioners   has   risen    to 1,29,362. It is pointed out that the widows get the  pension for  whole of their life or until they remarry, as the  case may be. The    respondents  have also filed a chart to  show that,  under the Scheme, an employee gets more than what  he really  contributes. By way of illustration, the case of  an employee  is taken whose salary is Rs 1000 per month  for  a period  of eleven years and Rs 1600 per month for  the  next three years and so       on.  In  the course of  twenty  one years, it is pointed out, his share of  contribution   would be  Rs  4803, to which is added an equal  amount  being  the employer’s  contribution,  making a total of  Rs  9606.  The interest  on the said amounts for the period  of  twenty-one years is calculated at Rs 6868 on each of the employer’s and employee’s contribution thus making a total of Rs 23,342. As against this, his withdrawal benefit, according to the rates applicable  from 1-4-1992, it is stated, would be Rs  18,235 which is far more than the contribution made by him, namely, Rs 4803 + Rs 6868 =             Rs 1 1,67 1. It is submitted that  since several benefits are provided including a  long- term  benefit  like  Pension  Fund  to  a  large  number  of widows/minor   children,  the employees cannot  insist  upon the  entire amount contributed by them, their employers  and the Government being paid to them as the withdrawal benefit. It  is  just  not possible,  say  the  respondents.  Another statement  brought  to  our notice is the one  made  in  the reply-affidavit  filed in Civil Appeal No. 5159 of 1993.  It is stated therein :               "The  rates are so designed as to ensure  that               the  employee gets back the amount of his  own               contribution with certain additional amount of               interest.   The amount of contribution by  the               employer and the Central               66               Government   and   interest   of    employees’               contribution  is  retained  and  utilised   to               provide  for  payment of other  two  benefits,               namely,  monthly Family Pension Fund and  Life               Assurance benefit, to the widows or minor sons               or  unmarried daughters of  those  unfortunate               members who die prematurely during employment.               Thus the entire amount of contributions to the               Family  Pension  Fund is utilised  for  giving               benefits to the member of the Fund himself  or               to  his destitute surviving family members  in               case of his death in one of the aforesaid four               ways  and  no part of it is utilised  for  any               other purpose." 13.  Annexure-IV   to  the  said  affidavit  gives   certain particulars  in support of the said averment.  With  respect to  the report of the Manager of the Grindlay’s Bank, it  is submitted  by the respondents that it was a report  made  in 1985  and  that since then the Government  has  revised  the benefits  to the employees.  It is submitted that  according to  the  rates of 1992, the benefits to  the  employees  are larger than their contribution. 14.  While  it  is  not possible for us to  embark  upon  an enquiry  into  the  correctness or otherwise  of  the  rival statements  and  particulars furnished by the  parties,  the fact  remains  which we should emphasise  that there  should

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be  a  broad  correspondence  between  what  the   employees contribute  and  what they get in return.  We  have  already expressed  ourselves on this aspect while dealing  with  the plea  of discrimination, which we do not think it  necessary to  repeat here.  The benefits to be provided to them  under the  several  schemes should broadly approximate to  and  be commensurate with what they contribute.  This is what Clause 34-D  of Pension Scheme provides, in  particular  sub-clause (2)  thereof.  Though, worded as an enabling  provision,  it contains  a salutary and an obligatory principle  which  the Government should always keep in view.  We agree, as already emphasized hereinbefore, that no conclusions should be drawn by  taking any single instance and that the matter  must  be decided  taking  an overall view, yet the  inescapable  test remains, viz., there must be a broad correspondence  between what the employees pay and what they and their families  get ultimately.   It cannot be that while the Fund  accumulates, the employees  and their families  decay.  The scheme is one conceived  in  their interest and for their benefit  and  it should  prove so in practice.  It is the statutory  duty  of the  respondents  to ensure that both the  contributions  by employees  and the benefits flowing to them must be  broadly commensurate.  Since actuarial appraisal is done every three years,  as provided by the statutory scheme itself,  we  are sure that the observations made herein will be kept in  mind and necessary adjustments made. 15.  The  appeals and the writ petition are  dismissed  with the above observations.  No order as to costs. 67