Constitutional Equality Upheld: Karnataka High Court Strikes Down Arbitrary Provisions for International Workers

The Hon’ble High Court of Karnataka (“Hon’ble Court”), presided over by a single judge bench led by Justice K. S. Hemalekha, in the case of Stone Hill Education Foundation Vs. Union of India & Others, has invalidated the special provisions for 'international workers' as described in paragraph 83 of the Employees’ Provident Funds Scheme, 1952 (the "Provident Fund Scheme") and paragraph 43A of the Employees’ Pension Scheme, 1955 (the "Pension Scheme"). The Hon’ble Court has ruled that these provisions are unconstitutional and arbitrary.

The issue pertains to a notification issued by the Government of India, dated October 01, 2008, whereby the Government of India introduced paragraph 83 in the Provident Fund Scheme and additionally, paragraph 43A under the Pension Scheme, extending coverage to international workers with effect from the same date. These provisions were specifically enacted to include international workers within the ambit of The Employees' Provident Funds and Miscellaneous Provisions Act, 1952 ("EPF Act").

In this case, the petitioner argued before the Hon’ble Court that under paragraph 83 of the Provident Fund Scheme, "international workers" are covered within the EPF Act and its subsequent schemes, regardless of the salary they receive. However, employees other than international workers, whose salaries exceed INR 15,000 (Indian Rupees Fifteen Thousand Only) per month, are excluded from the Provident Fund Scheme’s purview. The petitioner contended that since international workers typically do not work until retirement and only serve for a limited period, requiring them to contribute to the EPF based on their entire global salary would result in irreparable harm. The petitioners asserted that mandating EPF contributions from international workers is arbitrary and violates Article 14 of the Constitution of India.

In its judgment, the Hon’ble Court considered Article 14 of the Constitution of India, which guarantees the right to equality for every citizen of the country. This provision encompasses the fundamental principles of equality before the law and prohibits unjustifiable discrimination between individuals. It embodies the concept of equality as expressed in the preamble of the Constitution.

The Hon’ble Court, considering the essence of Article 14 of the Constitution, pointed out a disparity in the treatment of Indian employees working in foreign countries with a Social Security Agreement (“SSA”) compared to foreign workers from SSA countries without a certificate of coverage. Despite both groups being categorized as international workers, an Indian employee covered under the EPF Act contributes a nominal sum of INR 15,000 (Indian Rupees Fifteen Thousand Only), whereas a foreign worker from an SSA country, lacking a certificate of coverage, is obligated to contribute provident fund based on their entire salary. The Hon’ble Court noted that the respondents failed to establish any correlation with the intended objective. Consequently, paragraph 83 was deemed discriminatory for treating international workers of Indian origin and foreign origin disparately, thus infringing upon Article 14 of the Constitution. Additionally, the Hon’ble Court remarked that the differentiation in contribution amounts between an employee departing to a non-SSA country and an employee arriving from a non-SSA country to India is discriminatory and violates Article 14 of the Constitution of India.

Considering the aforementioned points, the Hon’ble Court declared that the enactment of paragraph 83 in the Provident Fund Scheme by the Government of India, along with the introduction of paragraph 43A of the Pension Scheme, is arbitrary and unreasonable, thus violating Article 14 of the Constitution. The classification established is deemed unreasonable and would undermine the fundamental purpose of the EPF Act. The Hon’ble Court in the end ordered that:

“The introduction of para 83 of Employees’ Provident Fund Scheme and para 43A of Employees’ Pension Scheme are hereby struck down as unconstitutional and arbitrary and consequently, all the orders passed thereof are unenforceable.”

Conclusion:

To conclude the above, in this landmark judgment, the Hon’ble Court, represented by Justice K. S. Hemalekha, has invalidated special provisions for 'international workers' under the Provident Funds Scheme and Pension Scheme. The Hon’ble Court found these provisions, introduced by the Government of India in 2008, to be arbitrary, unconstitutional, and incompatible with Article 14 of the Constitution, which guarantees the right to equality. The judgment highlighted the discriminatory treatment between Indian and foreign workers under SSA, deeming the classification unreasonable and violative of the EPF Act's fundamental purpose. Consequently, the Court struck down Paragraph 83 of the Provident Fund Scheme and Paragraph 43A of the Pension Scheme, declaring all related orders unenforceable. This ruling marks a significant step towards ensuring equitable treatment for all workers, regardless of nationality, in India's social security framework.