[This is a guest post by Yajat Kumar.]
A Circular (“The June Circular”) issued by the Employees Provident Fund Organisation (“EPFO”) dated 1st June, 2021 mandated the seeding of Aadhaar with the Universal Account Number (“UAN”) which is generated under The Employees Provident Fund and Miscellaneous Provisions Act, 1952 (“The EPF Act”). Whenever contributions, under the EPF Act are made in respect of the employees an Electronic Challan-Cum-Receipt (“ECR”) is generated which serves as a proof of deposit of the Provident Fund in their accounts. If the said ECR is not generated, then the employers have to suffer the consequences of non-deposit of dues in the form of damages. So, the onus, directly or indirectly, is upon the employer to make sure their employees’ UAN is seeded with Aadhaar and to further file the ECR for the UAN. The June Circular was issued in pursuance to a notification by the EPFO dated 30th April, 2021 which put into force section 142 of the Code on Social Security,2020 (“The Code”). While the four Labour Codes are unlikely to be implemented before the next fiscal year, the reasons cited by the EPFO in implementing the section in an isolated manner were “to collect Aadhaar details for the database of beneficiaries under various social security schemes” and the “creation of social security fund for providing comprehensive social security to the unorganized sector.”
The June Circular, however, read along with section 142 of the Code, in using the term “mandatory” for seeding Aadhaar with UAN seems to go contra tothe judgement of K.S. Puttaswamy (Retd) & Anr. v. Union of India & Ors (“Aadhaar 5J”). To this end, I shall be probing the following two questions in this piece- 1) Whether Section 142 can be implemented independent of the Code, and can it inter alia form the basis of seeding of the UAN with Aadhaar? And, 2) Whether the June Circular issued by the EPFO (read along with section 142) is constitutionally valid with respect to the Aadhaar 5J judgement?.
Maintainability of Independent Application of Section 142 of CoSS, 2020
Section 142 of the Code reads as follows-
“142. (1) An employee or unorganised worker or any other person, as the case may be, for— (a) registration as member or beneficiary; or
(b) seeking benefit whether in kind, cash or medical sickness benefit or pension, gratuity or maternity benefit or any other benefit or for withdrawal of fund; or
(c) availing services of career centre; or
(d) receiving any payment or medical attendance as Insured Person himself or for his dependants,
under this Code or rules, regulations or schemes made or framed thereunder, shall establish his identity or, as the case may be, the identity of his family members or dependants through Aadhaar number and for such purpose the expression “Aadhaar” shall have the meaning as defined in clause (a) of section 2 of the Aadhaar (The Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016:
Provided that any foreigner employee shall obtain and submit Aadhaar number for establishing his identity, as soon as possible, on becoming resident within the meaning of clause (v) of section 2 of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016.
(2) For the purposes of sub-section (1), the Aadhaar number issued to an individual shall be in accordance with the provisions of section 3 of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016.”
At the very outset, a plain reading of the proviso (d) of the subsection 1 of the section, “under this Code or rules, regulations or schemes made or framed thereunder” makes it clear that the section seeks to make Aadhaar imperative to establish the identity of the concerned member and the identity of his/her family members or dependents. This is only possible, under the proviso’s pursuance, once the Code is made applicable on the whole. Also, on applying the Literal Rule of Interpretation, it is pretty much self-explanatory that the term “Under this Code” envisages the provisions of the section to operate only when the Code has been implemented and not independent of it since the section’s very existence depends upon the applicability of the Code.
Secondly, a Gazette notification dated 3rd May, 2021 enumerates that the section has been made effective in pursuance to the provisions under sub-section 3 of section 1 of the Code read along with section 14 of The General Clauses Act, 1897 (“The GCA”). Section 1(3) of the Code provides for bringing into effect different provisions of the Code on different dates while being facilitated, with respect to Section 142, by section 14 of The GCA which, in turn, provides that if a power is conferred by a Central act or regulation, then that power can be exercised from time to time, unless there is a different intention on the part of the legislature. While this provision does seem to offer a plausible explanation for the above lacuna, but the Supreme Court (SC) in the case of Sri Nasiruddin vs State Transport Appellate Tribunal has held that section 14 of The GCA cannot have any application if a different intention, other than the one currently assumed, appears in any other part of the statute. Here, as discussed above, clause (d) of sub-section one envisages the seeding of Aadhaar to be done “under the code or rules, regulations or schemes made or framed thereunder” and not as an excluded provision which would, inextricably, have an application without other interlinked provisions such as section 113 of the Code (in this section, the term “Aadhaar” for the purpose of registration of unorganized, gig or platform workers is derived from section 142 only). This, clearly, does not appear to be the intention of the legislature.
Further, on a simple reading of Section 142, no responsibility is fixed upon the employer to seed the Aadhaar with UAN but rather upon the employees/ beneficiaries for taking benefits under the provisions of the Code, and not under the provisions of the EPF Act. Ergo, while issuing the June Circular, the EPFO has completely misread Section 142 of the Code.
If section 142 is allowed to be constructed vis-à-vis the convoluted language of the aforementioned circular, it would absolutely deflect the purpose of the code. This discrepancy not only makes this section obsolete, but also in contravention to the very objective of “extending social security to all employees and workers either in the organised or unorganised sector”. Cues, in this case regard, can be taking from the writings of Maxwell who has talked in length about the consonance between the object and the law- “When a law is non-sequitur to its intent, it is liable to be struck down” (Maxwell on Interpretation of Statutes, 11th Edn, p. 221). One can also find a similar obiter in A. Ram Mohan vs State of Madras, “When the language is plain and unambiguous and admits of only one meaning, no question of construction of a statute arises, for the Act speaks for itself”(para 22). Hence, if the section has to be implemented it can only come into force with the Code (much less the rules) and cannot exist in vacuum.
Checking the conduciveness of Mandatory Seeding against the tests laid down under the Aadhar 5J judgement
As argued above, the interim enforcement of section 142 sans the Code would not be maintainable in the court of law, but even if- for argument’s sake the above legal caisson is set aside, there still exists the bigger question of constitutionality of the section (read along with the June Circular) under the Aadhaar 5J judgement. Now, I will look into the validity of mandatory Aadhar seeding with respect to Employees Provident Fund and Pension Scheme. Even though the same UAN number would be used to access both of the aforementioned schemes, but it is necessary to look at both of them through a differential perspective in accordance with the tests laid down under The Aadhaar 5J Judgement.
First Point of Contention
The contours surrounding the applicability of linking of Aadhaar with EPF has seen a sea-change over the years. Initially, in K.S Puttaswamy & Anr. v. UOI & Ors, (2015), The SC had observed that “The Aadhaar card Scheme is purely voluntary and it cannot be made mandatory till the matter is finally decided by this court one way or the other.” In pursuance of this, major modifications were made by the court in Aadhaar 5J. It observed-
“No doubt, the government cannot take umbrage under the aforesaid provision to enlarge the scope of subsidies, services and benefits. ‘Benefits’ should be such which are in the nature of welfare schemes for which resources are to be drawn from the Consolidated Fund of India…
We also make it clear that a benefit which is earned by an individual (for example, pension by a government employee) cannot be covered under Section 7 of the Act, as it is the right of the individual to receive such benefit” (paras 321-322)
Now, Section 7 of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 (“The Aadhaar Act”) provides that individuals should produce their Aadhaar card or Aadhaar enrollment number for the purpose of accessing social services, subsidies, benefits etc., the funds of which are drawn from the Consolidated Fund of India. Here, the court examined and clarified the ambit of the term ‘benefits’, along with ‘services’ under section 7 of the Aadhaar Act. It observed that the term ‘Service’ which, ordinarily includes provisions and facilities provided to an individual, should not be constructed in such a manner that a person is denied a benefit on non- production of the Aadhaar which he/she is otherwise entitled to (see para 322). So, ‘Benefits’ should include any, or all social welfare schemes whose funds are extracted from the Consolidated Fund of India (this being read ejusdem generis with ‘subsidies’).
Section 6 of The EPF Act says that the contributions payable by the employee is 12 per cent of basic wages (which is inclusive of dearness and retaining allowances). An equal contribution is remitted by the employer as well. It is essential to note that the expenditure paid thereof is not, in any way, taken from the Consolidated Fund of India or any other governmental purse and is a benefit which is rightfully earned by the employer himself. Likewise, the benefits provided under sub-clauses 1(b) and 1(c) of Section 142 such as pension, gratuity, maternity leave; and any payment or medical attendance for an insured individual or his dependents- are also not covered under the expenses withdrawn/retrieved under The Consolidated Fund. Hence, the June Circular read with section 142 of the Code for these purposes has flouted the court’s guideline concerning the implementation of the Aadhar Scheme and is squarely violative of not only the principles of natural justice, but also of articles 14, 19(1)(g), 21 and 300A of the Indian Constitution.
It is also pertinent to note that under The Atmanirbhar Bharat Rojgar Yojana (“ABRY”), the Central Government will pay the PF share of employer and employees who lost their jobs due to Covid-19 and were called back to small scale jobs in the formal sector (registered under EPFO) till 2022. While this is a commendable step, it will again, seamlessly require mandatory Aadhaar-UAN linkage. Reference here can be taken under the case of Binoy Viswam vs Union of India and Ors, where the court had to deal with a similar issue of mandatory seeding of Aadhaar with PAN number under section 139AA of the Income Tax Act,1961 for filing income tax returns. While holding up the validity of the same, it observed that since all income tax assesses constitute one class only so they are to be treated alike. The ratio of this case, however, will not be applicable here because the fact remains that a separate nexus cannot be created by the government only for some individuals under a ‘temporary’ scheme while excluding others not eligible under the aforesaid. There cannot be any differential treatment solely on the basis of extending ‘benefits’ to a class of people who will be seeding Aadhaar with their UAN solely because they are a part of a scheme which is due to tentatively expire next year. Article 14 of Indian Constitution forbids class legislation, but does not prohibit reasonable classification for the purpose of legislation. Government cannot create ‘a class-within-a class’ under the garb of denying benefits to the deserving working class. Hence, the government cannot impose Aadhaar on the beneficiaries of ABRY under the ‘consolidated fund’ argument.
Second Point of Contention
The pension which an employee receives under The Employee’s Pension Scheme, 1995 is mostly made up of contributions by the employer and the employee, but some portion (1.16 percent) is also remitted by the central government. While the amount is surely derived from the Consolidated Fund of India and falls in consonance with this line of reasoning (as contained in the judgement), Aadhaar 5J also talks about a much bigger purpose of “plugging the leakages and ensure that fruits of welfare schemes reach the targeted population, for whom such schemes are actually meant” and also highlights that the “Government seems to be sincere in its efforts to ensure that no such exclusion takes place and in those cases where an individual who is rightfully entitled to benefits under the scheme is not denied such a benefit merely because of failure of authentication.”(see para 318)
This was opined because, after all, such laws are social security measures- made primarily for the benefit of workmen. With that said, a huge chunk of workers in our country do not even have an Aadhaar Card because of which many employers are being pressured to not employ them – and this does not even consider the number of migrant workers who are unable to arrange proper documents for the purpose of seeding, or the mismatch between the Aadhaar data and UAN data of the employees which leads to mechanical rejection by the Unique Identification Authority of India’s(“UIDAI”) software (which does not even generate OTP most of the time!). This may deprive the employees from availing benefits under schemes such as ARBY and insurance linked-aid under Employees’ Deposit-Linked Insurance Scheme, 1976 (EDLI).
Consequently, when the EPF contributions of such members are deposited late, the employer will be penalized for late payment of contribution, and interest and damages will be levied. Since EPF contribution is not paid in time for such members, employer cannot get necessary tax benefit because of late payment. Imposing arbitrary deadlines and the stringency on part of the EPFO to not create any other means of depositing the dues except the UIDAI portal is, only for the sake of contributing a minute token-sized percentage (1.16%) of contribution in the pension fund, is unwarranted (especially when there not fault on part of both- the employer and the employee). It is therefore, in pursuance to the spirit of Aadhaar 5J, it is imperative on the part of the EPFO to create alternate arrangements for vitiating the hardships faced by the vulnerable workforce during these trying times.
The Delhi High Court(HC) in the case of Association of Industries and Institutions v Union of India has granted extension with regard to the employees whose seeding exercise is yet to begin till 30th November, 2021 and has directed that no coercive action is to be taken against the employees with respect to employment and benefits under ABRY and against the employers with respect to sections 14B(damages) and 7Q(interest) under The EPF Act. The Delhi HC is yet to decide the validity of the June circular against the Aadhar 5J judgement. Whatever be the final judgement of the court, it is surely set to alter the contours of UIDAI verification and social security jurisprudence of India.