The apex court on 28th February 2019 delivered a revolutionary judgement that has changed the Employee Provident Fund deduction structure entirely. The apex Court in The Regional Provident Fund Vs. Vivekananda Vidyamandir & Others held that Special Allowances are to be considered as a part of basic wage and it was camouflaged as part of an allowance so as to avoid deduction and contribution accordingly to the provident fund account of the employees. In this Judgement, the apex court has relied on the Bridge & Roof Co (India) Ltd Vs. Union of India, where it was held that the Special Allowance is to be included while calculating the basic wages and it cannot be excluded while calculating the contribution under Section 6 of the Act .

In Manipal Academy of Higher Education Vs Provident Fund Commissioner, it was held that special allowances are not to be included in basic wages as it is specifically paid to those who avail the opportunity and is not universally available to everyone . But the apex court in this case held that special allowance is a part of the basic salary and thus has to be included. The respondents were of the view that Special allowance could not be included in the basic wages as they were not universally given to all the employees and were variable from person to person. For example, Education allowance is not universally given to all & it is variable in nature.

A person who does not have any kids may not get any educational allowance as compared to a person who has kids. Similarly overtime allowance also differs and is not universal in nature. The overtime allowance given to an employee working overtime for two hours is different from the employee working overtime for more than twenty hours. For calculating basic wage all the payments that are universal in nature should be taken into account. But the apex court rejected the contentions of the respondent as they failed to provide any record of the extra amount paid to the workmen were in fact paid for the extra work which had exceeded the normal output prescribed for the workmen.

The Employee Provident Fund Organization (EFPO) also issued a circular on 20th March,2019 marking this judgement as very crucial and abundantly important. After passing of this circular there has been an unrest between the employers regarding the affectivity of this judgement and whether it should be applied prospectively or retrospectively.

The rule of beneficial construction states that every statue is prospective in nature unless anything is expressively mentioned in the statute to give a retrospective effect . In this case the effectivity of the judgement is not touched upon by the judge and nothing is expressly mentioned regarding its applicability. But due to the Circular there are concerns among the employers that if this judgement is given a retrospective effect, they would be liable to pay special allowances to all their present and past employees which would amount to a huge pay-out. Since the judgement is silent upon the effect, the employers are anxious because if it is applied retrospectively then they would have to pay Special allowance to their past employees who may have left the organization, retired or may have died. This would not only increase the financial burden on the employers but also make it a tedious task to make such deductions for all the employees.

In Regional Provident Fund Commissioner, West Bengal Vs. Superintendence Co. of India Private Limited an order was passed wherein it was held that We also hold that in accordance with the law laid down by the Courts retrospective effect cannot be given in respect of a statute until and unless it is specifically mentioned in the statute. Similarly, coverage under the appropriate schedule also cannot be retrospectively would lead to absurdity since fact would show that many employees have already left service the same world some retired, some of them left this world also.

The apex court has not expressly mentioned about the judgement applying retrospectively but there are speculations because of the circular published by the authorities and it has been raising concerns among the employers.

In Aluminium Corporation of India Vs. Regional Provident Fund Commissioner an order was passed where it was held that It is, therefore, entirely against the purposes and object of the Act to apply a scheme retrospectively to the company for a period of five years within which time some of the employees have already left and presumably left by taking their provident fund accumulations. The Government by calling up the company to replenish and refund even those moneys is doing something illegal and against the preamble and object of the Act because no beneficiaries are there any more to avail of that fund for whom alone the Government can secure such fund from the employer.

On 29th March 2019, one of the petitioners in the case named Surya Roshni filed a review petition against the ruling of the Supreme Court. But the court found no merits in the review petition and hence dismissed the petition on 28th August 2019. By dismissing this petition, it is clear that the earlier ruling of the supreme court in relation to the Special Allowance shall prevail. The EFPO has also issued a circular dated 28th August 2019 advising the field officers not to conduct any investigations/Inspections without the permission of the Central Analytics and Intelligence Unit (CIAU).


The main issue was not the judgement of the apex court, but the circular issued marking the judgement as important for the employers. If the circular had not been issued, then there would be no question about the applicability of the judgement. But still some concerns remain among the employers regarding the retrospective effect of the judgement.

If this judgement is applied retrospectively then there would be chaos regarding the payment to the workmen and would affect the financial position of some employers. Although in the light of the above orders and since the judgement is silent about the applicability the judgement should be applied prospectively in order to avoid extreme and grave hardships to the employers.

But it is ultimately upon the judges to decide whether this judgement should be given a prospective or a retrospective effect. The employers as of now can only wait for further updates and hope that this judgement is prospectively applied.