Delhi High Court Upholds Validity of Paragraph 83 of EPF Scheme: Distinguishes Karnataka HC's Stone Hill Education Foundation Ruling

(SpiceJet Ltd. v. Union of India & Anr. and LG Electronics India Pvt. Ltd. v. Union of India & Ors., W.P. (C) 2941/2012 & W.P. (C) 6330/2021, Judgment dated 04.11.2025)

Background

The Delhi High Court has upheld the validity of Paragraph 83 of the Employees' Provident Fund Scheme, 1952 (“EPF Scheme”), which governs “International Workers.” This ruling stands in contrast to the Karnataka High Court's decision in Stone Hill Education Foundation v. Union of India (2024 SCC OnLine Kar 49), where Paragraph 83 was struck down as arbitrary and violative of Article 14 of the Constitution.

Key Issue

Whether the classification under Paragraph 83 of the EPF Scheme, distinguishing “International Workers” from domestic employees, is constitutionally valid and consistent with Article 14 (equality before law).

Findings of the Delhi High Court

• Reasonable Classification Based on Economic Duress The Court held that the distinction between “International Workers” and Indian employees is reasonable and based on economic duress. Indian employees contribute to the EPF over long-term employment, while foreign employees generally work in India for shorter durations (2-5 years) and do not face comparable economic hardship.

• Article 14 and Differential Treatment The Court reaffirmed that Article 14 permits reasonable classification if it is based on an intelligible differentia and bears a rational nexus to the object sought to be achieved. Since the differentiation under Paragraph 83 is linked to the duration and nature of employment, it was held to be constitutionally valid.

• Consistency with International Obligations Paragraph 83 was introduced to implement India's Social Security Agreements (SSAs) with other countries. The Court observed that striking down such a provision would undermine India's international treaty commitments, which fall within the sovereign prerogative of the State.

• Rejection of Karnataka High Court's View The Delhi High Court expressly disagreed with the reasoning of the Karnataka High Court in Stone Hill Education Foundation, noting that the latter failed to consider the economic duress faced by Indian workers and did not adequately assess the reasonableness of the classification. Accordingly, the Delhi High Court held that Stone Hill Education Foundation cannot be treated as a binding precedent.

Outcome

The Court dismissed the petitions filed by SpiceJet and LG Electronics, upholding:

• The notifications dated 01.10.2008 and 03.09.2010 introducing and substituting Paragraph 83;

• The validity of EPFO circulars and summons issued under Section 7A of the EPF Act.

Key Distinction from Karnataka High Court Judgment

Aspect	Delhi High Court	Karnataka High Court (Stone Hill Education Foundation)
Approach	Upheld Paragraph 83 as constitutionally valid	Struck down Paragraph 83 as violative of Article 14
Reasoning	Classification reasonable - based on “economic duress” and rational nexus with object	Held classification arbitrary and lacking rational basis
View on International Treaties	Recognized India's sovereign prerogative to honour SSAs	No significant discussion on India's international obligations
Binding Effect	Expressly declined to follow Karnataka HC's reasoning	Earlier single judge decision not binding on Delhi HC