The Karnataka High Court in a recent judgement has upheld amendments to the Employees’ Pension Scheme, 1995, which was challenged by retired employees on the ground that this amendment lowered their monthly EPS-95 pension. The Karnataka High Court held that the Central Government has the power to make this amendment and thus the court found no grounds to strike down the challenged amendments.
The primary contention of the retired employees is members of EPS 1995 Scheme were entitled to various benefits, which have been taken away consequent to the 2007 amendments. Hence, it is their contention that a right that was vested by virtue of the EPS 1995 Scheme cannot be taken away by a subsequent amendment. However, EPFO challenged this contention by saying that the 2007 notifications which amended the law were clarificatory in nature and essentially fixed anomalies existing with the EPS scheme.
EPFO said that the anomaly in the payment of pension in terms of the EPS 1995 Scheme was corrected by the said notifications and the same does not tantamount to taking away any vested rights.
The retired employees cited an example of pension payable before and after this 2007 amendment:
Illustration 1:bEntitlement of Pension before amendment
- Unamended Paragraph No. 12(7) -
A member, if he so desires, may be allowed to draw a monthly reduced pension from a date earlier than 58 years of age, but not earlier than 50 years of age. In such cases, the amount of pension shall be reduced at the rate of three percent for every year, the age falls short of 58 years.
If 'X' entitled for Rs 1100 per month as pension and desires to draw monthly pension at the age 52 years, there is a shortage of 6 years and it is necessary to deduct 18% (3% X 6 years) in the said amount Rs 1100-18% i.e Rs 198 = Rs 902
Entitlement of Pension after amendment:
- Amended Paragraph No. 12(7) - A member if he so desires may be allowed to draw a monthly reduced pension from a date earlier than 58 years of age, but not earlier than 50 years of age. In such cases, the amount of pension shall be reduced at the rate of four percent for every year, the age falls short of 58 years.
If "X' entitled for Rs 1100 per month as pension and desires to draw monthly pension at the age 52 years, there is a shortage of 6 years and it is necessary to deduct 24% (4% X 6 years) in the said amount Rs 1100-24% i.e Rs 264= Rs 836
Thus as can be seen from the illustration above, the pension was reduced by Rs 62 (902-836).
On October 14, 2026 the retired employees lost the case in Karnataka High Court.
Why did the employees lose the case in Karnataka High Court?
The Karnataka High Court ruled against the employees and upheld the amendments made to EPF Act.
Vaibhav Bhardwaj, Partner at Khaitan & Co, said to ET Wealth Online: This case came down to the government's power to rewrite the pension scheme. The EPF Act expressly allows the Central Government to amend the EPS, even with retrospective effect.
Bhardwaj says that by way of the 2007 amendment the old provision was replaced altogether. The new amended law treats the new wording as if it had been there since 1995. So retirees couldn't really claim they had a locked-in right under the old pre-amended law provision just because they retired before 2007 amendment date.
Bhardwaj says that the Karnataka High Court also accepted that the amendment largely clarified what the scheme always meant. The pensioners read the Rs 800 minimum pension as applying only to their past-service pension, but the courts said it applies to the total pension. EPFO had been calculating pension this way from day one, so in practice nothing was taken away.
Importantly, the Karnataka High Court followed the Supreme Court's 2022 view that judges should be slow to interfere with how a pension scheme is designed. Hardship to retirees is a genuine concern, but it is a policy call for the government, not something a court can fix by striking down the rule. Pointing to one hypothetical employee who gets less wasn't enough to overturn the changes.
Bhardwaj says: "The takeaway for pensioners is that, to succeed, a challenge has to show the government acted without power or arbitrarily. Simply showing that the amended scheme pays some members less won't do it."