The Punjab and Haryana High Court has delivered an important judgment for pensioners covered under the Employees’ Pension Scheme, 1995.
The Court held that the Employees’ Provident Fund Organisation cannot apply an unsupported pro-rata formula while calculating pensions in eligible “higher wages” cases.
Instead, EPFO must calculate the pensionable salary using the average monthly pay drawn during the contributory period falling within the final 60 months before the employee exited the pension fund.
The Court also directed EPFO to recalculate pension arrears and pay interest for delayed payments.
The judgment was delivered on May 27, 2026, in Surinder Kumar v. Union of India and Others, CWP-28189-2025, along with several connected petitions. Justice Harpreet Singh Brar decided the batch through a common judgment.
This article has also been prepared with reference to the legal update published by LaWGiCo, titled “EPFO’s Pro-Rata Formula for Higher Pension Illegal; P&H High Court Orders Recalculation on Actual Wages, Grants Interest on Delayed Arrears.”
Key Details of the Judgment
Case name: Surinder Kumar v. Union of India and Others
Case number: CWP-28189-2025 and connected cases
Date of judgment: May 27, 2026
Court: Punjab and Haryana High Court
Judge: Justice Harpreet Singh Brar
Neutral citation: 2026:PHHC:084041
Main issue: Calculation of pension on higher wages under the Employees’ Pension Scheme, 1995
The Court considered a large batch of petitions involving pensioners who had opted for pension on higher wages.
These pensioners challenged EPFO’s method of dividing their pensionable service into separate periods before and after September 1, 2014.
What Was the EPFO Pro-Rata Formula?
EPFO had introduced a methodology that divided an employee’s pensionable service into two periods:
- Service before September 1, 2014.
- Service on or after September 1, 2014.
Under this method, EPFO calculated the pension separately for both periods. It applied different salary considerations to each segment.
EPFO communicated this method through an internal email dated February 14, 2024. It later reiterated the methodology through a circular dated January 18, 2025.
The petitioners argued that this process reduced the pension payable to employees who had contributed on their actual higher wages.
They also argued that Paragraph 11(4) of the Employees’ Pension Scheme did not permit such a division.
Difference Between Wage-Ceiling and Higher-Wage Cases
The High Court explained the difference between wage-capped pension cases and pension-on-higher-wages cases.
Paragraph 11(1) of the Employees’ Pension Scheme applies to employees whose contributions remained limited to the statutory wage ceiling.
In such cases, the wage ceiling was ₹6,500 before September 1, 2014. It later increased to ₹15,000.
Therefore, pro-rata calculations may apply to wage-ceiling cases because contributions were made according to different statutory ceilings.
However, Paragraph 11(4) deals with employees who opted to contribute on salaries exceeding the statutory wage ceiling.
These employees and their employers contributed based on actual higher wages.
The Court found that Paragraph 11(4) did not provide for a pro-rata division of service. It also did not authorise separate pre-2014 and post-2014 pension calculations.
According to the Court, the pensionable salary in eligible higher-wage cases must reflect the actual higher salary covered by the scheme.
Background of the Lead Petitioner’s Case
The lead petitioner, Surinder Kumar, had worked with the Punjab Water Resources Management and Development Corporation Limited.
He joined the organisation in October 1980 and retired on August 31, 2019.
After exercising the joint option for a higher pension, he deposited the required differential contribution along with interest.
EPFO subsequently sanctioned his revised pension at ₹24,511 per month.
However, the petitioner claimed that his pension should have been ₹28,212 per month after considering the correct salary figures and removing the pro-rata reduction.
The Court recorded that EPFO had considered one set of wage figures while collecting the differential contribution. However, it used a lower amount while fixing the petitioner’s pension.
According to the judgment, the difference arose partly because Dearness Allowance arrears and pay revision benefits were not properly assigned to the months to which they related.
Arguments Raised by the Pensioners
The petitioners argued that EPFO’s pro-rata formula had no statutory foundation.
They submitted that the Employees’ Pension Scheme required the pensionable salary to be calculated using the average monthly pay during the final 60-month contributory period.
They further argued that the entire pensionable service should remain one continuous period.
The petitioners claimed that EPFO had introduced new concepts through administrative communications. These included:
- Division of service into pre-2014 and post-2014 periods.
- Separate pension calculations for each period.
- Use of the “highest monthly salary” for different periods.
- Reduction of pension despite contributions on actual higher wages.
They maintained that administrative directions could not amend the Employees’ Pension Scheme.
The pensioners also challenged the delay in releasing revised pension arrears.
According to them, EPFO had collected differential contributions with interest. However, it had not paid corresponding interest when pension arrears remained unpaid for several years.
EPFO’s Defence of the Formula
EPFO defended the pro-rata formula by referring to the 2014 amendments to the Employees’ Pension Scheme.
It argued that the statutory wage ceiling had increased from ₹6,500 to ₹15,000 from September 1, 2014.
Therefore, EPFO claimed that the pension had to be calculated separately for different service periods.
EPFO also argued that the methodology was necessary to protect the financial and actuarial stability of the pension fund.
According to EPFO, calculating the entire pension on actual higher wages could increase the financial burden on the fund.
However, the High Court did not accept these arguments in relation to eligible higher-wage cases under Paragraph 11(4).
Executive Instructions Cannot Override a Statutory Scheme
One of the most important principles in the judgment concerns the legal status of administrative instructions.
The High Court observed that executive or administrative instructions cannot amend statutory rules.
They also cannot reduce, expand or change benefits provided under a statutory scheme.
The Employees’ Pension Scheme, 1995, was framed under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.
Therefore, EPFO could not introduce a new pension calculation formula through an internal email or circular when the scheme itself did not provide for that formula.
The Court found that the concepts introduced through EPFO’s communications did not appear in Paragraph 11(4).
It consequently held that the pro-rata methodology for higher-wage cases travelled beyond the statutory framework.
Supreme Court Had Not Approved This Pro-Rata Method
EPFO also relied upon the Supreme Court’s judgment in Employees’ Provident Fund Organisation v. Sunil Kumar B.
However, the Punjab and Haryana High Court observed that the specific pro-rata methodology challenged by the pensioners was not considered in that case.
The High Court noted that EPFO introduced the disputed methodology through its internal email dated February 14, 2024.
Therefore, the methodology did not exist when the Supreme Court considered the earlier higher-pension dispute.
The High Court consequently rejected the argument that the Supreme Court had already approved EPFO’s disputed calculation method.
Pension Must Be Recalculated Using the Final 60 Months
The High Court quashed the January 18, 2025 circular and February 14, 2024 internal email to the extent that they prescribed pro-rata calculations in higher-wage cases.
EPFO was directed to recalculate the petitioners’ pensionable salary using the average monthly pay drawn during the contributory period within the 60 months preceding their exit from the pension fund.
The calculation must be completed without:
- Applying the disputed pro-rata formula.
- Dividing service into pre-2014 and post-2014 periods.
- Using salary figures inconsistent with the differential contributions collected.
The direction does not mean that the pension should be calculated using only the employee’s last drawn salary.
Instead, EPFO must use the average monthly pay from the relevant contributory period within the final 60 months.
DA and Pay Revision Arrears Must Be Included Correctly
The Court also addressed differences between the wages used for collecting contributions and those used for fixing the pension.
EPFO had considered higher wages while recovering differential contributions from employees.
However, in some cases, the same wages were not fully included while calculating the pensionable salary.
The High Court directed EPFO to maintain complete parity between both figures.
Therefore, EPFO must properly assign Dearness Allowance arrears and pay revision benefits to the months to which they relate.
Any pension arrears arising from the corrected wage calculation must also be released to eligible pensioners.
High Court Grants 8% Interest on Recalculated Arrears
The High Court directed EPFO to pay simple interest at 8% per annum on pension arrears arising from:
- Removal of the pro-rata formula.
- Recalculation of the pensionable salary.
- Correction of differences between contributory wages and pensionable wages.
- Proper inclusion of DA arrears and pay revision benefits.
The 8% interest must be calculated after the expiry of 15 days from the submission of the pensioner’s joint option form.
It will continue until the date on which the recalculated arrears are actually paid.
Compound Interest on Previously Delayed Arrears
The judgment provides another form of interest for pension arrears that should have become payable after retirement.
In the lead petitioner’s case, EPFO released ₹13,33,882 in January 2025.
This amount represented the difference between the pension originally sanctioned and the pension payable on higher wages.
However, the payment was made without interest despite a delay of more than five years from the petitioner’s retirement.
The Court directed EPFO to pay compound interest on such delayed arrears.
The rate must be the same as the rate at which EPFO charged interest from the concerned pensioner.
The interest must be calculated after the expiry of two months from the pensioner’s retirement date. It will continue until the arrears are actually paid.
EPFO Given 12 Weeks to Complete the Process
The Court directed the concerned authorities to complete the following exercise within 12 weeks:
- Recalculate the pensionable salary.
- Issue the corrected pension calculation.
- Release consequential arrears.
- Pay applicable simple interest.
- Pay applicable compound interest on delayed arrears.
The 12-week period begins from the date on which EPFO receives a certified copy of the order.
Therefore, the actual compliance deadline may vary according to when the certified order was received.
Judgment Applies to Similarly Situated Pensioners
The High Court declared the decision to be a judgment in rem.
This means its benefit is not limited only to the petitioners who filed the cases.
The Court directed the authorities to extend the benefit to all similarly situated pensioners.
Eligible pensioners should not have to file separate writ petitions to receive identical relief.
However, similarly situated pensioners may submit appropriate representations to EPFO or another competent authority.
The Court permitted such representations to be submitted within three months from the judgment date of May 27, 2026.
It also directed the concerned authorities to process these claims expeditiously.
Who May Benefit From the Judgment?
The judgment may benefit an EPS-95 pensioner who:
- Was eligible for pension on higher wages.
- Exercised the relevant joint option.
- Paid or transferred the required differential contribution.
- Had pension calculated using the disputed pro-rata method.
- Had service divided into pre-2014 and post-2014 periods.
- Found differences between contributory wages and pensionable wages.
- Did not receive interest on delayed pension arrears.
Eligibility will depend on each pensioner’s employment history, contribution records, joint option and revised Pension Payment Order.
Therefore, pensioners should not assume that every EPS-95 claim will automatically receive the same calculation.
Documents Pensioners Should Review
An affected pensioner should review the following records:
- Pension Payment Order.
- Revised Pension Payment Order.
- Joint option acknowledgement.
- EPFO demand letter.
- Proof of differential contribution.
- Employer’s month-wise wage details.
- Salary slips for the relevant 60-month period.
- Dearness Allowance arrear calculations.
- Pay revision statements.
- Bank statements showing pension arrears.
- Communication received from EPFO.
These documents can help identify whether EPFO applied a pro-rata reduction or used incorrect salary figures.
What Can an Affected Pensioner Do?
A similarly situated pensioner may submit a written representation to the concerned Regional Provident Fund Commissioner.
The representation should clearly mention:
- The pensioner’s name and Universal Account Number.
- Pension Payment Order number.
- Date of retirement.
- Date of submission of the joint option.
- Amount of differential contribution deposited.
- Existing monthly pension.
- Expected pension based on the relevant wage records.
- Details of unpaid or delayed arrears.
- Reference to the May 27, 2026 judgment.
- Request for recalculation and applicable interest.
The pensioner should keep an acknowledged copy of the representation.
Where the calculation involves disputed wages or missing service records, professional legal or financial assistance may be required.
Why the Decision Is Important
The judgment reinforces the principle that a pension authority must follow the statutory pension scheme.
It cannot introduce a disadvantageous calculation formula through internal communications when the scheme does not authorise that formula.
The ruling also promotes fairness in contributory pension calculations.
When EPFO collects contributions using actual higher wages, it must consider the corresponding wages while fixing the pension.
The authority cannot use one calculation for collecting money and another calculation for paying benefits.
Furthermore, the interest directions recognise the financial loss caused by delayed pension payments.
A delayed pension payment loses value over time. Therefore, merely releasing the principal amount may not provide complete relief.
Conclusion
The Punjab and Haryana High Court’s judgment provides major relief to eligible EPS-95 higher-pension beneficiaries.
The Court held that EPFO’s disputed pro-rata methodology could not be applied to eligible higher-wage cases under Paragraph 11(4).
It directed EPFO to calculate pensionable salary using the average monthly pay from the relevant contributory period within the final 60 months.
The Court also ordered parity between the wages used for contributions and those used for pension fixation.
Additionally, eligible pensioners were granted interest on recalculated and delayed pension arrears.
Most importantly, the judgment was declared to operate in rem. Therefore, similarly situated pensioners may seek the benefit without filing separate cases.
However, pensioners should verify their eligibility and check whether any appeal, stay or subsequent order affects the judgment before taking legal action.
Frequently Asked Questions
What did the Punjab and Haryana High Court decide about EPFO’s pro-rata formula?
The Court held that EPFO could not apply the disputed pro-rata formula in eligible higher-wage cases under Paragraph 11(4) of the Employees’ Pension Scheme.
How should pension on higher wages be calculated?
The pensionable salary must be based on the average monthly pay drawn during the relevant contributory period within the final 60 months before leaving the pension fund.
Did the Court order the use of the last drawn salary?
No. The judgment refers to the average monthly pay during the contributory period within the final 60 months. It does not direct EPFO to use only the last drawn salary.
What interest did the Court grant?
The Court ordered 8% simple annual interest on certain recalculated arrears. It also granted compound interest on previously delayed arrears at the same rates charged by EPFO from the pensioners.
When does the 8% interest begin?
It begins after 15 days from the date on which the concerned pensioner submitted the joint option form.
Does the judgment apply only to the petitioners?
No. The Court declared it a judgment in rem and directed authorities to extend its benefit to similarly situated pensioners.
How much time was EPFO given?
The Court directed the recalculation, release of arrears and payment of interest to be completed within 12 weeks of receiving a certified copy of the order.
Can similarly situated pensioners submit a representation?
Yes. The judgment allowed similarly situated persons to submit appropriate representations to the competent authority within three months from May 27, 2026.
Reference
This blog has been prepared using the judgment in Surinder Kumar v. Union of India and Others, CWP-28189-2025 and connected cases, decided on May 27, 2026.
It also refers to the case summary published by LaWGiCo under the title “EPFO’s Pro-Rata Formula for Higher Pension Illegal; P&H High Court Orders Recalculation on Actual Wages, Grants Interest on Delayed Arrears.”
Disclaimer: This article is intended only for general information and legal awareness. It does not constitute legal advice. Pensioners should verify subsequent appellate proceedings, stay orders and individual eligibility with a qualified legal professional.
