Tata Motors in Legal Battle with EPFO Over Pension Fund Transfer

Tata Motors is in a legal dispute over transferring pension funds with the Employees’ Provident Fund Organisation (EPFO).

Tata Motors Pension Fund Management

Tata Motors, which manages its own exempted pension fund, wanted to give up this exemption and move its employee provident fund to the EPFO. However, the EPFO asks for detailed documentation and additional information about all employees’ pension funds before approving the transfer.

EPFO’s Requirements and Response

According to court filings, the EPFO found some of the information provided by Tata Motors needed to be revised. Government sources say that while the EPFO is open to transferring the provident fund corpus, it specifically needs detailed information about the pension scheme. The EPFO has instructed Tata Motors to conduct a thorough audit of its pension fund records and has denied the company’s request to relinquish its exemption status. Tata Motors has not commented on the issue yet.

As per Paragraphs 38 and 39 of the Employee Pension Scheme, the government can grant exemptions from the scheme’s rules. An official said that the EPFO needs Tata Motors to meet these criteria before considering their request.

Tata Motors’ Financial Losses and Pension Fund Exemption

Tata Motors, which faced losses for 3 years in a row (2019-20, 2020-21, and 2021-22), asked for automatic cancellation of its pension fund exemption and offered to cover extra liabilities through actuarial valuation. The company applied to give up the exempted pension fund starting October 1, 2019, but the issue still needs to be solved.

Supreme Court Ruling on Pension Contributions

In November 2022, the Supreme Court ruled that people who were members of a statutory pension fund as of September 1, 2014, could choose, along with their employer, to contribute more than the statutory limit and receive a pension based on their average salary over the last 5 years.

Employee Requests and Tata Motors’ Response

In its annual report, Tata Motors mentioned receiving requests from current and former employees to extend pension benefits. To address these concerns and avoid lengthy legal battles, the company approved joint options on the EPFO portal and stated it would cover the extra liability. As a result, Tata Motors set aside ₹691.07 crore for the 9 months ending December 31, 2023, and listed this amount as an exceptional item.

However, the EPFO redirected all joint applications to Tata Motors’ pension trust. In response, the company filed a writ petition in the Delhi High Court, asking for an order for the EPFO to manage its pension fund and accept the joint applications. Additionally, trade unions filed a joint petition requesting the quick transfer of the pension fund corpus and the acceptance of the employees’ joint applications.

The court hearing for this matter is set for August 8.

On July 29, 2024, Tata Motors Ltd’s share price opened at ₹1,124.00, touching the high of ₹1,139.90 as of 11:32 AM on the NSE.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.