The conundrum around Aadhaar-UAN seeding for Employee’s Provident Fund contributions and filings
“No doubt, the government cannot take umbrage under the aforesaid provision to enlarge the scope of subsidies, services and benefits. ‘Benefits’ should be such which are in the nature of welfare schemes for which resources are to be drawn from the Consolidated Fund of India… We also make it clear that a benefit which is earned by an individual (for example, pension by a government employee) cannot be covered under Section 7 of the Act, as it is the right of the individual to receive such benefit.” - Supreme Court of India (26 September 2018)
In its judgment in Justice KS Puttaswamy (Retired) v Union of India [(2019) 1 SCC 1] (Puttaswamy), the Supreme Court of India (Supreme Court) discussed the ambit of the term ‘services’ in Section 7 of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 (Aadhaar Act), which states that the government may require furnishing of Aadhaar number or Aadhaar-based authentication as a pre-condition to receiving a subsidy, benefit, or service. While the Aadhaar Act already defines ‘service’ to cover any provision, facility, utility, or other assistance provided to an individual, the Supreme Court made it clear that the said definition should not be interpreted in a manner that a benefit which a person is otherwise entitled to receive is made unavailable but for the furnishing of Aadhaar number or the authentication through Aadhaar.
Notwithstanding the aforesaid ruling, on 1 June 2021, the Employees’ Provident Fund Organisation (EPFO) issued a circular (June Circular) providing that the electronic challan-cum-return (ECR) filed by employers in respect of employees’ provident fund contributions would be accepted only in respect of employees whose Aadhaar number has been seeded with their Universal Account Number (UAN). The June Circular, made effective immediately, has caused significant stir among employers and employees, in respect of both its timing and the ensuing practical challenges. Several stakeholders also see the June Circular as coming into direct conflict with the judicial pronouncement in Puttaswamy.
It is in this context that the authors, in this article, examine the June Circular and its potential to cause legal and practical challenges for employers and employees.
The years’ old saga
The June Circular is not the first time that the EPFO mandated seeding of Aadhaar number with UAN. Through its circular dated 22 June 2015, the EPFO made it mandatory for employers to ensure seeding of Aadhaar number of their employees within one month of receipt of their UAN to enable the employees to file online claims for benefits. However, pursuant to Puttaswamy, the EPFO issued another circular dated 18 October 2018 directing the field officers to not take any action against an employer for failure to seed the Aadhaar number with the UAN of the employees. Notwithstanding the said circular, the officials at the EPFO maintained that at least as far as online claims for withdrawal of employees’ provident fund accumulations are concerned, seeding of Aadhaar number with the employee’s UAN would be mandatory. This statement, read with the circular of the EPFO dated 13 April 2018 (whereby the EPFO effectively allowed offline claims), seems to suggest that claims of member-employees would not be denied by the EPFO for want of Aadhaar – only the online facility will not be available to such employees.
The officials at the EPFO have been justifying its insistence on UAN-Aadhaar seeding on the ground that, previously, employers were generating a new UAN upon the onboarding of a new employee instead of requesting for the old UAN, thus defeating the purpose of assigning one universal number to an employee; Aadhaar would, in such situations, avoid duplication.
The upcoming labour law regime
On 28 September 2020, the President of India granted his assent to the Code on Social Security, 2020 (SS Code), one of the four labour codes that the Government of India seeks to implement to replace 29 extant labour laws at the Central level. The SS Code has not been brought into force yet, except Section 142 thereof, which came into force on 3 May 2021. Section 142 of the SS Code provides that for an employee or any other beneficiary to obtain any benefit under the code, he / she shall establish his / her identity or the identity of his / her family members or dependants (as the case may be) through Aadhaar number.
The presence of Section 142 in the SS Code became a source of worry for employees who were apprehensive of the said provision being used as a tool to deprive them of their statutory benefits for want of Aadhaar. Accordingly, on 5 May 2021, the Government of India issued a press release clarifying that the said provision has been notified “only for collection of data of workers including migrant workers. No benefit will be denied to workers for want of Aadhaar”.
The June Circular
Taking Section 142 of the SS Code as the base, the EPFO issued the June Circular. The resistance from industry and employees that the circular received was on expected lines since the Government of India had assured that Section 142 would be utilised only for the limited purpose of creating a database of the organised / unorganised workforce.
While some experts are of the view that the June Circular mandates Aadhaar seeding only for the purpose of online return filing, what may be worrying is the lack of other alternatives to filing of necessary returns from a compliance viewpoint. The officials at the EPFO have time and again emphasised that the very concept of ECR was introduced in 2012 to make “the online filing of the returns mandatory for the employers”. By way of a circular dated 19 August 2015, the EPFO had mandated online remittance of employees’ provident fund contributions with effect from 1 January 2016. This potentially makes compliance by employers difficult where the Aadhaar number of its employees could not be seeded either on account of resistance from the employees or because of other practical issues such as mismatch in the employee’s data on Aadhaar and UAN.
The road ahead
The road ahead indicates challenges from several quarters as regards implementation of the June Circular. The Association of Industries and Institutions has already filed a writ petition before the High Court of Delhi (which has admitted the same) alleging non-adherence to the principles set out in Puttaswamy and inter alia seeking directions towards enabling employers to remit employees’ provident fund contributions and file returns without mandatory seeding of Aadhaar number with UAN.
While the EPFO has extended the timeline for mandatory Aadhaar seeding until 1 September 2021, there is likelihood that the continuing challenges faced by employers due to continued insistence on Aadhaar seeding may not abate especially in view of the ongoing COVID-19 pandemic when coordination with and cooperation from employees may be difficult to achieve. In any event, the extension of the deadline does not resolve the potential contradiction of the June Circular with the pronouncement in Puttaswamy. To this extent, therefore, there is an apparent legal quandary that the Ministry of Labour and Employment, Government of India, and the EPFO must look into and address.
Views are personal.