FCC rules 14.75 years of service counts as 15 years for old-age pension

ISLAMABAD: The Federal Constitutional Court (FCC) held that the services of 14.75 years of an employee shall be treated as 15 years for old-age pension based on a stipulation contained in the Schedule of the Employees’ Old Age Benefit Institution Act, 1976.

A three-member bench, headed by FCC Chief Justice Amin-ud-Din Khan and comprising Justice Syed Hassan Azhar Rizvi and Justice Arshad Hussain Shah, dismissed the Employees’ Old-age Benefit Institution (EOBI) appeals against the Lahore High Court (LHC) judgment.

Shahbaz Hussain (the respondent), being an insured person, applied for old-age pension based on his insurable employment for 14 years and 10 months. However, the EOBI, vide impugned order dated 28 April 2023, declined him old age pension and allowed a lump sum old age grant under Section 22A of the Act, 1976.

The respondent challenged the rejection order before the EOBI’s adjudicating authority on the ground that his insurable employment was more than 14.6 years and he is entitled to old age pension based on the formula set out in the Schedule of the Act, but the Institution again rejected his claim. The respondent then approached the LHC, which interpreted the stipulation in his favour and admitted the rounding of the period of insurable employment of 14 years and 11 months to a full 15-year service, as part of the statute.

Advocate Hassan Latif Chaudhry, who appeared on behalf of the respondent – Shahbaz Hussain, submitted before the FCC that the Supreme Court in Amir Sultan vs EOBI (2024 SCMR 826) held; “The Act is a beneficial statute intended to provide security and old-age benefits to employee of industrial, commercial or other organizations covered by it and; therefore, its provisions have to be construed liberally to advance its objective.”

The EOBI’s counsel submitted that Section 22 (1) (b) of the Act stipulates that the contribution in respect of an employee must have been paid for a period not less than 15 years, and, thus the essential condition laid down by the Act was not fulfilled in the case of the petitioners and that they were not entitled to the old-age pension.

The LHC had passed the judgment that Section 22 (1) of the Act stipulates that an insured person shall be entitled to a monthly old-age pension to be calculated at the rate specified in the Schedule. This provision, therefore, must be read with the Schedule, which prescribes “A period of six months or more on insurable employment shall be treated as one full year.”

The LHC stated that ‘rounding off’ is a built-in calculation of old-age pension as provided for in the Schedule. “In other words, where the service of any employee is more than 14.6 years, he/ she shall automatically become entitled to old-age pension,” it added.

Proviso (b) to section 22(1) provides the qualification of 15 years of contribution for establishing the entitlement of an employee to seek old-age pension.

The stipulation for rounding off in the Schedule is explanatory in character, and it must be read as expressing a clear intention that the length of service provided in proviso (b) to section 22 (1) of the Act is to be construed in conjunction with and subject to the Schedule. The length of service contained in the proviso in question is controlled by the explanation contained in the Schedule.

A strict adherence to the text of proviso (b) to section 22 (1) of the Act, requiring 15 years of service as a compulsory condition, would destroy and make redundant the explanation contained in the Schedule. Such a narrow construction is not permissible as the Act is required to be construed as a whole.

The interpretation of various provisions ought to be carried out in a manner that advances the objectives of the Act and in favour of the employees. The services of 14.75 years of the petitioner shall be treated as 15 years based on the stipulation contained in the Schedule, said the LHC judgment.

Copyright Business Recorder, 2025