Recently, Parliament has passed The
Pension Fund Regulatory and Development Authority Bill, 2013 (“Pension
Bill”) which seeks to provide for the establishment of a statutory Pension Fund
Regulatory and Development Authority (PFRDA) to promote old age income security.[1] The
Bill, which is divided into 10 chapters and 56 clauses, has the following key features:
Pension
Fund Regulatory and Development Authority (Chapter II): The
Bill provides for the establishment of the Pension Fund Regulatory and
Development Authority (“Authority”) with its head office in the National
Capital Region. The members of the Authority will be appointed by the Central
Government and there shall be one member each from the field of economics,
finance, law or administrative matters. Apart from the Chairperson, there will
be three whole-time and three part-time members. While Chairperson and
whole-time members will hold the office for a period of five, the tenure of a
part-time should not ‘exceed’ five years.
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Clause 6 of the Pension Bill provides for the
conditions (five conditions in total) which can lead to the removal of the
Chairperson or any other member of the Authority. If sought to be removed for
acquiring interest which is prejudicial to the function as a member or for the
reason that his continuance in the office is against public interest, the
concerned member will be given an opportunity to be heard.
Extent
of Application (Chapter III):
According
to clause 12, the pension bill will be applicable to ‘National Pension System’
or ‘any other pension scheme not regulated under any other enactment’. Clause
12 also provides a list of subject areas where the provisions of the Bill will
not be applicable, for example, schemes or funds under the Coal Mines Provident
Fund and Miscellaneous Provisions Act, 1948. However, the State or Central
Government, as the case may be, may extend the application of Bill to the
excluded subjected areas.
Duties,
Functions and Powers of the Pension Fund Regulatory and Development Authority
(Chapter V):
Apart
from the duty to duty, to regulate, promote and ensure orderly growth of the
National Pension System and pension schemes, the Authority is conferred with
the power to regulate several pension schemes including National Pension
Scheme. For example, the Authority is empowered to regulate the National
Pension Schemes and other schemes where the Bill is applicable, register and
regulate intermediaries, establishing mechanism for redressal of grievances of
subscribers. The Authority is also vested with the powers as that of a civil
court under Code of Civil Procedure, 1908 for conducting inquiries and
investigation. After making such inquiry, the Authority can be also pass
orders, as it may deem fit, under Clause 15.
National
Pension System (Chapter VI): According to Clause
20, the contributory pension system, under the notification dated 22nd
December, 2003 of the Central Government, shall be deemed to be the National
Pension System with effect from January, 2004. The basic features of the
National Pension System includes an individual pension account number,
restriction on withdrawals from the account, choice of multiple pension funds,
restriction on exit from National Pension System etc.
The Authority shall also appoint a Central Record
Keeping Authority which shall be responsible for receiving instructions from
subscribers through the points of presence, transmitting such instructions to
pension funds, effecting switching instructions received from subscribers
Registration
of Intermediaries (Chapter VII): Clause 27 of the
Pension Bill restricts an intermediary from commencing an activity related to
pension fund except in accordance with the conditions of certificate of
registration granted by the Authority. Intermediaries, who had been associated
with Interim Pension Fund Regulatory and Development Authority and had been
functioning without certificate of registration, can continue to do so for a
period of six month from the date of establishment of the Authority.
Penalties
and Adjudication (Chapter VIII): Any person, who
carries on activities related to pension funds under Bill without obtaining a
certificate of registration, shall be liable to a penalty of one lakh rupees
for each day during which the failure continues or one crore rupees, whichever
is less. Penalty has also been provided where there is a failure to comply with
the conditions of the certificate of registration, or failure to furnish any
information, books, document, returns, report to the Authority, or failure to maintain
books of accounts or records. Further, a person shall also be liable if he
fails to enter into a required agreement with the client, or fails to redress
the grievances of subscribers, or fails to segregate the money of clients, or
fails to comply with the provisions of the Bill.
While adjudicating and deciding the amount of
penalty under Clause 28, the due regard should be given to the amount of
disproportionate gain or advantage, amount of loss caused to the subscriber and
the repetitive nature of default. Clause 31 of the Pension Bill also enables
the aggrieved person to seek interim measures and Clause 32 makes the
contravention of any provision of the Bill an offence.
Clause 35 of the Bill restricts a court from
taking a cognizance for any offence under the Bill except on a complaint made
by the Authority. Clause 37 bars the jurisdiction of a civil court from
entertaining any suit or proceedings under the Bill. An appeal against the
order of the Authority, or of any adjudicating authority, can be made to
Securities Appellate Tribunal. An appeal can be made to the Supreme Court
against the decision of the Securities Appellate Tribunal.
Pension
Advisory Committee: Clause 45 of the Pension Bill
empowers the Authority to constitute a ‘Pension Advisory Committee’ which shall
advise the Authority, as may be required.
Link for the text of Bills:
2. The Pension Fund Regulatory and DevelopmentAuthority Bill, 2011
[1] Today,
Union Finance Minister, P. Chidambaram, was to move The Pension Fund Regulatory
and Development Authority Bill, 2013 in
Rajya Sabha (Refer: http://164.100.47.5/newlobsessions/sessionno/229/R060913.pdf)
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