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Petitioner: NADEEM SHAHZAD and 80 others VS Respondent: Messrs JOHNSON & PHILIPS (PAK.) LTD.
Court Name: Labour Appellate Tribunal Judge(s): Tanzil-ur-Rehman Title: NADEEM SHAHZAD and 80 others vs Messrs JOHNSON & PHILIPS (PAK.) LTD. Case No.:Appeals Nos,K-170 to K-250 of 1999Appeals Nos,KAR-46 to KAR-75 of
JUDGMENT
Reported As: 2000 PLC 534 Result: Appeals dismissed Judgment JUDGMENT ' These are 81 connected appeals (listed as above), under section 37(3) of the Industrial Relations Ordinance, 1969, against common decision, dated 17-8-1999, passed by the learned Presiding Officer, Si.Ndh Labour Court No,3, Karachi, involving questions of common facts and law, on application under section 25A, I.R.O., 1969, dismissing the grievance petitions of the appellants. 2. I have heard, at great length, the appellant's representative Mr. Saleem Raza and Mr. Ch. Muhammad Ashraf Khan, Advocate for the respondent and have perused the record and proceedings of the case in the lower Court with their assistance. 3. The facts, briefly stated are, that the appellants were permanent workers of the respondents' factory since different dates, as per list at page 245 of the R&P (Exh.R.W.2), giving the initial date of appointment in various capacities and departments. 4. The respondents, on 30-12-1996, had retrenched 56 workers on the ground that the respondent establishment was constantly suffering from losses and was thus, constrained to make retrenchment. However, on 15-4-1997, they were taken back in employment under a written agreement (pages 329(R)/11). This agreement has been referred to me by both the parties and read out in detail. It, therefore, seems necessary to reproduce some portions of it, which read as under:-- "Preamble: ' The extremely poor prevailing economic conditions over the last two years resulted in large scale curtailment of business and manufacturing activity in the country, coupled with this due to the
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severe financial and liquidity problems being faced by the main customers of the Company. WAPDA and KESC, the sales of the Company had drastically dropped. The situation further deteriorated because of the inability of the Company and also being unable to place new orders because of shortage of funds. ' In view of the above situation the Company which was suffering losses and was working at very low production capacity had no alternative but to reorganize its factory, so as to save the factory from closure, therefore, had to retrench 56 workers of the Company with effect from January 1, 1997. This extreme step was taken for the first time in the 48 years' history of the Company. ' The C.B.A. While acknowledging the very difficult circumstances the Company was facing because of the above circumstances, approached the Chairman of the Company to save the jobs of the retrenched workers on humanitarian grounds. ' The Chairman having consideration for the 56 retrenched workers, proposed that an effort and plan be made to try and get sales orders from the private sector and the export market, however, this could only be done by bringing down the cost of the company's products by better productivity to improve the competitiveness of the products against competition and to achieve higher sales and profit. ' The C.B.A. Fully backed the Chairman's suggestion and agreed that unless conditions improve both inside and outside the factory it will be difficult for the company by survive. The C.B.A. Further agreed that there was room for increasing productivity and pledged to give more production and fully support the efforts of the company to become more competitive and viable. Now therefore, this agreement witnessed as follows:-- 1. Whereas the Company cannot guarantee the success of increasing sales inputs from the private sector and the export market, but pledges to make full efforts. The C.B.A. Agrees that God forbid in case the efforts do not realize good results and the Company is not in a position to continue operating the factory, in that case the Company shall be at liberty to take any action or decision it deems necessary according to its best judgment, such decisions or actions of the Company shall not be disputed by the C.B.A. 2. . 3. 4. The Company proposes to introduce new machines with effect from April 15, 1997. Immediately on introduction of these machines the production units will further be reduced by 10% from the figures as given in "Annexure A". 5. However, the respondent establishment, on 5-5-1998, resorted to retrench 82 employees. It seems pertinent to reproduce the letter, dated 5-5-1998, in order to ascertain the reasons for such retrenchment, which reads as under:-- "You will recall that due to economic crisis extreme financial liquidity problems of our buyers WAPDA and KESC and reduced orders, the Company was constrained to effect retrenchment of a number of workers from their services on 30th of December, 1996. However, on humanitarian grounds and other understandings arrived at between the C.B.A. And the Company by settlement, dated 18th March, 1997. 55 workers were taken back in the employment. ' Thereafter, although the management made all possible efforts to run the company profitably including cutting down of costs, downsizing the management cadre, the company continued to suffer huge losses, rendering the Company in no position to operate at present level of overhead and expenses with little business opportunities; very low productivity and critical financial problems faced by the Company. ' The Company at present is finding it difficult to arrange finances to complete the orders in hand, which have already been delayed and are liable to massive penalties.
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' Consequently, the company has reached at the brink of disaster with no alternative except to reorganize and reduce its structure and it, therefore, constrained to declare your post in the Company as being surplus to its requirements. ' We would like to mention here that the constraints which have forced us to take this painful decision, have also been considered and accepted by the HonOurable N.I.R.C. In Case No,4A(O1/4 98K). ' Your services, therefore, are hereby terminated with close of May 5, 1998. You will, however, be paid one month's salary in lieu of notice in addition to all other legal dues admissible under the law. ' As per law, the Company has taken the steps of terminating the junior most employees in your category, in case you have any grievance in this regard, you may point out the same to the management for consideration. ' You may collect your dues from the accounts department from 25th May onwards between 3 p.m. And 5 p.m. On any working day after' obtaining clearance from your departmental head for any tools or company property in your possession. ' Your faithfully. (Sd.) ' Shehryar Saeed, ' General Manager (Prod. & I.R.)" (Pages 19-21) 6. Being aggrieved with the said letter, the appellants gave individual grievance notices to the respondents on or about 30-7-1998, which was replied by the respondent establishment by their letter, dated 12-8-1998. Having felt dissatisfied with the reply, the appellants filed grievance application before the learned Third Sindh Labour Court. Each of the appellants filed their affidavits-in-evidence separately and Riaz Ahmed. General Secretary of the union appeared as sole witness for all the appellants, who was cross-examined. On behalf of the respondent one Riaz Muhammad Khan filed his affidavit-in-evidence as Manager (Industrial Relations) and Notified Factory Manager, who was cross-examined by the other side. The parties, then, closed their evidence. The learned Presiding Officer, then, framed the following issues:-- "(1) Whether the respondents have followed the laws regarding retrenchment and had legally applied the same? (2) Whether the termination of the services of the applicants by way of retrenchment is legal? (3) What should the order be ?" ' And after hearing the arguments, he dismissed the said grievance petitions by his decision, dated 17-8-1999, against which, the above appeals have been filed. 7. Mr. Saleem Raza, representative of the appellants (appearing for appellants in Appeals Nos,K 170 to 249) raised the following contentions:-- (1) The reply statement is signed by one Riaz Muhammad Khan, who is Manager (Industrial Relations) and, as such, he is not competent to sign the reply statement on behalf of the respondent. In consequence, the reply statement has no value according to law and cannot be taken into consideration. (2) The termination letter, dated 5-5-1999 is signed by the General Manager (Prod. And I.R.), who is neither the Factory Manager nor the owner/attorney. He was, therefore, not competent to sign the termination letter. (3) The reasons, given in termination letters, are not true. They are mala fide. (4) The principle of "last come first out" has not been followed. (5) The respondents have retrenched more than 50% of the total number of workmen without seeking permission from the Labour Court as required under Standing Order 11-A of the Standing Orders Ordinance, 1968.
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(6) At the time of retrenchment i,e, 5-5-1998, conciliation proceedings were pending before the area conciliator and no permission was sought from the area conciliator. 8. As regards the first contention, Mr. Saleem Raza, referred to reply statement filed by the respondents on 21-11-1998 (page 35). Letter of authority (R/2, page 283) in favour of Mr. Riaz Muhammad Khan. Reference was also made by him to the appellant's affidavit-in-evidence (page 43) filed on 5-1-1999. In para. 3 whereof, this plea was specifically taken. Lastly, reference was made by him to Annexure S/I (page 51) dated 5-1-1999 which is a letter, issued by the Assistant Director Labour (Inspection II), West Division, Karachi addressed to the Union. In reply to the above submission Mr. Ashraf Khan, learned Advocate for the respondent referred to notice of occupation, dated 27-9-1998 with Form A, submitted to the Inspector of Factories by the respondent under Rule 3 of the Factories Act (page 281). Column 8 whereof notifies Mr. Riaz Muhammad Khan to be the Manager for the purpose of Factories Act. Whereas column 1 shows Mr. Azizur Rehman as Occupier. This form is signed by Occupier and the Manager both and is, dated 24-9-1998 (R/1). This document (page 279) appears to have been received by the office of the Director Labour. West Division, Karachi on 25-9-1998. On perusal of the said document, the seal of office of the Director Labour was not ligible as it was a photo copy. I expressed my doubt about it whereupon Mr. Ashraf Khan produced the original letter, which bears full seal and signature (seen and returned). 9. Mr. Ashraf also referred to reply statement, dated 21-11-1998 (page 35). The said reply statement., at (page 41) bear the signature of Riaz Muhammad Khan stating, inter alia, as competent and authorised to depose on behalf of the respondent. 10. Reference was also made by the learned counsel to the affidavit-in-evidence of Mr. Riaz Muhammad Khan (page 161). In para. 1 thereof, he states that:" I am Manager, Industrial Relations and Notified Factory Manager and Authorised Officer to represent the respondent and as well conversant with the facts of the case". In cross-examination by Mr. Saleem, Raza, on behalf of the appellants, he also reiterated the same thing (page 169). 11. Learned counsel for the respondent also referred to a notice issued by the Court of SDM, S.1.T.E., District West by one Mr. Ahmed Ali Lakho, Labour Officer and Inspector' of Factories, West Division, issued against Sheharyar A. Saeed, the Occupier and Riaz Muhammad Khan, the Manager, to appear in his Court on 30-4-1999. 12. Taking up the plea, on legal plain, learned counsel referred to section 2(viii)(c) and (e) of the I.R.O., 1969, wherein the definition of "employer" has been given. Sub-clause (e) seems to be relevant which, for the sake of convenience, is reproduced as under:-- "(e) in relation to any other establishment, the proprietor of such establishment and every director, manager, Secretary, agent or officer or person concerned with the management of the affairs thereof; " ' Reference was also made to section 2(c)(i) of Standing Orders Ordinance, 1968, defining the "employer" as under:- "(c) employer means the owner of an industrial or commercial establishment to which this Ordinance for the time being applies, and includes -- (i) in a factory, any person named under clause (e) of subsection (1) of section 9 of the Factories Act, 1934 (XXV of 1934), as Manager of the factory; " ' Learned counsel further placed his reliance on an unreported judgment, dated 5-10-1999, passed in Appeals Nos,KAR-46 to 75 of 1999 by this Tribunal (M/s. Johnson and Philips (Pakistan) Ltd. v. Muhammad Akram and others), referring to portion appearing at page 14 of the said judgment, wherein the same point appears to have been taken as to the competency of Mr. Riaz Muhamamd Khan which, in the circumstances of the case, was repelled by me. By this discussion, it seems apparent that the contention, raised by the representative of the appellants, is, not tenable.
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13. Taking up the second plea, Mr. Saleem Raza submitted that Mr. Shahryar Saeed, who issued the termination letter, was not a Notified Manager, as stated by one of the appellants in his affidavit- in-evidence (page 43, para. 7). He referred to Annexure S/1 (page 51) wherein the name of Occupier and Factory Manager of the respondent is stated to be Mr. Bilal Qureshi as per register of Factory, Form B maintained for the purpose. Learned counsel for the respondent to R/3 (page 285), which is a notice of acceptance of Form 'A', dated 2-1-1998 addressed to Joint Director Labour, West Division, showing the name of the Occupier as Azizur Rehman, Director and Mr. Shahryar Saeed as Manager for the purpose of Factories Act, column 8. He also referred to cross-examination of appellant A. Kaleem Qureshi by Mr. Ashraf Khan (at page 55) (adopted by consent for all the appellants), wherein it was admitted that, "Mr. Shahryar A. Saeed is Manager (also since last one year). It is correct that at the time of retrenchment he was Factory Manager" Reliance was again placed on section 2 (viii)(c) and (e) of the I.R.O., 1969, which refers to Manager/Notified Manager both as Occupier and also section_ 2(c)(i) of Standing Orders Ordinance, 1968. In view of this documentary evidence, which has come on record from the respondent's side, the contention, raised by the appellants that Mr. Shehryar A. Saeed had no Authority to issue termination letter, falls flat. 14. As regards the third contention that the reasons in the termination letter are not true. They are mala fide, admittedly the agreement, dated 15-4-1997 supports the plea of the respondent that the respondent had lost two main clients WAPDA and K.E.S.C. 15. It is pertinent to note that the Union had taken up the matter to the N.I.R.C. Against the apprehended action of retrenchment. This application was filed on 1-1-1998 and N.I.R.C., after hearing the parties, passed its order, dated 31-3-1998, accepted the plea of the respondent that it was running in losses and due to financial exigency it was essential to retrench the employees. It will be beneficial to reproduce below the relevant portion from the said order:-- 7. It is admitted position that the respondents' management had retrenched 56 workers and then reinstated them in pursuance of the agreement signed by applicant CBA and the management, which as it appears from the record was done by the respondents, management to run the business with co-ordination with applicant CBA and not to deprive any worker of his employment. There appears so far no material on the record to show that the respondents management at any occasion had victimised any of the office-bearers of applicant union CBA or its member due to their trade union activities. According to the respondents, they have no orders from WAPDA and K.E.S.C., who were their main customers as such now they are going through financial crises and their share has also fallen down in the Stock Exchange from Rs,100 to Rs,10. There appears no any substantial material from applicant union to doubt this version of the respondents. It is right of the respondents employer to run the business in a manner to fetch profit from it and not to have losses, as such if the respondents' employer is facing financial constraint, he has, therefore, statutory right re-organise his establishment in the way best suited to him." ' Learned counsel for the respondent further submitted that this order was passed by the single Member, N.I.R.C. Had the union been dissatisfied with the said order, it had a right to file appeal before the Full Bench, which.Was not done and, therefore, this order has become final. He also referred to pages 329 to 337, which are the accounts of the company. A perusal of the said accounts, placed on record, is enough to show that the company has been constantly running in losses for the three consecutive years. 16. It is not disputed that the respondent company did not pay the shares of the workers in the workers participation fund as it was not in a position to pay the same due to losses for the last three years constantly. 17. Mr. Saleem Raza, however, took a plea that the accounts of the company were not correct and did not exhibit the correct position. The plea is unfounded. If the union was dissatisfied with the
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accounts, it could ask the Government for re-audit as provided under section 23B(10) of the I.R.O., 1969, which appears to have not been done and so document has been placed on record to this effect. It is noticeable that the office-bearers of the appellant's union are represented on the Board of Workers' Participation Fund. Had there been profit, they would have certainly raised an objection in the meeting. So, it was in the knowledge of the appellants themselves that the respondent was running into losses. In fact, Mr. Riaz Ahmed Khan, who appeared as a witness on behalf of the appellants and enjoy the position of General Secretary of the Union, has admitted in Court in his statement that there are losses. In cross-examination, it was also admitted by the appellants that no workers' participation fund to the companys' profit was paid to the workers in general for the last three years, evidentially there being no profits. Mr. Saleem Raza, however, urged that the union had moved an application for reaudit of the account to the Government, but I regret to accept this plea in view of my ruling reported as Sher Bahadur and others v. M/s. Subcos II (Pvt.) Ltd. (1999 PLC 447). The onus was on the appellants to prove that they had applied for the re-audit, which the appellants failed to discharge. 18. Mr. Saleem Raza also took a plea of mala fide that it was only the workers, who were retrenched and no officer was turned out. This objection stands repelled by the affidavit-in-evidence of Riaz Muhammad Khan (163, page 4) wherein it has been stated by him on oath that, "over 30 members of the Management were also terminated, removed and/or severed from the employment after 5- 5-1998 and a number of facilities, given to the officers, were either withdrawn or curtailed to economise the expenditure of the company". This goes further to show that there is no mala fides against the workers. 19. As regards the fourth contention of Mr. Saleem Raza that the principle of "last come first out" has not been followed. It was submitted by Mr. Ashraf that it was fully observed by the Company while retrenching the workers. Reference was made by him to the letter of termination (page 19). On perusal of the letter of termination, at page 21, last part of its states that, "the basis of termination has been last come first out". It is further stated in the aforesaid letter of termination that, "in case you have any grievance in this regard, you may point out the same to the management for consideration". There is nothing on record to show that the union or any individual appellant ever pointed out such a mistake. In fact, the management, of its own, found three such cases who were senior and were retrenched wrongly. Their letters of termination were, therefore, withdrawn on 9-6- 1999 and were reinstated in the employment. These three letters were produced by Mr. Ashraf which were taken on record with express consent of Mr. Saleem Raza. 20. Mr. Saleem Raza next contended that the principle of last come first .Out should have been on the basis of the entire respondent establishment and from the date of initial appointment and not categorywise. 21. Let me, first of all, reproduce the relevant provision of law i,e, Standing Order 13, which deals with the retrenchment and read as under:-- "13. Procedure for retrenchment.----Where any workman is to be retrenched and he belongs to a particular category of workmen, the employer shall retrench the workman who is the last person employed in that category." 22. Learned counsel for the respondent, repelling the said contention, submitted that the question of seniority and juniority has always been accepted by the Courts to be categorywise and not on the basis of the whole establishment. Reliance has been placed by him on the following authorities:--- (i) R.C.D. Ball Bearing Ltd. Employees' Union v. R.C.D. Ball Bearing Ltd., Karachi (1992 PLC 1236); (ii) Messers Bayar Pharma Ltd. v: Mirza Hussain Akhtar (1981 PLC 24); (iii) Messers National Tyre and Rubber Co., Karachi v. Subedar Fazal Rehman and 2 others (PLD 1977 Kar. 33);
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(iv) Utility Stores Corporation of Pakistan Limited v. Punjab Labour Appellate Tribunal and others (PLD 1987 SC 447); (v) Shamas Textile Mills and others v. Muhammad Sharif Zahid and others (1994 PLC 594); (vi) Unreported judgment, passed on 11-5-1999 in Appeals Nos,K-383, 384, 386, 387 and 388 of 1998. (M/s. Epla Laboratories (Pvt.) Ltd. v. Muhammad Afsar and 4 others) 23. In the first-named case, it was held that: "It appears that the respondent-company was undergoing serious losses from 1985 to 1991. There are the reports of the auditors to that effect that had not been seriously challenged by the applicadt union. There is no law to compel a party that lack finances to keep the industry going." ' In the second-named case, it was, inter alia, observed that:- "6. In order to appreciate whether the reduction in the quantum of work in the Analytical Department justified reduction in staff. I would briefly discuss what constitutes retrenchment and when it is permissible and when it can be considered to be invalid. It is well-established proposition that it is within the discretion of an employer to organize and arrange his business in the manner he considers best. The law, however, requires that in effecting retrenchment for any reason whatsoever, the employer must be acting bona fide and not for purposes of victimising his employees or as a cloak to get rid of the services of any particular employee. Justification for the retrenchment has, however, to be assessed by the reasonableness of a decision taken by the Management in a particular situation of actual or threatened losses or actual or expected reduction in the quantum of work." ' It was further observed that:-- "8. So far as the law in Pakistan is concerned, retrenchment would be permissible as long as it does not infringe the provisions of. The Standing Orders, particularly Standing Order 12, and other Labour. Laws. If, the services of any workman are retrenched for any reason, including on the plea of retrenchment, he is entitled to file a grievance petition under section 25-A, I.R.O., as has been done by the respondent-workman, and thereupon the Labour Court is entitled to go into all the facts of the case, as provided in subsection (5) of the said section. It is thus the duty of the Labour Court to see that retrenchment has not been resorted to as a cloak to get rid of a workman who is found inconvenient for any reason or for any extraneous reason I have already shown, on the basis of the annual report, that there was substantial reduction in the work in the Analytical Department though some item of work undoubtedly showed an increase." ' It was, thus, held that:- "The upshot of the above discussion is that there appears to have been bona 'fides retrenchment in the Analytical Department of the appellant company in consequence of reduction of work and hence no fault can be found with the order terminating the services of the respondent workman on that ground." ' In the third-named case, it was, inter alia, observed that:- ' This Standing Order envisages different categories of workers within one single establishment. This is for obvious reasons, specially when workers are required to have specialised knowledge in a particular field, or to have a certain skill for performance of their jobs. In such cases, the wisdom of overriding the principle of 'last…
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