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Petitioner: MESSERS DAWOOD COTTON MILLS LTD., KARACHI VS Respondent: SOCIAL SECURITY JUDGMENT
Court Name: Sindh High Court Judge(s): Ajmal Mian Title:MESSERS DAWOOD COTTON MILLS LTD., KARACHI vs SOCIAL SECURITY
JUDGMENT
Reported As: PLD 1978 Karachi 744 Result: Appeal disposed of Judgment JUDGMENT The above appeals involve the interpretation of clause (30) of section 2 of the West Pakistan Employees' Social Security Ordi--nance, 1965 (hereinafter referred to as the Ordinance) and, therefore, I intend to dispose of the above appeals by this judgment. The facts of the above appeals are as follows :- M. A. 22 of 1977.-The facts disclosed in the memo. Of appeal are that the appellants are an Industrial Unit registered under the Factories Act, and that the appellants have been paying to their workers from time to time certain payments including leave encashment, motor--cycle allowance and payment for festival holidays. It has also been asserted that on 21-6-75 the appellants received a notice from the Director of the respondents in which it was alleged that the appellants had failed to make their contribution to the Social Security Institution for the following items; (1) Conveyance allowance. (2) Leave Encashment. (3) Supplementary payments. (4) Festival Holidays. The appellants were called upon to pay a sum of Rs. 44,708.98 being the alleged outstanding contribution and Rs. 22,207.78 being the alleged increase for the failure to deposit the above contribution. The appellants were also given the option to furnish a representation in writing along with all relevant documents/evidence etc. In case they did not agree with the above demand so that the assessm ent of the dues or contribution and increase outstanding against them might be
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revised accordingly. It was also stated that in case the appellants failed to avail of the opportunity of furnishing representation within 15 days along with the relevant documents/evidence etc. To support of their representation, the provisional assessment of the Social Security contribution and increase mentioned in the notice shall be confirmed on the basis of the evidence already available with the Director, and that the recovery of the dues shall be made in accordance with the prescribed procedure. The appellants were also asked to deposit the contribution and increase outstanding against them for the months of April 1975 onwards. In response to the above notice, the appellants through their letter dated 1-7-75 addressed to the Director of the respondent pointed out to him that his demand was not justified for the reasons mentioned therein. It was also pointed out that the demand of the respondent with effect from 1-3-67 was also not justified for the reason that the above various items were paid from various dates, namely, (1) conveyance w.e.f. January 1971. (2) Leave encashment w.e.f. June 1972, (3) Payment in lieu of festival holidays w. e. f. February 1974. The attention of the Director was drawn to the fact that if the above allowances were included in the salaries of the employees whose salaries were on the margin then the total wages of these employees would be over Rs. 500. It was also asserted that, in that event they would not be liable to pay any contribution in respect of those staff whose salary would exceed Rs. 500 per month. The appellants' above letter was followed by their Advocate's letter dated 10-7-74 in which also the appellants raised the plea that the above items did not fall within the definition of wages and that they were not liable to pay any amount. After that the appellants filed a review application before the Director under section 58 of the Ordinance, which, according to the appellants was rejected by the Director of the respondent without granting personal hearing. After that the appellants filed an appeal in the Social Security Court under section 59 of the Ordinance, which was allowed on the technical ground that the matter was referred back to the respondent for deciding the aforesaid. Review application on merits. It has also been asserted that the Commissioner of the respondent after hearing the review application partially accepted the appellants' representation, but held that the payment for leave encashment was within the ambit of wages and that the Social Security contribution was payable in that respect. The Commissioner also took the view that the contribution was also payable on the supple--mentary payments, conveyance allowance and payments made for festival holidays under the Ordinance, but at the same time the Commissioner accepted the appellants' contention that they had started making payments in respect of the above items to the employees on the various dates referred to herein above. Accordingly, the Commissioner ordered that the contri-- bution for leave encashment was payable with effect from 1-6-72, contribution for conveyance allowance was payable w.e.f. 1-10-71 and payment for festival holidays was payable with effect from 1-2-74. Aggrieved by the above order of the Commissioner, the appellants filed an appeal under section 59 of the Ordinance in the Social Security Court, which appeal was rejected by the Court by the judgment dated 14-7-77. The appellants being aggrieved by the above judgment have filed this appeal. I may mention here that out of the above four items in the above demand notice dated 21-6-75 in respect of which contribution was demanded from the appellants, the learned counsel for the appellants Mr. Khurshid Anwar Shaikh in his submissions has challenged the demand for contribution in respect of three items only, namely, (a) leave encashment payments, (h) festival holidays, and (c) motor-cycle allowance. The learned counsel concedes that the appellants are liable to make contribution for the fourth item, namely, supplementary payments. Appeals Nos. 23/77 and 26/77 The above two appeals have common facts as in both the appeals the same order has been impugned.
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The facts of the above appeals are that the Director of the Sind Employees' Social Security Institution for the first time issued a notice dated 1-8-76 to Messrs Firdous Textile Mills Limited (hereinafter referred to as Messrs Firdaus) stating therein, that on their visit to the Mill and the Head Office of the Mill, it was found that the above mill had not paid social contri--bution on following payments; Payment madeS. S. Contribution Rs. 1. Leave encashment3,04,509.9918,270.54 2. Sick leave and casual leave1,98,216.4211,892.96 (2 yrs.) 3. Amenities of Labours1,80,658.2410,839.48 4. Rewards52,268.033,136.08 It was also stated that the amounts mentioned above pertained to the three years i.e. 1973-74, 1974-75 and 1975-76 (up to June 1976) and according to their calculation the total alleged evasion of contribution worked out to Rs. 44,139.06. It was also asserted that the amount of the remaining period i.e. March 1967 to June 1973 had been provisionally assessed on the above basis of the alleged evasion detected by them. Messrs Firdous were also called upon to pay a sum of Rs. 1,32,471 plus an increase of Rs. 66,235.50. Thus a total amount of Rs: 1,98,706.50 was demanded. It was also mentioned that if Messrs Firdous were not satisfied with the amount so provisionally assessed, they may prove the same by producing the records within three days of the receipt of the above notice. It was also stated that failing which the amount demanded by the institution would be deemed to he confirmed and it would be recovered as land revenue. In the above notice it teas further asserted that as per verification of the general ledger, it had also been found that the mill had been subsidising canteen expenditure for provid--ing cheaper meal facilities to their workers at Rs. 6,000 per month, and that the contribution for the period of 112 months i.e. From 1-3-67 to 30-6-76 worked out to Rs. 40,000 and that the increase thereon worked out to Rs. 20,000. Thus Messrs Firdous were also asked to snake payment of an additional sum of Rs. 60,000 in respect of the above item. In response to the above notice Messrs Firdous through their letter dated 24-8-76 pointed out that the above notice was received by them on 21-8-76 which was Saturday. It was also pointed out that in the notice the Director had given to them 3 days time to prove their dissatisfaction of the alleged assessment. It was also stated that since the records related to the period of 9 years they should be given 15 days time to produce the record. Thereupon, the Director through his letter dated 25-8-76 declined to grant time as requested by Messrs Firdous in their above letter dated 24-8-76. It was also stated by him that the assessment already made by him stood confirmed as no, objections were filed and that a notice under Land Revenue Act had already been issued by the Assistant Collector (Gr. I), Karachi (who was no other person than himself). After that the Director who was also acting as Assistant Collector (Gr. I) issued on the same day i.e. On.25-8-76 a notice under section 81 of the Land Revenue Act, 1967 and rule 118 of the Land Revenue Rules, 1922, demanding the payment of a total sum of Rs. 2,58,706.50, the detail of which was given in the above notice. It is also stated that unless the amount demanded was paid within 10 days from the date of the issue of the notice together with the sum of Re. 1 being the fee chargeable for the notice, compulsory proceeding would be taken according to law for the recovery of the whole of the revenue amount. It appeals that after that the Director of the Institution sealed the godowns of Messrs Firdous in pursuance of his above notice issued by him in the capacity of the Assistant Collector (Gr.l). Thereupon Messrs Firdous through their letter dated 7-9- 76 addressed to the Commissioner of the Institution pointed out that the Director, Social Security Mr. Bhutto visited their office and informed them that no Social Security contribution had been paid
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on canteen subsidy, rewards and ex gratia payments etc. It was also stated that they had requested, that the alleged outstanding amount had to be determined whether it was at all payable, and if so, to what extent. It was also asserted that the Director was also requested to allow reasonable time for the above purpose, but instead of allowing them time he gave three days' notice and before the expiry of the above period, contrary to law sealed their godowns. After that Messrs Firdous addressed another letter dated 8-9-76 to the Commissioner of the Institution stating therein, that they had a personal meeting with him on 7-9-76, when he had ordered the unsealing of the godowns and staying of any further action subject to the payment of Rs. 5,000 (which amount was deposited by them), and subject to furnishing a bank guarantee for the balance amount. It was also stated that they undertook to produce the record from 1967 to 1972/73 within three days for verification. It was also pointed out that the godowns contrary to his order were not unsealed. The attention was also invited to the fact that the consignment of 440 bags was to be exported which was in the godowns sealed by the Director and that the steamer was already in the port for loading the above consignment. Thereafter, Messrs Firdous through their letter dated 9-9-76 forwarded a bank guarantee of Rs. 75,000 as per order dated 8-9-76 passed by the Social Security Court in the appeal filed by them. After that there was some further correspondence between Messrs Firdous and the Institution. Mr. Sarwana, Advocate has stated at the Bar on behalf of the Institution that the Institution had issued several letters to Messrs Firdous asking them to produce account books and Institution to vouchers etc., as was promised by them, for the purpose of enabling the institu--petition to assess the amount of contribution. The letters referred to by Mr. Sar--wana, Advocate have not been filed either before the Social Security Court or along with the Memo. Of appeal in this Court. On the other hand, Mr. Nizam Ahmed, Advocate for Messrs Firdous submitted that as the matter was sub--judice before the Social Security Court since 8-9-76 there was no occasion for Messrs Firdous to produce the account books and the vouchers etc. Before the Institution. Be that as it may, the above controversy has no relevancy in view of the impugned judgment dated 27-6-77 passed by the Court below referred to hereinbelow. It may be pertinent to mention here that Messrs Firdous in the appeal filed by them in the Social Security Court (namely, Appeal No. 11/763had challenged the Institution's demand for contribution on the payments made for the following items; (1) Leave encashment. (2) Sick leave and casual leave. (3) Amenities to Labour. (4) Rewards. (5) Subsidy to canteen. The Social Security Court in its impugned judgment has held that Messrs Firdous are liable to make contribution in respect of the Items Nos. 1 and 2 referred to hereinabove but they are not liable to make any contribution in respect of the Items Nos. 3, 4 and 5, mentioned hereinabove. In consequence thereof the Social Security Court has set aside the notice order dated 21-8-76 and dated 25-8-76 issued by the Director of the Institution referred to hereinabove. The Court has also directed the Institution to examine the records and to make a fresh assessment of the Social Security contribution payable by Messrs Firdous in respect of the above two items. The Social Security Institution, being aggrieved by the above judgment of the Social Security Court No. 1 disallowing the claim for the contribution in respect of the above items filed Miscellaneous Appeal 23/77, whereas Messrs Firdous being aggrieved by the above judgment of the Social Security Court by disallowing their objections to the Items Nos. 1 and 2 referred to hereinabove filed Miscellaneous Appeal No. 26/77 in this Court. " `Wages' means remuneration for service paid or payable in cash or in kind to a secured person not being less than remuneration based on the minimum rates of wages declared under the
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Minimum Wages Ordinance, 1961 (XXIX of 1961) without taking into account of deductions for any purpose, under a contract of service or apprentice--ship, expressed or implied and shall be deemed to include any dearness allowance or other addition in respect of the cost of living and any payment by the employer to a secured person in respect of any period of authorised leave, illegal lock-out or legal strike ; but does not include--- (a) any payment for overtime ; or (b) any sum paid to the person employed to defray special expenses entailed by the nature of his employment ; or (c) any gratuity payable on discharge ; or (d) any sum paid as bonus by the employer. A perusal of the above definition shows that any remuneration for services paid or payable in cash or in kind to a secured person which is not less than the remuneration based on the minimum rates of wages declared under the Minimum Wages Ordinance, 1961 (XXIX of 1961) shall be construed as wages without taking into account any deduction for any purpose under a contract of service or apprenticeship express or implied. It also provides that the wages would also include dearness allowance or other additions in respect of the cost of living and any payment by the employer to a secured person in respect of any period of (a) authorised leave, (b) illegal lock-out, (c) legal strike. At the same time the above definition excludes from its ambit four items specified therein and provides that the wages do not include---- (a) any payment for overtime, or (b) any sum paid to the person employed to defray special expenses entailed by the nature of his employment, or (c) any gratuity payable on discharge, or (d) any sum paid as bonus by the employer. (a) Leave encashment. (b) Payment for the festival holidays. (c) Payment for sick leave and casual leave, It has been contended by Messrs Khurshid Anwar Shaikh and Nizam Ahmed, Advocates that the payment for leave encashment is not covered by the definition of wages. According to them the definition covers a payment made for the authorised leave and not any payment made for not availing of the authorised leave. It has also been urged that the above item is covered by the exception (o) mentioned in clause (30) of section 2 of the Ordinance, namely, any payment for overtime. The contention of the learned counsel is that the payment for the leave period to an employee who has not availed of the same is in the nature of payment for overtime and not wages. The above contention is devoid of any force as the word `over--time' has a definite meaning. As there is no definition provided for the above word in the Ordinance or the rules/regulations framed thereunder I will have to refer to the ordinary meaning of the above term given in the various dictionaries. In this connection I may refer to the Shorter Oxford English Dictionary, Vol. II, third Edn. Where the word `overtime' has been defined as; "Time worked over and above the regular hours ; extra time." Reference can also be made to Oxford English Dictionary (Reprinted Edition of 1961) where the above term has been defined as follows;---- "Time during which one works over and above the regular hours ; extra time." From the above definitions, given in the above dictionaries it is clear that the work done by an employee during the regular hours of a day though during the period in which he was entitled to leave cannot be covered by the term 'overtime'. If an employee is liable to pay a contribution for the authorised leave period, it will be an unreasonable interpretation to say that he is not liable on the amount of wages which he has paid to his employee for the work done by him during the
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above period. The above item, namely, leave encashment, has been the subject-matter of discussion of a judgment of this Court given by a learned Single Judge in the case of Messrs Quadri Brothers Foundary do Workshop, Karachi v. Sind Employees' Social Security Institution, Karachi (PLD 1977 Kar. 112), where his Lordship Mr. Justice Z. A. Channa in para. 18 has observed as follows;----- "So far as the second item in the respondent's letter of 8th June 1973, is concerned, namely leave encashment, the amount in question was paid by the workmen for the period of leave which they had earned or was due to them. According to the definition of "wages" in the Ordinance, it includes, payment to workmen in respect of any period of authorised leave. The leave encashment being payment in respect of period of authorised leave, whether such leave was actually' taken or not, would thus amount to "wages" for the purpose of the Ordinance and "contribution" was, in my opinion, rightly levied thereon." I am in respectful agreement with the above observation of his Lords hi and I am also of the view that the item of leave encashment is covered within the ambit of the definition of wages given in the Ordinance. In this connection it may also be pertinent to refer to the ruling of our Supreme Court in the case of Sind Employees' Social Security Institution v. Messrs Dawood Cotton Mills (PLD 1977 SC 177), wherein my Lord the present Chief Justice while discussing the term "wages" with reference to clause (30) of section 2 of the Ordinance has been pleased to observe as follows;---- "This definition accords with the dictionary meaning of the term "wages" which is construed as the amount paid periodically, specially by the day or week or month, for time during which workman or servant is at employer's disposal. The word 'remuneration' as used in the definition means, according to the Oxford Dictionary, a reward payable for service rendered. It would be seen that the rendering of service, or at least the availability of the employee at the disposal of the employer for service, is an essential requirement or pre-requisite for the payment of wages. The definition by including payments made by the employer in respect of any period of illegal lock--out or legal strike has indeed given effect to the principle that during these periods the employee must be deemed to be available for service with the employer. By specifically including the payment made for any period of authorised leave, the definition accorded a statutory status to this payment as if it were included in every contract of service." If we examine the payment for the leave encashment keeping in view the above observation of our Supreme Court, it becomes clear that the payment for leave encashment is nothing but wages for all intents and purposes. Mr. Nizam, Advocate has also contended that in any case the payment for leave encashment is in the nature of a bonus and, therefore, it is excluded by sub-clause (d) of clause (30) of section 2 of the Ordinance. The above contention is also devoid of any force inasmuch as the accepted meaning of the term 'bonus' as interpreted by the various Courts is, that it is generally an annual payment made by an employer to his employees either under a contract or under a statutory provision. The original concept of the payment of bonus was that it was an ex gratis payment by an employer to his employee, but this view stands modified in view of the various pronouncements made by the various Courts, holding that bon generally is no longer a bounty or an ex gratia payment by an employer. It is generally either a contractual payment or a payment under the statutory provisions. In Pakistan section 10-C of the Schedule to the West Pakistan Industrial and Commercial Employment (Standing Orders) Ordinance (VI of 1968) provides payment of bonus compulsorily in case an employer earns profit, during a year. Reverting to the payment for the festival holidays, it was contended by Mr. Khurshid Anwar Shaikh, Advocate thatthe item is also excluded from the definition of wages given in the Ordinance by implication. It is well-established principle of construction of a statute that nothing can be implied in a clear and unambiguous provision of it and, therefore, this item cannot be excluded by any implication. As a matter of fact the payment for festival holidays is on the same footing as any
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payment for lea v encashment. An employer makes payment for the festival holidays to hi employees because the employees could not avail of the leave which they were entitled to. The employees instead of having a leave on any working day opt to work and to encash their leave. This payment is made by the employer at the rate of normal wages for any other day and, therefore, it cannot be contended that the payment for festival holidays is in the nature of compensation for festival holidays, which might have fallen on a day which is already a regular holiday. The payments for casual leave and sick leave are also akin to the payment for leave encashment and festival holidays and I am of the view that they) are also covered by the definition of wages given in the Ordinance. In these case also an employee opts to encash casual and sick leave instead of availing of the same which he was entitled to, as a matter of right. In other words the employee works during the casual and sick leave period and receives normal wages in addition to the payment for the leave period. I, therefore, hold that the Institution was justified in claiming contribution from the appellants mills in respect of the above items. Messrs Khurshid Anwar Shaikh and Nizam Ahmed learned counsel for the appellants mills have also relied upon the case of Messrs Pakistan Tobacco Co. Ltd. v. Pakistan Tobacco Company Employees' Union, Dacca and others (PLD1961SC403) (relevant portion at page 417), 'Muhammad Yousus v. Central Board of Revenue, Government of Pakistan and others (PLD1964SC113) (relevant portion at page 119) and contended that this Court while interpreting the provisions of the Ordinance should give reasonable construction and should also keep in mind that though the Ordinance is a beneficial legislation but at the same time it is a taxing legislation and should be construed strictly. There cannot be any quarrel for the proposition that a reasonable construction i, should be placed to the provisions of an enactment but the contention that the Ordinance is a taxing piece of legislation is not correct. Mr. Justice Yaqoob A.I Khan (My Lord the then Chief Justice of. Pakistan) in the case of Messrs Kohinoor Chemical Co. Ltd. Referred to hereinabove had observed that, the contribution under the Social Security Ordinance was in the nature of a fee and not a tax. The relevant observation is at p. 211 of PLD 1977 SC which reads as follows;--- "It was stated from the bar by the learned counsel for the employer, respondent herein, that the workers employed at the Head Office have all along been provided, under an agreement, some of the services which the respondent would have rendered to them had they been registered with it under the West Pakistan Employees' Social…
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