Full Judgment Text & Judicial Ruling

2011 P L C (C.S.) 1579 [Sindh High Court] Before Munib Akhtar, J MUHAMMAD SHAHNAWAZ and 44 others Versus KARACHI ELECTRIC SUPPLY COMPANY through Company Secretary and 2 others

C.M.A. No.5422 in Suit No.815, C.M.A No.5144 in Suit No.772 and C.M.A. No.7672 in Suit No.1158 of 2010, decided on 28th July, 2011.

(a) Constitution of Pakistan---

----Art. 189---Judgments of Supreme Court---Two decisions---Interpretation of statute---If a decision of Supreme Court contains an explication of a principle of law enunciated in an earlier Supreme Court decision, then such explication in the subsequent decision is itself the enunciation of a principle of law and hence binding on all Courts in Pakistan within the meaning of Art. 189 of the Constitution (subject always to the rules regarding precedence of Supreme Court decisions as established by jurisprudence of Supreme Court itself)---Such enunciation of a principle of law in a decision of a Constitutional Court is as much "law" as is, for example a section of a statute---Interpretation of a statutory provisions by Supreme Court is an explanation of the correct legal meaning of a "law" and is binding in terms of Art.189 of the Constitution---Explanation in a decision of Supreme Court of a principle of law enunciated in Court's earlier decision is also an exposition of the correct legal meaning of a "law" namely the principle laid down in the earlier decision---Explanation given in the subsequent decision is, therefore, itself binding in terms of Art. 189 of the Constitution---Two factors need to be kept in mind by a Court that is referred to two Supreme Court decisions that stand in relation to each other, firstly the subsequent Supreme Court decision should expressly refer to the earlier decision and secondly the context in which the subsequent Supreme Court decision explicates the earlier decision is also relevant. CIT v. Oberoi Hotels (P) Ltd., I.T.A. No.13 of 2001; Union of India v. Azadi Bacho(?) Andolan (2003) 263 ITR 706 and McDowell and Company Ltd. v. Commercial Tax Officer [1985] 3 SCC 230 rel.

(b) Constitution of Pakistan---

----Art. 199(1)(a)---Expressions "person" and "functions in connection with the affairs of Federation, a Province or a local authority"---Karachi Electric Supply Company (KESC)---Status---Simply because the State has to cope with results of power shortage does not necessarily mean that an entity involved in the business of generating, distributing and supplying electricity becomes an instrumentality of the State---KESC is not a person carrying on functions in connection with the affairs of the Federation or the Province.

(c) Contract---

----Ascertainment of contract---Principles---If there is dispute over ascertainment of a contract, it is a mixed question of law and fact and is in the end a question to be decided by the Court itself---If terms of a contract have been ascertained or are not in dispute, then interpretation thereof (i.e. a determination of their true legal meaning) is also a question of law to be decide by the Court---Contract cannot normally be unilaterally varied or altered by one of the parties thereto and provisions of the contract are to be construed and interpreted objectively. Sirius International Insurance Co. v. FAI General Insurance Ltd. [2004] UKHL 54; [2005] 1 All ER 191 and Abu Dhabi National Tanker Co v. Product Star Shipping Ltd. (The "Product Star") (No 2) [1993] 1 Lloyd's Rep 397 rel.

(d) Words and phrases---

----Contra proferentem---Connotation---Any ambiguity or doubt in the scope of the power should be construed against the employer and in favour of the employee.

(e) Specific Relief Act (I of 1877)---

----Ss. 39, 42 & 54---Civil Procedure Code (V of 1908), O.XXXIX, Rr.1 & 2---Cancellation of contract, declaration and injunction---Interim injunction, grant of---Contractual employment---Termination of service---Altering terms of contract---Unilateral exercise of power---Plaintiffs were contract employees of Karachi Electric Supply Company (KESC) and the Company had unilaterally changed the terms of contract by formulating new service policy, resultantly the services of plaintiffs were terminated---Plaintiffs sought suspension of termination letter on the plea of mala fide---Validity---Stand of KESC was not that it had simply repudiated the contracts of employment but it had attempted to alter the terms and conditions of service and then purported to exercise a contractual power in terms of varied contracts---If the contractual terms and conditions were governed by previous rules that could constitute an insuperable impediment in the way of releasing the plaintiffs from employment---Allegations of mala fides as to the manner in which the new policy of service was brought about carry weight and were an additional factor to be kept in mind while considering the question of interim relief---Prima facie it did not appear that new policy was enforced in a less than transparent manner and once it was in the field even in relation to the existing contracts with plaintiffs, was immediately implemented against them; as such the same had prima facie raised a serious question about bona fides of KESC and also whether the contractual power conferred by previous service rules was invoked in good faith and honestly or was a mala fide exercise of power conferred---Plaintiffs had made out a case for interim injunctive relief and operation of termination letters were suspended---High Court directed the KESC that any arrears of salaries and other emoluments, if not already dealt with in terms of pervious order would be paid in full to plaintiff---Application was allowed. Salahuddin and others v. Frontier Sugar Mills and Distillery Ltd. and others PLD 1975 SC 244; Sukhdev Singh and others v. Bhagatram Sardar Singh and another AIR 1975 SC 1331; Pakistan International Airline Corporation and others v. Tanweer-ur-Rehman and others PLD 2010 SC 676; Pakistan Telecommunication Company Limited and another v. Muhammad Zahid and others 2010 SCMR 253; Pakistan Telecommunication Company Limited v. lqbal Nasir and others PLD 2011 SC 132; Huffaz Seamless Pipe Industries Ltd. v. Sui Northern Gas Pipelines Ltd and others 1998 CLC 1890; Muhammad Ashraf v. United Bank Limited 2009 CLD 1250; Karachi Development Authority and another v. Wali Ahmed Khan and others 1991 SCMR 2434; Pakistan State Oil Co. Ltd. v. Muhammad Tahir Khan and others 2001 PLC (C.S.) 591; Shahid Mahmood v. Karachi Electric Supply Corporation Ltd. 1997 CLC 1936; Arif Majeed Malik and others v. Board of Governors, Karachi Grammar School 2004 CLC 1029; Nooruddin Hussain and another v. Diamond Vacuum Bottle Manufacturing Co. Ltd. and another PLD 1981 Kar. 720 and Shahida Raza v. Oxford University Press 2003 PLC (C.S.) 11 ref. Salahuddin Ahmed for Plaintiffs. Abdul Sattar Pirzada and Tehreem Taj for Defendant No.1. Abdul Haleem Siddiqui for alleged contemnors. Dates of hearing: 29th March, 4th, 19th and 30th May, 2010.

ORDER MUNIB AKHTAR, J.--- The plaintiffs, who are (according to them) or were (according to the defendant No.1) the permanent employees and officers of the said defendant (hereinafter referred to as "KESC") have filed the instant suits (which are the same in all material respects) seeking appropriate declaratory and injunctive relief against the notices dated 19-4-2010 whereby their services were terminated. The admitted position is that the case of the plaintiffs is not covered by any statutory rules or regulations; their cases fall within what is still known as the law of master and servant. The principal issue raised in the suits, and therefore posed by the present applications for interim relief, if reduced to its bare essentials, is simply this: where the relationship between the employer and employee is governed by the law of master and servant, can injunctive relief be granted and if so, on what basis? This question of course, needs to be dealt with on both the legal and factual planes. The recital of the relevant facts is however, being deferred to later in the order and I proceed at once to the submissions made by learned counsel for the parties. 2. Learned counsel for the plaintiffs accepted, in my view quite correctly, that the general rule is that if the contract of employment is governed simply by the law of master and servant, then the onus lies heavily on the plaintiff to show that he has a case for the grant of injunctive relief. Learned counsel submitted that since the services of the plaintiffs had been purportedly terminated, and they were being rendered unemployed, two of the ingredients for interim relief, i.e., balance of convenience and irreparable loss and injury could easily be regarded as lying in their favour. He therefore directed his submissions towards establishing a prima facie case. Learned counsel relied on a number of decisions to which I will presently refer, but it would be more convenient at this stage to simply state his submissions as to the legal principles involved. Learned counsel submitted that the general rule that injunctive relief would not normally be given was a judicially evolved rule whereby the courts had chosen to fetter their own discretion, and there was nothing as such in law that would prevent the grant of such relief. Traditionally, according to him, the reason why courts refused to grant such relief stemmed from section 56(f) of the Specific Relief Act, 1877, which provides that an injunction would be refused to prevent the breach of a contract the performance of which would not be specifically enforced. This provision was then read with section 21(b) of the said Act, and a contract of employment was regarded as falling within the ambit of the latter provision. It was for this reason, and also because neither an employee could be foisted on an unwilling employer nor could an employer be assisted to retain an unwilling employee that the court, in its discretion, refused to grant injunctive relief. Learned counsel submitted that nonetheless there were exceptions to the general rule and in certain categories of cases, interim relief was granted. The context in which such exceptions were developed was petitions filed under Article 199 of the Constitution. Learned counsel submitted that these exceptions fell in three categories: (a) where there were any statutory provisions applicable and the services were terminated in breach thereof; (b) the termination was mala fide; or (c) the termination created a stigma on the reputation of the employee which not merely affected him generally but could also possibly prevent him from obtaining other gainful employment. Learned counsel submitted that in the last mentioned category, the rules of natural justice had to be followed. Any claim that came within one of the foregoing exceptions could, in appropriate cases, warrant interference by the court. 3. Continuing his submissions, learned counsel submitted that if an employee's services were terminated, and he sought his remedy by way of a suit, injunctive relief could be granted in the suit in the same circumstances in which such relief would be available under Article 199 of the Constitution. As is well known, a petition under Article 199 is maintainable only against a person carrying on functions in connection with the affairs of the Federation, or a Province or any local authority, i.e., the State. Thus, the case put forward by learned counsel for the plaintiffs can be stated as follows. KESC is a person carrying on functions in connection with the affairs of the State. Hence, any termination of services of its employees could, in an appropriate case, fall within one of the exceptions noted above and if so, then injunctive relief would be in order. Learned counsel submitted that the termination of the plaintiffs' services in the present cases was precisely of such a nature. He contented that the termination was both mala fide and carried such a stigma on the plaintiffs' reputation that they ought to have been granted an opportunity of personal hearing, which manifestly was not done. The relevant facts as to why, according to learned counsel, the termination was mala fide will be stated later. Insofar as the question whether KESC was carrying on functions in connection with the affairs of the State, learned counsel relied on a number of decisions, including those of the Supreme Court, and also certain American and Indian cases. The gist of the submissions on the basis of the case-law was that KESC performed essential State functions, which placed it in the position of a public functionary. Learned counsel submitted that KESC also, directly or indirectly, received a large subsidy from the State and such State benefits/aid brought it within the scope of Article 199. Learned counsel contended further that although KESC had been privatized, that did not mean that it therefore fell outside the scope of the said Article. He contended that since taxpayer money was being used to prop it up, KESC was a State entity. Since all of its functions and actions were those of the State, KESC had to be held to the same standards as applicable to other State entities and public sector corporations. He also submitted that KESC continued to remain partly owned by the State, to the extent of 27% of its shareholding. He submitted that there was a clear nexus between the impugned action, i.e., the termination of the plaintiffs' services, and the performance and discharge by KESC of its public functions, i.e., the supply of electricity to the metropolis of Karachi. Since the employees were clearly both an integral and an essential factor in and component of KESC's ability to continue performing its functions, the plaintiffs could be regarded as being, and were, in the same position as employees of State entities. Since the latter would be entitled to suitable injunctive relief in terms of Article 199, the plaintiffs were also, in the present case, entitled to such relief by means of the present suits. 4. In support of his case on the basis of mala fides, learned counsel submitted that at the material time, the terms and conditions of the plaintiffs' employment were governed by the KESC Service Rules, 2002 (hereinafter referred to as "2002 Rules"). Learned counsel submitted that the relevant provisions of the 2002 Rules placed express fetters on the power of KESC to terminate the services of its employees. (These provisions are considered in detail below.) He contended that the KESC management surreptitiously purported to substitute the 2002 Rules with a new service policy or rules in 2010 (hereinafter referred to as the "2010 Policy"). It appears that on 15-4-2010, the senior management circulated the 2010 Policy amongst the departmental heads with a covering letter that directed them to keep the new policy as secret as possible and expressly prohibited any copying of the same, and directed that an employee could have access to it only if he submitted a specific request for any information or clarification. As presently relevant, it is to be noted that the termination provisions in the 2010 Policy were quite different from the 2002 Rules and according to learned counsel, biased and tilted heavily in favour of KESC. It was on the basis of the new policy that the impugned termination letters were issued. Learned counsel questioned and challenged KESC's bona fides and submitted that if the new policy had been lawful and regular, then it should have been given effect in an open and transparent manner, by giving proper intimation and information to all the concerned employees since, after all, it was the terms and conditions of their employment that were being materially affected. The secrecy in which the new policy was cloaked, and the swift manner in which it was then executed to remove the plaintiffs from service spoke volumes about the bad faith with which KESC acted. Learned counsel also submitted in the context of mala fides that KESC had, in late 2009, approached NEPRA, the power sector regulator, for an increase in the tariff charged by it from customers. One of the justifications given for the proposed increase was the excessive burden being carried by KESC on account of its employees, including the plaintiffs. NEPRA awarded a tariff increase in December 2009. Learned counsel contended that once it had obtained this benefit, KESC then released the very employees whose retention had provided the excuse for the increase. This, according to him, clearly established the bad faith with which KESC had acted throughout. 5. Learned counsel also submitted that as a result of the termination of their services, the plaintiffs had suffered a huge stigma on their reputation, which had materially affected their chances of obtaining other gainful employment and this had been done without affording them an opportunity of hearing. Learned counsel submitted that many of the plaintiffs were nearing their retirement age and this was an additional factor that ought to be kept in mind while considering the application for injunctive relief. He submitted that for all the foregoing reasons, a proper case for interim injunctive relief had been made out. 6. Learned counsel for KESC strongly opposed the grant of any injunctive relief. He based his case squarely on the principle of master and servant and submitted that it was well settled that an unwanted servant could not be imposed on an unwilling master. In this context, learned counsel referred to the provisions of the Specific Relief Act noted above. Learned counsel contended that KESC, like any other employer in its position, was entitled to, and did have, a free choice in the matter of the appointment and discharge of its employees. He submitted that the law was well settled in this regard and, according to him, admitted to no exception in any context that could be relevant for present purposes. He strongly denied the allegations of mala fides against KESC or that the plaintiffs had suffered any loss or injury on account of any alleged stigma on their reputation. Referring to certain provisions of the 2002 Rules (which will be considered in detail below), learned counsel contended that KESC's Board of Directors had ample power to amend, alter or even to entirely substitute the service rules from time to time, and it was in the exercise of this power, lawfully granted and available, that the 2010 Policy had been formulated. It was only thereafter, i.e., once the new policy was in place, that the plaintiffs were released from service in terms thereof by the issuance of the impugned termination notices. He submitted that all policies and rules framed from time to time by KESC were applied openly and without discrimination to, as appropriate, all the concerned employees. Thus, according to him the termination notices dated 19-4-2010 were entirely proper and lawful and could not be assailed by the plaintiffs. He also placed reliance on the share purchase agreement in terms of which KESC had been privatized and the management transferred to private hands. He referred to certain clauses from the said agreement to contend that as stated therein, there was only a certain period during which KESC could not release its employees, but that that period and obligation (which had been duly honored) had long since expired. Learned counsel also submitted that since the plaintiffs' services had been terminated, any interim relief would be tantamount to creating a new situation, which was impermissible. He contended that the plaintiffs had failed to make out any case for injunctive relief and therefore the present applications were liable to be dismissed. Like learned counsel for the plaintiffs, he relied on certain case-law, including decisions of the Supreme Court, which is considered below. 7. Both learned counsel also filed written submissions in which they further elaborated their respective cases. 8. I have heard learned counsel for the parties and have examined the record with their assistance and have considered the case-law relied upon by them. The submissions of learned counsel and the case-law relied on covered an extensive area and I intend no disrespect to their industry and efforts by not taking up each and every case cited by them. In my view, the submissions made by learned counsel for the plaintiffs may be regarded as constituting two distinct, though connected, limbs. Firstly, learned counsel contended that the plaintiffs were entitled to interim relief on the same grounds on which such relief would be available in appropriate cases by way of a petition under Article 199, i.e., when the facts and circumstances of the case fell in one of the exceptions noted above. Secondly, learned counsel contended that even in terms of the law of master and servant, which operated purely on the contractual plane, the plaintiffs were entitled to relief in the present circumstances. It will be convenient to consider these submissions in the foregoing order. 9. The starting point for a consideration of the first limb of learned counsel's submissions must be whether KESC can be regarded as performing functions in connection with the affairs of the State within the meaning of Article 199. Learned counsel relied on a number of decisions of the Supreme Court and some High Court decisions, as also on American and Indian case-law in support of his contentions. Principal reliance was placed on the well known decision of the Supreme Court reported as Salahuddin and others v. Frontier Sugar Mills and Distillery Ltd. and others PLD 1975 SC 244, which contains an elaborate discussion as to what constitute the functions of the State within the meaning of Article 199. Insofar as the foreign case-law is concerned, learned counsel cited extensively from a decision of the Supreme Court of India reported as Sukhdev Singh and others v. Bhagatram Sardar Singh and another AIR 1975 SC 1331, and reference was also made in particular to two decisions of the US Supreme Court. In reply, learned counsel for KESC primarily placed reliance on Pakistan International Airline Corporation and others v. Tanweer-ur-Rehman and others PLD 2010 SC 676, where it has been held as follows:--- "12. Now let us see what is meant by expression 'performing functions in connection with the affairs of the Federation'. The expression clearly connotes governmental or State functions involving an element of exercise of public power. The functions may be the traditional police functions of the State, involving the maintenance of law and order or they may be functions concerning economic development, social welfare, education, public utility services and other State enterprises of an industrial or commercial nature. Generally, these functions are to be performed by persons or agencies directly appointed, controlled and financed by the State; either by Federation or a Provincial Government. On the other hand, private organizations or persons, as distinguished from Government or Semi-government agencies and functionaries, cannot be regarded as a person performing functions in connection with the affairs of the Federation or Province, simply for the reason their activities are regulated by laws made by the State. The primary test must always be: (i) whether the functions entrusted to organization or person concerned are indeed functions of the State involving some exercise of sovereign or public power; (ii) whether the control of the organization vest in a substantial manner in the hands of Government; and (iii) whether the bulk of funds is provided by the State. If these conditions are fulfilled, then the person, including a body politic or body corporate, may indeed be regarded as a person performing functions in connection with the affairs of the Federation or a Province, otherwise not. [see Salahuddin v. Frontier Sugar Mills & Distillery Ltd. (PLD 1975 SC 244)]." 10. It is, of course, well established that a decision of the Supreme Court or a High Court constitutes "law". Article 189 of the Constitution provides that a principle of law enunciated in a decision of the Supreme Court is binding on all courts in the country, and Article 201 likewise provides that subject to Article 189, a decision of a High Court, which enunciates a principle of law, is binding on all courts subordinate to it. In my respectful view, it necessarily follows from the foregoing principles, which are of course of the highest constitutional importance, that if a decision of the Supreme Court contains an explication of a principle of law enunciated in an earlier Supreme Court decision, then such explication in the subsequent decision is itself the enunciation of a principle of law, and hence binding on all courts in Pakistan within the meaning of Article 189 (subject always to the rules regarding the precedence of Supreme Court decisions, as established by the jurisprudence of the Supreme Court itself).…

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