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Petitioner: ADAMJEE COTTON MILLS, KARACHI VS Respondent: SIND EMPLOYEES' SOCIAL SECURITY JUDGMENT
Court Name: Sindh High Court Judge(s): Durab Patel Title:ADAMJEE COTTON MILLS, KARACHI vs SIND EMPLOYEES' SOCIAL SECURITY
JUDGMENT
Reported As: 1974 PLC 213 Result: Appeals allowed Judgment JUDGMENT Both these appeals turn on the proper construction of the definition of wages in the West Pakistan Employees' Social Security Ordinance, 1965 (hereinafter called the said Ordinance). The appellants in both appeals admit their liability for the payment of contributions under section 20 of the said Ordinance but they do not accept liability for these contributions for a few days in the month of June 1972, and for a few days in the month of July 1972. All the learned counsel state in this connection that mills in Karachi and in Landhi were closed for those few days in June 1972 on account of industrial unrest and similarly mills were closed for a few days in July 1972, because of the language riot. Nonetheless during both these disturbances the appellants paid full wages to their workmen. However, as according to them these payments were made on an ex gratia basis in pur--suance of the Provincial Government's order, the contention of the appellants is that these ex gratia payments were not wages within the meaning of the said Ordinance, therefore they did not pay the 6 % contribution on these ex gratia payments to the Surd Social Security Institution, which is the first respondent in Miscellaneous Appeal No. 13 of 1974 and the sole respondent in the other appeal. I shall refer to it as the respondent, and it not only directed the appellants to pay contributions under section 20 on these ex gratia payments, but also imposed heavy penalties on them for not having paid these contributions. The appellants therefore challenged the respon-- dent's orders in appeals before the Social Security Court at Karachi, but as these appeals were dismissed by identical orders on 11-2-1974, they have come in appeal to this Court under section 64 of the said Ordinance.
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2. As the question is of the construction of the definition of "wages" in section 2 (30) of the said Ordinance, I would first quote it. The definition reads as follows: "Section 2(3)."Wages" mans 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 Minimum Wages Ordinance, 1961 (XXXII of 1961), without taking account of deductions for any purpose. Under a contract of service of 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; of (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." It would be convenient to compare this definition with the ordinary meaning of the word, and I would quote here, the definition in the Concise Oxford Dictionary. This Dictionary defines a "were" as "the amount paid periodically, especially by the day or week or month, for time during which workman or servant is at employer's disposal". I have deliberately I selected the definition from the Concise Oxford Dictionary, because it throws better light on the ordinary man's concept of a were. That" concept, as defined long ago by the economists, is that a were is tile price for hiring labour, therefore, the liability to pay this price would, in the absence of a contract or law to the contrary, cease on the workman withdrawing his labour, and at the same time, the definition excludes the idea of any ex gratia payment. Indeed such a payment is the very antithesis of the ordinary grammatical meaning of the word were. But with reference to my observation that liability for wages ceases when the workman withdraws his labour, I would make it clear that a workman might be entitled, under his contract, to paid holidays, sickness allowances etc. Thus under the Factories Act, which was erected more than a generation ago, a worker employed in a factory was entitled to holidays on Sundays with full pay but, with the advance of welfare legislation, workmen now enjoy more earned leave and allowances. However payments in this respect are payments to which workmen are entitled under their contracts of employment, and although this is the result of the statutory modification of such contract, such payments are only the quid pro quo for the services rendered by workmen to their employers. 3. I now turn to the definition in the said Ordinance, and, according to Mr. Sarwana, it had to be construed liberally, because the said Ordinance WAS a piece of welfare legislation, and if it was so construed, it was were enough to include an ex gratia payments. But as, according to the diction-- aries, an ex gratia payment is a payment made as an act of grace, it is contrary to the very concept of a were, therefore learned counsel's submission implies that the definition is an artificial definition and that there is some ambiguity in it. 1 would now examine the definition but I must first observe that when the meaning of words in a statute is clear, the Court must construe them according to their ordinary meaning. The definition states: "Wages means remuneration for service paid or payable in cash or in kind . . . . ." Mr. Sarwana relied on the word "remuneration", but, according t:; the Oxford Dictionary, it only means "a reward pay for service rendered". However, in view of the stress placed on this word, I have examined the law, and I would refer here to a passage from the judgment of a very eminent common law Judge in J. B. Saunders v. The Postmaster General ((1875) 1 K B 658) The question there was of the construction of an English Statute under which very officer and clerk of a telegraph company was entitled to compensation on the basis of his salary and remuneration. Blackburn, J. Observed with reference to the difference between salary and remuneration as follows:
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"But I think the word "remuneration" is a wider term and means a quid pro quo. If a man gives his services, whatever consideration he gets for giving iris services seems to me are muneration for them." Thus even though the word remuneration is a word of were import, .Asp submitted by Mr. Sarwana, it cannot include any ex gratia payment. But Mr. Sarwana pointed out that the definition of wages included dearness allowances and payments in respect of the cost of living. That is true, but these allowances are part of the remuneration to which a workman is entitled under his contract of employment. That the liability for such allowances, may have been imposed by law does not as I have explained, alter the fact that those allowances are a part of the contract of employment to which a workman is entitled as a reward for his services. Thus this part of the definition also does not mark a departure from the ordinary meaning of the word wages. Finally, the definition includes payments for periods of authorised leave, illegal lock-outs and legal strikes. I pointed out earlier that a payment for authorised leave is a part of a workman's contract o employment, therefore it is only the quid pro quo for the service rendered by him. Thus this provision also does not enlarge the ordinary meaning of the word "wages". But merely clarifies what is, in the context of modern legisla- -tion, a necessary implication of the ordinary concept of wages. Then, as to the liability for illegal lock-outs, a workman's contract is like any other contract, and would therefore be suspended when the workman withdraws his services unilaterally in a manner not contemplated or permitted by the contract, But, on the other hand, as wages are the remuneration for a contract for service, if the employer prevents a workman from rendering his services, the employer would be liable to pay wages, and the reference to illegal lock-outs in the definition only clarifies this obvious position, because an illegal lock-out means that the employer has illegally prevented a workman from working. Obviously therefore even this provision does not enlarge the definition of wages, but appears to have been included in the definition for abundant caution and in order to prevent unnecessary litigation. Finally, there is a reference to legal strikes, and this provision also appears to have been inserted for abundant caution, because a legal strike means that the workman was justified in suspending his services, with the further result that this suspension was not in breach of the contract of employment. But this means the definition has not made any departure from the ordinary concept of wages, nor is there any ambiguity in it, and it merely clarifies that the employer's contribution under the said Ordinance is to be calculated not on the basis of wages simplicitor but on the basis of real wages as specified in the definition. 4. It is true that the definition does not expressly refer to the type of situation, which has arisen in these appeals, namely, a strike, which has neither been declared illegal nor legal. Therefore the question of the employer's liability under such a situation has to be determined by reference to the basis meaning of wages, which is that it is the amount due to a workman for his services. Therefore, if a workman unilaterally withdraws his services, prima facie this would be a suspension of the contract, which would in turn suspend the employer's obligation to pay wages, in the absence of any provision to the contrary in the relevant contracts of employment or in some law. But the respondent does not, in support of its claim, rely on any terms in the contracts between the appellants and their workmen. Further, on my enquiries, Mr. Sarwana stated that the respondent did not rely on any other law but only on the fact of payment by the appellants, and the fact that the appellants had not only paid their workmen wages but also their allowances. But all these payments were ex gratia, and an ex gratia payment B is a payment made as an act of grace, whilst the payment of a were is payment of what is due to a workman, therefore even if the appellants paid wages as well as allowances for the disputed periods, this could not convert ex gratia payments into payments made in the discharge of a legal obligation. 5. I must not however be understood to mean that a payment is ex gratia merely because some one who is an interested party says so.. The question is always one of fact. But here it is admitted
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that the payments were made in pursuance of the Government's orders or requests, which however had no legal sanction whatever, therefore, as the payments were made for periods during which the workmen of the appellants had not worked, they were prima facie ex gratia payments which cannot fall under the definition of wages. 6. Mr. Sarwana therefore referred me to a judgment of this Court in Writ Petition No. 329 of 1969. This petition had been filed against the respon--dent to challenge its order that good attendance and other similar allowances paid by the petitioner to its workmen were wages under the said Ordinance, the petitioner admitted that its workmen were "entitled to receive these allowances just as they would be entitled to other wages" therefore the petition was dismissed. Thus, as there was no question of any ex gratia allowances, the judgment is irrelevant to these appeals, but I may point out that it supports me in my view that a were consists of what a workman is entitled to. Mr. Fazeel on the other hand referred me to a case in Watan Mills v. E.S.I. Corporation (AIR 1956 Born. 336). The question there was of construing the meaning of wages in the Indian Employees State Insurance Act, 1948 under which the employer had to pay, a contribution for labour welfare on the basis of the wages paid, and, according to the respondent, the amount paid by the appellant to workmen for lay-of compensation under some other Statute was wages within the meaning of the Employees State Insurance Act. Thus this plea was almost identical to that of the respondent before me, and Chagla, C. J. Observed (in para. 5 of the judgment as under): "If the contract is not suspended and if the mutual obligations between the employer and the employee continue, then he cannot render services to the employer will not derogate from his right to receive wages from the employer. A subsisting contracts of employment results in there being obligations upon the employer and also upon the employee and also certain rights as between the employer and the employee. The obligations are that the employer is bound to pay wages and the employee is bound to serve. The rights are that the employer is entitled to claim from the employee that he should render services. The right of the employee is that if he is prepared to serve he would have the right to receive the wages stipulated. But if the contract of employment is suspended, then there is no obligation upon the employee to serve the employer, nor is there a reciprocal obligation upon the employer to pay wages." I now turn to para. 7 on which Mr. Fazeel relied "The Government Pleader's contention is that during the period of the lay-of the relationship of master and servant-continues between the employer and the employee and for this purpose he relies on the fact that the name of the employee is maintained in the muster roll, that he got to present himself every day at the employer's office, that he i3 bound to accept alternative employment, and it is only if all these terms are satisfied that he is entitled to compensation." Thus it will be seen that -on a similar statute the respondent's contention was the same as that of Mr. Sarwana in the appeals before me. But in rejecting it, Chagla, C. J. Observed. "In the first place, the definition of "wages" emphasises the fact that it is remuneration paid or payable to an employee if the terms of the contract of employment, express or implied, were fulfilled. Therefore, it is clear that it is not every payment by the employer, which would come within this definition. It must be a payment, which would be remuneration, and remuneration must mean that it is payment for services rendered or to be rendered by the employee. It is perfectly true that in fact the employee may not render services and yet the payment made to him would be wages. That would be the case-where the employee would be ready and willing to render services, would be under an obligation to render services, and yet he may not do so because the employer for any reason does not give him an opportunity to render those services. But under this definition it is clear that if in fact no services are rendered and if in fact there is no obligation upon the employee, to render services, then whatever also the payment by the
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employer may be it would not be remuneration. Further, under this definition the payment must be made as a result of the terms of the contract being fulfilled and if the payment is made when the terms of the contract are not fulfilled then clearly the payment would not satisfy this definition." 7. I agree with Mr. Fazeel that these observations support his sub--mission. But Mr. Sarwana submitted that the definition construed in the case cited was different from that in the instant case. That is correct, but the difference is not material to the question of the legal consequence of an ex gratin payment, because both the definitions are in consonance with the ordinary meaning of the word wages. And further the ratio of the case, which is contained in para. 5 of the judgment, is that an employee's liability for wages is suspended when the contract of employment is suspended. That follows from the very concept of wages, in the absence of any contractual or statutory provision to the contrary. But as Mr. Sarwana did not rely on any provision in the contract or in any other law, the failure of the workmen of the appellants to work during the two disturbed periods of June and July 1972 amounted to suspension of their contracts of employ--ment, so as to relieve the appellants of their obligation to pay wages. And D as this obligation was suspended, on the principle laid down in the case cited, the ex gratin payments cannot be treated as wages. 8. 1 would however note here that at one stage Mr. Sarwana very half-- heartedly contended that the workmen of the appellants had reported for duty during the June disturbances. The plea was advanced on the basis of the evidence of the respondents' employees, but the learned, counsel for the appellant wanted me to hold that these witnesses had given false evidence. It is significant that the respondent did n t examine any workmen in support of this plea, nor did its witnesses give the names of the workmen who were alleged to have gone to work at the appellant's mills. And the finding of the Social Security Court: which examined these witnesses, was that the workmen of the appellants were on a sympathetic strike in June 1972. When I pointed out to Mr. Sarwana that this finding amounted to a rejection of the evidence of these witnesses learned counsel dropped the plea and said that the workmen of the appellant had been prevented by Force major from working during the disturbances of June 1972. Now this plea is not only totally inconsistent with the plea that the 'workmen had reported for duty, but it is also inconsistent with the finding of a sympathetic strike, and as. It is not sported by any evidence, I reject it. 9. But would the finding about a sympathetic strike help the respon--dent's claim? According to the Social Security Court, it did, because the appellants had failed to show that a sympathetic strike was an illegal strike The attention of the Social Security Court was perhaps not drawn to the fact that an ex gratia payment did not fall within the definition of wages, and similarly the very finding of a sympathetic strike implied that workmen had with drawn their services unilaterally, therefore the burden was on the respondent to show that t As unilateral withdrawal was justified. But as the respondent did not even attempt to show that the strike was justified, it follows that the strike had suspended the contract of employment, in the absence of any term to the contrary in the contract of employment or in any other law. 10. Now I pointed out earlier that it was not contended that there was any term to the contrary in the contracts of employment; but would not Standing Order 11 of the West Pakistan (Standing Orders) Ordinance, 1968 be relevant? According to Mr. Sarwana, it was not relevant. But as Mr. Fazeel relied on it, I would point out that it relates to stoppage of work on various grounds, one of which is civil commotion. No doubt, this cannot cover a strike simplicitor, but the dispute in July 1972, relates to the period when there was curfew in Karachi. Now as Mr. Fazeel and Mr. Khurshid very fairly conceded that workmen could not break the curfew, their absence from work during the July, 1972 period was on account of causes beyond their control, therefore it can be argued that there was no suspension of the contract of employment or at least th--t tile employer could not, in conse--quence escape his liability for wages. But on, the other hand, this would mean punishing him for no fault of his own. Therefore, on first principles, the question whether the appellants were
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liable for wages during the period of curfew would have been difficult to answer. Fortunately the Legislature, in its wisdom, has struck a fair balance between the rights of the employer and of workmen. Standing Order I1 in so far as it is relevant, reads as follows "11. Stoppage of work. (1) The employer may, at any time, in the event of fire, catastrophe, break- down of machinery or stoppage of power supply, epidemics, civil commotion or other cause beyond his control, stop any section or sections of the establishment, wholly or partially for any period or periods without notice. (2) In the event of such stoppage during working hours, the workmen affected shall be notified by notices put up on the notice board The workmen shall not ordinarily be required to remain for more than two hours after the commencement of the stoppage If the period of detention exceeds one hour, tile workmen so detailed shall be entitled to receive wages for the whole of the time during which they are detained as a result of the stoppage ............... (3) In cases where workmen are laid-of on account of failure of plant, a temporary curtailment of production or any stoppage of work for reasons mentioned in clause (1) they shall be paid by the employer an amount equal to one-half of their daily wages during the first fourteen days of lay-of as compensation" Mr. Fazeel and Mr. Khurshid submitted in the alternative and without prejudice to their earlier submissions that, at the highest, half of the ex gratia payments for the period of the July 1972 curfew could fall under sub-rule (3) and were therefore not wages, because such payments were expressly rated to be in the nature of compensation. As I observed earlier, the sub-rule impresses a statutory bargain for the solution of what would otherwise have been a difficult problem and as the right thus conferred is the creature of the statute, the nature of this right can only be determined by the terms of that statute. It is described, not as wages, but as a payment equal to half of the wages "as compensation'", and further this is in sharp contrast with the provisions of sub-rule (2), which state that the workmen "shall be entitled to wages". I therefore agree with the submission that a payment under Standing Order 11 (3) cannot be treated as wages within they meaning of the definition in the said Ordinance, and this means that the F respondent's orders directing the appellant to pay contributions as well as increases on their ex gra is payments is illegal and therefore the judgments of the Social Security Court are contrary to law and are set aside. 11. Mr. Fazeel and Mr. Khurshid pressed the appeals on other grounds also. These were that the respondent's orders were illegal because they had been passed without hearing the appellants, and further with regard to the "increases" imposed under section 23 of the said Ordinance, Mr. Fazeel's contention was that this section was illegal, because it amounted to an excessive and arbitrary- delegation of power to the respondent in the matter of imposing "increases" which was nothing but another name for a fine. In view of my finding that ex gratia payments are not wages, it would not have been necessary to examine these findings but for the fact that the dispute in Miscellaneous Appeal No. 22 of 1974 also includes a further claim, which would be illegal if the appellant can resist it on the basis of these submissions. Therefore I would examine the submissions advanced, and I may point out that Mr. Sarwana denied that section 23 of the said Ordinance was illegal or that it imposed an obligation on the respondent to hear in employer before passing orders against him. But for reasons which I will presently show, Mr. Sarwana pressed this objection very feebly, and he submitted in the alternative that the objections of the appellants fell under section 57 of the said Ordinance, but because of the express provision for hearing the employer under section 58, Mr. Sarwana submitted that section 57 excluded any such right. I would therefore examine these provisions. 12. Section 23, in so far as it is relevant, reads as follows: "23. Increase of unpaid contribution and recovery of contribution, etc., as arrears of land revenue. If any employer fails to pay, on the due date the contribution payable by him' under subsection (1) of
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section 20, the amount so payable by him shall be increased by such percentage or amount as may be prescribed: Provided that in no case shall such increase exceed fifty per centum of the amount due;" Taking first Mr. Fazeel's criticism of the illegality of the section, the sub--mission is not correct, because the section prescribes that the amount payable as a contribution "shall be increased" on the failure to pay that contribution, and rules have been framed fixing the rate of the increase that can be charged, therefore no discretion has been conferred, and the argument about excessive delegation of power to the respondent is misconceived. However the section is obviously a penal provision and must be construed strictly. It is applicable in terms to the failure to pay contributions, and it would be attracted when an employer, who admits his liability for a…
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