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Petitioner: UNITED BANK LIMITED through President VS Respondent: SHAHMIM AHMED KHAN and 41 JUDGMENT
Court Name: Supreme Court of Pakistan Judge(s): Saeeduzzaman Siddiqui, Kamal Mansur Alam, Sh. Ijaz Nisar Title:UNITED BANK LIMITED through President vs SHAHMIM AHMED KHAN and 41
JUDGMENT
Reported As: PLD 1999 Supreme Court 990 Result: Appeal allowed Judgment JUDGMENT ' SAIDUZZAMAN SIDDIQUI, J.---We intend to dispose of above-mentioned 42 civil appeals filed with the leave of this Court by a common judgment as the questions of law and facts raised in these appeals are identical dated 6-10-1998 and they also arise from the one and the same leave granting order. 2. The respondents in the above appeals were the employees of United Bank Limited (hereinafter to be referred to as 'the Bank.). On 9-10-1997 the bank enforced a compulsory retrenchment scheme to reduce the strength of staff which reacts as follows:-- "As you are aware, U.B.L. Is passing through the most critical period in its history. In order to turn around the Bank and eventually restore it to its former glory the management has decided to go through with the right sizing of its operations. ' The Bank is overstaffed and without reducing the number of employees, long term health and survival of the bank cannot be attempted, muchless ensured. The management has, therefore, decided to reduce the number of officers and executives by following a uniform, nondiscriminatory criterion i,e, the junior most in each category are being asked to go. ' The Bank has, therefore, reluctantly taken the painful decision, in exercise of its right under Rule 15(1) of the United Bank Limited (Staff) Service Rules, 1981, to retrench from service of the Bank all officers/executives (except those in the Computer Division) who came into their present grade on or after October 1, 1991. As a gesture of goodwill, and in lieu of notice period, in exercise of powers conferred by Rules 15, it has been decided to pay the retrenched employees, upon termination, the following benefits:
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(1) An amount equal to three months Basic Pay for each completed year of service or one and a half months Basic Pay for each remaining month of service, whichever, is less, subject, however, to a maximum of 90 months' Basic Pay. (2) An amount equal to ten years normal postretirement medical Annual Monetary limit presently available to retiring officers and executives, in lump sum, as final settlement in respect of medical facilities. (3) An amount equal to the Benevolent Fund Grant for ten years, in lump sum, in advance at the time of settlement of dues, as final payment. (4) Leave Encashment facility equivalent to 50% of leave balance, subject to a maximum of 180 days. (5) (a) For officers and executives under the Old Retirement Benefits Option:--The employee's balance and the Bank's contribution towards his/her. ' Provident Fund and profit thereon, plus Gratuity @a one month's Basic Pay for each completed year of service. (b-1) For officers and executives under the New Retirement Benefits Option and who have competed 25 years of service. ' Employees General Provident Fund contribution balance including profit thereon and 50% commutation of Gross Pension with mpnthly payment of remaining pension under the rules. (b-2) For officers and executives under the New Retirement Benefits Option and who have not completed 25 years of service; ' Employee's General Provident Fund contribution balance including profit thereon and, as a special case and without creating a precedent payment of 50% Commutation of Gross Pension as a full and final settlement. Option for those qualifying retirement: ' Staff members whose services have been terminated under this action and who have completed 25 years of service in the Bank, may at their discretion, opt for conversion of their retrenchment into early retirement under clause (18) of the Bank's Service Rules. Such staff members should forward their request, indicating that they waive their right to receive the above benefits and instead would like to avail of the normal retirement benefits of the Bank. Conditions of eligibility: ' The executives/officers who have obtained unauthorized overdrafts or who are absent without leave for a period exceeding 90 days or against whom disciplinary action in respect of any act of misconduct involving theft, fraud, forgery, misappropriation, dishonesty, causing wilful loss to the bank, or embezzlement, is pending or is likely to be initiated within the next 30 days, shall not be entitled to the benefits under this Scheme. They shall be entitled only to the substantive pay for the period of notice as per Rules. They may, however, appeal to the President of the Bank within 40 days of the date of this Circular, submitting their explanation in respect of circumstances alleged against them. The competent Authority may, after taking into consideration the charges, the explanation and such other documentary record as he may deem relevant, absolve the employee of the charges and consequently allow him/her the benefits of this Scheme. Residential Facilities ' Residential Facilities for six months after retrenchment, if provided, and sale of furniture already provided, shall also be allowed as a special case to all those executives, who are retrenched. Income-tax Deduction ' As per C.B.R. Circular No,1 of 1965, termination benefit amounts shall be taxed as separate block or item of income at the average rate of tax applicable to each recipient during the three preceding years. If the salary of an employee was not taxable during the last three years, no tax would
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become payable by him/her on the said compensation. As per rules on the subject, income-tax will be deducted at source. It is, however, clarified that tax liability is responsibility of the employee. Other terms and conditions: (1) This scheme is applicable to all officers and executives including those on leave. (2) While computing the length of service, the period exceeding six months will be treated as full year. (3) The period of extraordinary leave without pay will not be counted for purpose of calculation of any benefit under this Scheme. (4) For Home based officers and executives posted in overseas branches/offices benefits under this Scheme will be calculated on the basis of their Basic Pay, as admissible to them in Pakistan in Pak Rupees. Payment of Benefits after adjustment of Employee Liabilities: ' All loans and other liabilities outstanding against the staff member would be liable to be adjusted prior to any disbursement under the above Scheme. These are being worked out and would be advised individually to the affected employees. In the meantime, all such officers and executives are advised to return the bank's assets in their possession, such as cars, equipment, etc. (excluding furniture and fixture items allowed at residence) to expedite their individual settlement. Because of embargo placed on the Bank by the Ministry of Finance on purchase of new cars, departing officers/executives are required to return all Bank cars with immediate effect. Excluded from the withdrawal are executives of the rank of Senior Vice-President and above who elect to take the retirement option and, thus, may exercise their option to purchase the car from the Bank as per existing rules. Help Line for further information: ' Help Lines have been set up at Head Office to answer questions regarding this matter, and to provide information and clarifications. ' Where questions cannot be answered immediately, for instance, when data has to be gathered from others sources, every attempt will be made to provide a response as soon as possible when calling the Help Line, please provide your full name, employee number, and designation and location of last assignment in the Bank. Employees may use the following channels of communication to reach the Help Line:-- By telephone:111-999-444 By fax: 111-329-825 By post: GPO Box No,4613, Karachi. ' The decision to retrench valuable staff resources has been taken after detailed analyses of the present situation in the Bank. In the interest of its survival and future viability, the bank was left with no other option but to take this action. The Bank is conscious and appreciative of the services that retrenched employees have put in and would like to wish them success in their future endeavours. (Sd.) (ABDUL GHAFOOR), Executive Vice-President. (Sd.) (KHALID A. SHERVANI), Senior Executive Vice-President. ' As a result of the above retrenchment scheme, services of 5416 employees of the Bank were terminated which included Senior Executive. Vice-Presidents, Executive Vice-Presidents, Senior Vice-Presidents, Vice-Presidents, Assistant Vice-Presidents and Officers of the Bank serving in Grade-I to Grade-Ill. Out of the total 5416 retrenched employees, 42 are respondents, in the above
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appeals before us, and we have been informed by the learned counsel for the respondents that about 1000 appeals filed by the retrenched employees are presently pending before various Benches of Service Tribunals throughout Pakistan. In order to understand the controversy arising in the above appeals in its true perspective, it necessary to refer here briefly the background of these cases. 3. United Bank Limited was established in the year 1968 as a corporate entity. It was nationalised on 1-1-1974. For the last several years, the Bank suffered continuous losses as would appear from the balance-sheets issued by the Bank. In the year 1995, the Bank suffered pre-tax losses of 510 millions, which were increased to 1523 millions in the year 1996. Among others, one of the reasons discovered for the above losses was overstaffing of the Bank. Accordingly, in July, 1996 the Bank appointed Nexus Group an independent management consultants to carry out the study for reorganisation of the Bank. As a result of the study carried out by the Nexus Group, about 8 thousand employees in the Bank were found in excess. However, in order to reduce and minimise the effect of retrenchment, the management decided to reduce the work strength of the staff in the Bank by 5416 employees only. The bank, accordingly, decided to retrench only those employees who joined the Bank service in each cadre on 1-10-1991 on the principle of 'last come first go'. To give effect to this decision of the Bank, the Retrenchment Scheme reproduced above, was circulated amongst all the employees of the Bank. The respondents, whose services were terminated as a result of the above Retrenchment Scheme, challenged their termination from service before the Service Tribunal in appeals. The learned Service Tribunal, through a detailed judgment, declared the termination of the service of respondents as without lawful authority and directed their reinstatement in service. Leave was granted in the above appeals to examine the following questions of law arising in these cases:-- "In support of the above petitions Raja Muhammad Akram, learned counsel for the petitioner bank, has inter alia contended as under:-- (i) That in spite of the fact that the respondents were deemed to be civil servants for the purpose of the Act, they remained employees of a corporation and, therefore, in the absence of any statutory rules the relationship between the petitioner and the respondents was that of the master and servant. In this respect reliance has been placed on he cases of Raizuddin v. Chairman, Pakistan International Airlines Corporation and 2 others (PLD 1992 SC 531) and United Bank Limited v. Ahsan Akhtar and other (1998 SCM R 68). (ii) That the petitioner bank was entitled to downsize the number of the staff in view of the economic stress. Reliance was placed on the case of K. Rajendran and others v. State of Tamil Nadu and others (AIR 1982 SC 1107, para. 35 at page 1120). (iii) That the petitioner bank was entitled to re-organize its business in order to run it more efficiently and if in the above process some members of the staff have become redundant, it was entitled to terminate their services. Reliance was placed on the case of Zeal Pak Cement Factory Ltd., Hyderabad v. The Chairman, West Pakistan Industrial Court, Lahore and others (PLD 1965 SC 420). (iv) That the learned Tribunal has enunciated various points of law in the impugned judgment contrary to the law enunciated by the superior Courts. (v) That the Tribunal erred in ordering the reinstatement of the respondents in the above terms. ' On the other hand Messrs Akram Sheikh, Abid Hassan Minto and Abdul Majeeb Pirzada counsel for the respondents have vehemently urged that though there may be some error on the )cart of the Tribunal in enunciating the legal position on the various points, but the conclusion, namely, that the Scheme was illegally applied to the respondents, was correct. According to them, the Scheme was inter alia violative of Article 25 of the Constitution and also was in breach of the principle of natural justice.
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' We are inclined to grant leave to consider as to whether the impugned judgment is in consonance with the law enunciated by this Court." ' We have heard the learned counsel for the appellant as well as respondents at length. 4. The Hon'ble Service Tribunal set aside the termination of respondents from service on the following grounds:-- (i) That the termination of service of respondents was in violation of the principle of audi alteram partem as they were not issued any show-cause notice before termination of their service; (ii) That while terminating the service of respondents, the principle of "last come first go" was not followed in strict manner inasmuch as the persons who were promoted to the higher cadre a few days before the enforcement of Retrenchment Scheme, were not allowed to continue or given option of reversion to the lower cadre from which they were promoted while applying the above principle of retrenchment; (iii) that as a result of introduction of section 2-A, in the Service Tribunals Act, 1973 (hereinafter to be referred as 'the Act') the employees of the Bank were to be considered as persons in the service of Federation Who will be governed by the provisions of Civil Servants Act and other service laws applicable to such employees instead of application of the principle of Master and Servant; (iv) That the losses suffered by the Bank were not on account of overstaffing but were mainly attributable to non-recovery of the loans and that the employment of consultants by the Bank, after the termination of services of 5416 employees, on inflated salaries goes to show that the action of the Bank was not in good spirit. 5. The learned counsel for the appellant in support of the above appeals has contended that in view of the continuous losses suffered by the Bank and the fact that in order to save the Bank from a total collapse, Federal Government had to inject a huge amount, the Retrenchment Scheme introduced by the Bank was fully justified. It is contended that the Bank being a commercial organisation and a corporate entity had the right to run it on commercial consideration and to give effect to it, it was entitled to reorganise its working including retrenchment of the overstaffed employees. It is also contended that as the termination of service of respondents did not carry any stigma, no show-cause notice was necessary to terminate their services. In the alternative, it is contended that under the Service Rules of the Bank, the management had the right to terminate the services of employees by giving them either 3 months' notice or pay in lieu of that period and as such the question of giving any notice to the respondents before termination of their employment or hold an enquiry, was totally irrelevant. It is lastly contended by the learned counsel that by virtue of introduction of section 2-A in the Act only a right of appeal became available to an aggrieved employee before the Service Tribunal. This, however, did not mean that the terms and conditions of service of the employees of the Bank ceased to be operative and provision contained in the Civil Servants Act and other Service Rules applicable to State employees generally extended to them automatically. It is contended by the learned counsel that in spite of the fact that the employees of the Bank were declared civil servants by virtue of insertion of section 2-A in the Act, they continued to be governed by the terms and conditions of their service framed by the Board of Directors of the Bank and, therefore, the relationship of Master and Servant continued to be applicable to them. 6. Mr. Abid Hassan Minto the learned counsel for respondents in Civil Appeals Nos.1506 to 1516 of 1998 has raised following contentions while supporting the impugned judgment of Service Tribunal:-- (i) That although section 2-A has been introduced in the Act, it has two distinct and separate parts. First part of section 2-A relates to the declaration of service of employees of the Bank as Service of Pakistan while the second part relates to the conferment of right of appeal on the employees of the Bank before the Service Tribunal;
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(ii) that the retrenchment of employees under the scheme framed by the appellant has no nexus with Rule 15 of United Bank Limited (Staff) Service Rules, 1981 (hereinafter to be referred as the Rules') which deals with individual termination of an employee. It is, accordingly, contended that rule 15 (ibid), had no application to the present cases; (iii) that the retrenchment carried out by the appellant Bank in not covered by any statutory or other provision and, therefore, it could only be considered as having been done under the policy decision of the Government which was circulated on 12-8-1997; (iv) that the retrenchment of the employees by the Bank being fully covered by the policy ,decision of the Government, dated 12-8-1997 it could only be on voluntary basis as laid down in the circular of the Government and, therefore, its compulsory application by the appellant was contrary to the policy laid down by the Government. ' In addition to the above contention, Mr. Abid Hasan Minto, the learned counsel for the respondents, very vehemently contended that the case-law relied by the learned counsel for the appellants in support of his contention that by virtue of section 2-A (ibid), the respondents were to be treated in service of Pakistan only for the limited purpose of availing of the remedy of appeal before the Service Tribunal is not to be taken into consideration as in the cited cases, the contentions now raised by the appellant were not considered. It is also contended by the learned counsel that in view of the fact that the Bank employees. Were deemed to be in the service of Federation, by virtue of the provisions of section 2-A of the Act, the principle of Master and Servant would not be applicable in these cases. It is contended by Mr. Minto that if the intention of Legislature was only to confer right of appeal before the Service Tribunal, it could simply provide that the Bank employees will be deemed to be civil servants for the purposes of the Act instead of declaring them in the Service of Pakistan. The Federal Government having declared the service of respondents with the appellant as Service of Pakistan, the intention of Legislature was not limited only to treat them in the Service of Federation for the limited purpose of availing remedy of appeal before the Service Appeal. ' Mr. Abdul Mujeeb Pirzada, the learned counsel for respondents in Civil Appeals Nos. 1487 to 1505 of 1998 while supporting the above contentions of Mr. Abid Hussan Minto, contended that the respondents were treated in a discriminatory manner by appellant inasmuch as while in the other Financial Institutions namely, Habib Bank Limited, National Bank of Pakistan, Investment Corporation of Pakistan and State Bank of Pakistan the employees were offered Golden Hand Shake Scheme on voluntary basis, the respondents were given no such option under the Scheme of Retrenchment enforced by the appellants. It is contended by Mr. Mujeeb Pirzada that the termination of services of respondents was in total disregard of principle of natural justice as no opportunity was given to the respondents to explain their position before terminating their services under the Retrenchment Scheme. It is also contended by Mr. Pirzada that while enforcing Retrenchment Scheme, the principle of Last in First go was not followed inasmuch, the date of appointment of respondents in the service was not kept in view while terminating their services. The learned counsel contended that the principle of retrenchment could not be made applicable in the cases as no posts were abolished by the appellant while the respondents were thrown out of service. It is contended by the learned- counsel that the whole exercise of retrenchment of appellant was mala fide as only those employees were targeted who were employed by the previous Government. ' Mr. Muhammad Akram Shaikh, the learned counsel for other appellants while adopting the contentions of the counsel who preceded him, contended that the relationship of Master and Servant was no more applicable after the introduction of section 2-A in the Act. It is contended by Mr. Shaikh that in view of the scope of sections 4 and 5 of the Act, the Service Tribunal was fully competent to order reinstatement of terminated employees into service and therefore, principle of
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Master and Servant could not be made applicable to the proceedings before the learned Tribunal. Mr. Shaikh contended that the right to employment in a public sector undertaking is a fundamental right guaranteed under Article 9 of the Constitution and, therefore, while depriving a person employed in such an undertaking a very high standard of fairness and equity coupled with the principle of natural justice should have been followed. The learned counsel contended that the Service Tribunal recorded a finding that the employees of the Bank have been discriminated and this being the finding of fact, is not open to be gone into or scrutinized by this Court while hearing an appeal under Article 212 of the Constitution. The following cases were cited at the bar during the course of hearing of these appeals:- (1) Pakistan Petroleum Workers' Federation v, Burma-Shell Oil Storage & Distributing Co. Of Pakistan Ltd. (PLD 1961 SC 479); (2) N. Ramanatha v. State of Kerala (AIR 1973 SC 2641); (3) K. Rajendran v. State of Tamil Nadu (AIR 1982 SC 1107); (4) J. K. Iron and Steel Co, v. Mazdoor Union (AIR 1956 SC 231); (5) Muir Mills Co, v. Suti Mills Mazdoor Union (MR 1955 SC 170); (6) House Building Finance Corporation v. Inayat Ullah Shaikh (1999 SCM R 311); (7) United Bank Ltd. And others v. Ahsan Akhtar 1998 SCM R 68; (8) Muhammad Mahibullah v. Chaman Lal (1994 SCM R 222); (9) Pakistan and others v.Public-at-Large (PLD 1987 SC 304); (10) Raziuddin v, Chairman, P.1. A. Corporation (PLD 1992 SC 531); (11) Establishment Secretary v. S.A.M. Wahidi (1998 SCM R 1985); (12) Abdur Rahman v. Ghulam Rasul Tanvir (PLD 1987 SC 45): (131 WAPDA v. Muhammad Arshad Qureshi (1986 SCM R 18): (14) Syed Aftab Ahmed v. K.E.S.C. (1999 SCM R 197); (15) Pakistan v. General Public (PLD 1989 SC 6); (16) 1.A. Sherwani v. Government of Pakistan (1991 SCM R 1041); (17) lnamur Rehman v, Federation of Pakistan (1992 SCM R 563); (18) Delhi Transport Corporation v. D.T.C. Mazdoor Congress (AIR 1991 SC 101). (19) Mrs. M,N. Arshad v. Miss Naeema Khan (PLD 1990 SC 612); (20) Walayat Ali Mir v. Pakistan International Airlines Corporation (1995 SCM R 650); (21) Board of Trustees, Port of Bombay v. Dilipkumar (AIR 1983 SC 109); (22) Olga Tellis v. Bombay Municipal Corporation (AIR 1986 SC 180); (23) Federation of Pakistan v. Public-at-Large (PLD 1988 SC 202); (24) Yick Wo v. Hopkins (1885) 118 US 356; (25) Slaughter-House Cases (83 US 36); (26) R.v. Civil Service Appeal Board, ex parte Bruce (1988) 3 AELR 686; (27) Gunton v. London Barough of Richmond upon Thames (1980) 3 AELR 577; (28) N.B.P. v. Punjab Labour Appellate Tribunal (1993 SCM R 105); (29) State v. Qaim Ali Shah (1992 SCM R 2192); (30) Government of Baluchistan v. Aziz Ullah Memon (pL,D 1993 SC 341); (31) Federation of Pakistan v. Muhammad Nazir (1998 SCM R 1081); (32) Mian Muhammad Nawaz Sharif v. President of Pakistan (PLD 1993 SC 473); (33) Zeal Pak Cement Factory Ltd. v. Chairman, West Pakistan Industrial Court (PLD 1965 SC 420); (34) Vrajlal M. & Co. v. State of M.P. (AIR 1970 SC 129) and (35) Anisa Rehman v. P.I.A.C. (1994 SCM R 2232). ' We will refer some of these cases during the course of our discussion at appropriate stage, which are relevant to the discussion.
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7. The main controversy in the above appeals revolves around the interpretation of section 2-A, which has been introduced through an amendment in the Act. Section 2-A has been introduced through Service Tribunals (Amendment) Act XVII of 1997, dated 10-6-1997 and…
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