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Petitioner: SHAFIQUDDIN MOINEE VS Respondent: FEDERATION OF PAKISTAN through Secretary, Ministry of Human Resources Development, Islamabad and 2 others
Court Name: Sindh High Court Judge(s): Omar Sial, Munib Akhtar Title:SHAFIQUDDIN MOINEE vs FEDERATION OF PAKISTAN through Secretary,
Ministry of Human Resources Development, Islamabad and 2 others Case No.: C.P. No, D-1313 of 2013 Date of Judgment:2018-02-12 Reported As: 2018 PLC (C.S.) 1183, 2018 CLD 1088 Result: Order accordingly Judgment ORDER MUNIB AKHTAR, J.---This order applies to the petitions referred to in para 35 below. they raise various issues in relation to or arising out of the Companies Profits (Workers' Participation) Act, 1968 ("1968 Act" on "Federal Law") and the Sindh Companies Profits (Workers' Participation) Act, 2015 ("Sindh Act" or "Provincial Law"). The issues pertain mainly to the interaction and applicability of these two statutes. The issues also overlap in the sense that while some petitions raise only or the other issue, in some multiple issues arise. On 19.09.2017, with the assistance of learned counsel, an attempt was made to particularize and specify the various issues so that matters could be streamlined for case management purposes. The order made on that date in C.P. D-1313/2013 (treated as the lead petition for case management) provided in material part as follows: "This is a large bunch of connected petitions, which arise out of and as a consequence of, the 18th Amendment to the Constitution, whereby the Concurrent Legislative List was omitted. For present purposes, it may be noted that there was a federal law in the field being the Companies Profits (Workers' Participation) Act, 1968 ("Federal Law") and it is common ground that this law was, in its pith and substance, related to an entry on the Concurrent Legislative List. As a result of the omission of the said List, that legislative competence, previously concurrent, passed exclusively to the Provinces, but of course in relation to the Islamabad Capital Territory and such areas of Pakistan which do not form part of a Province, it continues to remain vested in the Federation. It appears that in exercise of the legislative competence, the Sindh Assembly has enacted the Sindh Companies Profits (Workers' Participation) Act, 2015 ("Provincial Law"). This Act provides that it is to be deemed to have effect from 01.07.2011 and that date appears to have been selected with
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reference to, or on account of, Article 270AA(8) of the Constitution. For purposes of the order being made today, and by way of a recapitulation, it suffices to note that it appears that in all material respects the Federal Law and Provincial Law are in the same terms. Those terms, in brief, were and continue to be that if a company makes profits during the relevant year, 5% has to be distributed for the benefit of workers. This distribution comprises of two parts. One part is to be distributed directly to the workers of the company according to a certain formula as set out in both Acts (which formula also appear to be in the same terms), and (the second part) in case there is any amount left over from the 5% profits after application of the formula, then such balance is to be paid over for the benefit of workers at large. In terms of the Federal Law as well as the Provincial Law, the balance is to be paid into certain worker welfare funds established under certain other legislation that, prior to the 18th Amendment, used to be exclusively federal, but is now both federal and provincial under respective statutes. Thus, on an overall basis, the schemes under the federal and provincial legislation for present purposes can be regarded are the same, i.e, the workers of the company are entitled to a certain amount and any balance is to be paid over into a common pool for the common welfare of labor. At this stage, the learned Additional Attorney General interjected to express certain reservations. So noted. After the 18th Amendment these petitions [came to] be filed since it appears that there was some confusion or at least ambiguity as to how the balance amount was to be dealt with. Various orders were made from time to time in these petitions. The overall effect of those orders, and subsequent developments, is such that for present purposes the petitions can now be regarded as falling into various categories. In the first category comes petitions where it appears that the concerned company has made and has been making payments to its own workers as per their entitlement, whether under the Federal Law or the Provincial Law, and in such cases it is the balance amount that has been deposited with the Nazir of the Court under interim orders. Therefore insofar as this category of petitions is concerned, neither the company nor its own workers have any claim to the amount that is lying with the Nazir and it appears that the only dispute, if any, is between the Federation and the Province. At this stage, learned counsel appearing in some of the petitions interjected to express certain reservations. So noted. There is a second category of petitions in which it appears that the concerned company and/or the relevant Board (constituted under the Federal Law or the Provincial Law) has been depositing the entire amount of 5% profits with the Nazir of the Court with the result that the workers of such company have not received anything at all. There is a third category of cases (which may overlap with the other categories stated above) in which the company concerned has trans-provincial operations and there is therefore a dispute as to whether such company is liable to make payment of 5% profits only under the Federal Law or under the Provincial Law or. both. There is a fourth category, which comprises of only one petition being C.P. No,D-1162 of 2012, in which learned counsel for the company states that although on account of interim orders, certain amounts have been deposited with the Nazir of the Court, the company in fact made a loss for the relevant year(s) and that therefore nothing whatsoever was payable by the company either in terms of the Federal Law or the Provincial Law and that entire amount is to be returned to the company. The order being made today shall not apply in respect of this company. There is possibly also a fifth category, again comprising of only one petition, but at this stage, it is not necessary to delve further into this aspect. As is clear from the foregoing resume, the issues involved in these petitions, even if overlapping, are of a somewhat divergent nature, and although these petitions are being listed together, for purposes of hearing some further division or category will be necessary.
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Having considered the matter, we make the following order.... Insofar as the companies that fall in the third category are concerned ... [on] the next date, hearing shall commence in respect of these companies and category of cases/petitions, i.e., in order to determine whether these companies fall under the Federal Law or the Provincial Law or both. Learned Counsel for the petitioners and respondents in such cases, as well as learned Additional Attorney General and learned AAG may prepare themselves. ...." 2. Thus, as directed in the aforesaid order, hearing commenced in respect of the third category described above, and this order deals with the issue raised in respect thereof. That category concerns companies involved in "trans-provincial" operations. For present purposes, a "trans- provincial company" can be regarded as being a company that, regardless of where its registered office is located, has business operations, undertakings, offices and/or workers in this Province as well as other Provinces and/or the Islamabad Capital Territory. The question that requires determination therefore is this: which of the two statutes applies in relation to a trans-provincial company? 3. Learned counsel appearing for the various private parties in the petitions took different and, as will be seen, divergent views as regards the question in issue. The learned Additional Attorney General and learned counsel for the FBR/Department argued in favour of the 1968 Act applying as a federal law to trans-provincial companies. The learned Additional Advocate General Sindh and learned counsel appearing for the Government of Sindh (in its Labor Department) argued for a result that would make the Sindh Act applicable. Given this somewhat diffuse position, we regard it simplest to note the submissions of learned counsel in the order that they appeared before us. 4. Learned counsel who appeared for the petitioner in C.P. D-1313/2013 referred to the 1968 Act and in particular to sections 2(f) and 3(b) thereof. Learned counsel referred to certain amendments that were made in the definition of "worker" in section 2(f), which amendments had been made by various Finance Acts and were challenged as being ultra vires for that reason. Learned counsel submitted that after the 18th Amendment the Sindh Assembly enacted the Sindh Act. Reference was made to the definitions section and to clauses (b) and (h) thereof. With reference to the former, learned counsel drew attention to sub-clause (ii) and submitted that the Sindh Act applied to trans-provincial companies also as long as the registered office was located in Sindh. Referring to the scheme of both Acts learned counsel submitted that there could be some dispute with regard to the sharing, between the Federation on the one hand and the Province on the other, of the excess distributable profits as per the scheme set out in the schedules to both the Acts. However, that was a question separate from the one being heard by the Court. With reference to the Sindh Act, learned counsel submitted that the words "in Pakistan" in section 2(d) thereof were omitted by an amending Act passed by the Sindh Assembly in 2017, which also made certain other amendments. Reference was also made to the judgment of a learned Full Bench of this Court reported as KESC and others v. NIRC and others PLD 2014 Sindh 553, 2015 PLC 1 (herein after referred to as the "KESC case") with regard to the position of trans-provincial companies. Learned counsel submitted that there were two categories of such companies that were relevant for present purposes. Firstly, there were those that were registered in Sindh but also did business and had workers outside the Province. In respect of such companies learned counsel submitted that the Sindh Act applied. The second category covered the converse situation i.e., companies that were registered outside of Sindh but also did business and had workers in this Province. Learned counsel submitted that insofar as this category was concerned, the 1968 Act continued to apply. Thus, according to learned counsel, section 2(b)(ii) of the Sindh Act would apply only to those companies that constituted the first category as described by him. 5. Learned counsel appearing in C.P. D-7940/2015 submitted that the company involved in this petition was registered in Sindh, but in respect of its workers outside of the Province the Sindh Act
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did not apply and it was the 1968 Act that would apply. Insofar as the workers in Sindh were concerned, learned counsel submitted that there were two possibilities. One was that the entirety of the distributable profits (being in the case of both Acts 5% of the profits made by the company) be distributed amongst the workers in Sindh (since the company was registered in this Province). The second possibility was that it was only that percentage of the distributable profits that represented proportionately the workers in Sindh that was to be distributed to the said workers in terms of the Sindh Act. Learned counsel also drew attention to paragraph 15 of the scheme (which has an equivalent in the 1968 Act) and the possibility of the division or splitting up of the Fund in terms of the said paragraph. 6. Learned counsel appearing in C.P. D-3227/2017 submitted that the majority of the workers of the company involved in this petition were located in Sindh. Learned counsel submitted that the Sindh Act would apply. Learned counsel. appearing in C.P. D-2336/2015 submitted that the real question was what was the nature of the law? Learned counsel submitted that it was concerned with giving a share of the profits made to the workers of the company. Learned counsel drew attention to Standing Order 10-C (of the Industrial and Commercial Employment (Standing Orders) Ordinance, 1968) in terms of which bonuses are paid to workers. 7. The learned Additional Attorney General submitted that the Sindh Act applied to companies registered in Sindh and obliged them to distribute a certain amount of their profits (i.e., the aforementioned 5%) to the workers. However, it was submitted that in respect of a trans-provincial company it was only the 1968 Act that applied, and it was submitted that that was the situation in respect of such companies regardless of the place where the registered office was located. Referring to section 7(2) of the Sindh Act the learned Additional Attorney General submitted that it provided for a mechanism for settling disputes between the company and any worker as regards matters arising under the statute, and provided that the dispute was to be settled in the same manner as provided for in the Payment of Wages Act, 1936. Referring to the position of workers located outside Sindh, of a company registered in this Province, the learned Additional Attorney General submitted that in such a situation the workers would be entitled to the dispute resolution mechanism as applicable in the Province where they were located. To hold that the Sindh Act applied also to such workers would require them to submit to the fora only in Sindh. This was not only untenable but would also work in a discriminatory manner, in violation of Article 25 of the Constitution. The learned Additional Attorney General emphasized that the Sindh Act would not apply to trans-provincial companies since uniformity was required and thus the Sindh Act applied only to a company registered in Sindh and having workers only in this Province. In relation to trans- provincial companies the 1968 Act continued to apply. Referring to the KESC case, the learned Additional Attorney General made reference to paras 14 and 15 thereof and submitted that the judgment did not rest on the fact that the federal statute there considered had been enacted after the 18th Amendment. 8. Learned counsel who appeared in C.P. D-1275/2013 adopted the submissions made by the learned Additional Attorney General and in addition drew attention to the territorial nature of provincial legislation Insofar as trans-provincial companies and operations were concerned, learned counsel submitted that that would require inter-provincial coordination and hence the matter would come within the exclusive domain of Parliament. In this regard reliance was placed on entry No,27 of Part I of the Federal List, insofar as it provides for "inter-provincial trade and commerce" and also on entry No,13 of Part-II, newly added by the 18th Amendment and which provides for "inter-provincial matters and coordination". Learned counsel also referred to entry No,31 of Part-I which relates to corporations as well as the entry No,58. Learned counsel also placed reliance on Articles 37(e) and 38(a), which form part of the Principles of Policy and submitted on a combined reading of all of these constitutional provisions that in respect of trans-provincial
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companies, it was the 1968 Act that would apply. Referring to the American Constitution learned counsel submitted that the jurisprudence of the US Supreme Court with regard to the Commerce Clause should be applied to the aforementioned portion of entry No,27 and in this regard placed, reliance on a recent decision of the Supreme Court reported as Sindh Revenue Board and another v. Civil Aviation Authority of Pakistan 2017 SCMR 1344. Learned counsel referred to various paragraphs from the judgment relying in particular on subpara (c) of para 43 thereof. Learned counsel also referred to the Australian Constitution where the legislative powers of the federal Parliament are listed in section 51. Reference was made to clause (xx) of this section, which relates to "corporations". Learned counsel referred to certain decisions of the High Court of Australia and relying on the same submitted that on this basis too, the 1968 Act insofar as it applied in respect of trans-provincial companies was, in its pith and substance, relatable to entry No,31 of Part-I of the Federal Legislative List. On such basis learned counsel submitted that as regards trans-provincial companies it was only the 1968 Act that applied and not the Sindh Act. 9. Learned counsel who appeared in C.P. D-1313/2013 for the company submitted that it had employees all over the country. Learned counsel submitted that the concept of a trans-provincial company was not to be found in the 1968 Act but originated in the post-18th Amendment scenario and found legislative expression in the (federal) Industrial Relations Act, 2012. Referring to the KESC case, where this statute was under consideration, learned counsel placed reliance on paras 18 and 19 thereof. Learned counsel submitted that if the Sindh Act were to apply, the result would be that the entire profits would have to be disbursed among the workers of the company in this Province, to the manifest detriment of the workers in other Provinces. It was for this reason that, according to learned counsel, in respect of trans-provincial companies the matter was relatable to entry No,58 of Part-I of the Federal List as held in the KESC case. Hence it was the 1968 Act that applied. 10.Learned counsel who appeared in C.P. D-2336/2015 and certain other petitions (appearing in all the petitions for the company concerned) submitted that the true question was whether the legislation in question (i.e. both the 1968 Act and the Sindh Act) was in its pith and substance a law that related to labor, or a law relating to corporations and providing for distribution of a certain percentage of the profits to the workers. If the former then, learned counsel submitted, the pith and substance would relate to entry Nos, 26 and/or 27 of the erstwhile Concurrent List (which had been omitted by the 18th Amendment) and the matter would now fall exclusively within the provincial domain. However, if, as learned counsel contended was the case, the pith and substance of the legislation related to the latter category then the relevant legislative entry would be entry No,31 of Part-I of the Federal List and hence fall exclusively in the federal domain. It was contended that the 1968 Act, being an existing law within the meaning of Article 268, fell in the exclusive federal domain by reason of entry No, 31 and since that position had not been altered by the 18th Amendment, the legislative competence continued to be exclusively federal in nature. In this regard learned counsel also referred to the preamble of the 1968 Act. On a specific query from the Court, learned counsel accepted that on his submissions the result would be that the Sindh Act would fail and be ultra vires the Constitution in its entirety, since it would relate in its pith and substance to a legislative competence that always had been, and continued to remain, exclusively federal in nature. Learned counsel also referred to certain case law in support of his submissions. 11.Learned counsel who appeared in C.P. D-3111/2013 and in another petition submitted that the resolution of the issue before the Court lay not in determining whether the registered office of the company was in this Province or elsewhere but rather, where was the industrial undertaking located? Learned counsel, referring to the position in C.P. D-3111/2013 submitted that the registered office of the company there was located in the Islamabad Capital Territory but its industrial undertaking was located in this Province. Thus, according to learned counsel the Sindh Act applied in respect of this company. In the other petition in which he appeared, learned counsel submitted
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that both, the registered office of the company as well as the industrial undertaking were in Sindh and all of its workers were also in this Province. However, learned counsel submitted, in all of these factors the only one that was of relevance and which had to be applied was the location of the industrial undertaking. That, according to learned Counsel, was the determining factor. On that basis in this petition also it was the Sindh Act that applied. 12.Learned counsel who appeared for the Labor Department of the Government of Sindh submitted that both the 1968 Act and the Sindh Act in their pith and substance related to nothing other than the welfare of labor, and thus were relatable to entry No, 26 of the erstwhile Concurrent List. On such basis learned counsel submitted that prior to the 18th Amendment the legislative competence had been concurrent but was now exclusively provincial in nature. Insofar as trans- provincial companies were concerned, learned counsel submitted that there was an appearance of a discriminatory effect but that the problem would be resolved if both statutes were interpreted in a manner that had nexus with the the purposes of the legislation, that being the welfare of workers. Learned counsel submitted that since the legislative competence was now purely provincial (and insofar as the Federation was concerned, vested in it in respect of any part of Pakistan not forming part of a province) the statutes had also to be so interpreted as had nexus with the territory in which they respectively operated. Thus, learned counsel submitted that the Sindh Act applied in respect of only the workers in Sindh but, and this was of importance, that this was true regardless of where the office of the company was registered and/or whether its operations were trans-provincial in nature or not. Similarly, the 1968 Act, which had ceased to apply in this Province with the enactment of the Sindh Act but continued to apply (although now as purely provincial legislation) in the other three Provinces would so apply in respect of the workers of a company as were located in each respective Province. Again, this would be regardless of whether the registered office or industrial undertaking of the company was in that Province. Finally, according to learned counsel, the 1968 Act would likewise apply as federal legislation in the Islamabad Capital Territory, but now only as a legislative competence vesting in the Federation by reason of Article 142(d) of the Constitution. Referring to the Sindh Act, learned counsel submitted that the deletion of the words in Pakistan" that were earlier to be found in section 2(d) by the amending Act of 2017 made no substantive difference. 13. Summing up her submissions, learned counsel submitted that the proper resolution of the question now before the Court lay in reading down the Sindh Act such that it only applied to a company's workers in Sindh, in the manner as noted above. Thus, for example, if a company had 10% of its workers in this Province, then it was 10% of the distributable profits (i.e., of the aforementioned 5%) that would be distributed in Sindh, and the Sindh Act would apply accordingly. The balance would be distributable to the workers in the other Provinces as per the proportion of the workers in each respectively, and likewise in respect of the Federal Capital Territory. Here the distribution would be in terms of the 1968 Act but it would now only operate as provincial legislation. However, learned counsel submitted with reference to the Sindh Act, that this submission was subject to one point namely that related to paragraph 1 of its Schedule, where the scope of the scheme was set out. Learned counsel submitted that that paragraph served only as a basis for determining whether a particular company came within the scope of the Act or not, and hence the requirement given in clause (1) thereof, namely that the number of workers employed by the company at any time during the year had to be hundred or more, was not to be applied as meaning only the workers actually in this Province but the workforce in its entirety, wherever located. Learned counsel submitted that such reading of this particular provision did not run contrary to the principle of territoriality of provincial legislation. Likewise, in respect of the "industrial undertaking" referred to in paragraph 1, learned counsel submitted that that could, for similar reasons, be located anywhere in Pakistan. Learned counsel further submitted that even if, as
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contended by some of the other learned counsel, Parliament had legislative competence over trans-provincial companies (a submission that learned counsel did not accept), the 1968 Act itself could not be regarded as applying to such companies. This was so…
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