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Petitioner: UNITED BANK LIMITED VS Respondent: SHAHMIM AHMED KHAN
1999 P L C (C
1999 P L C (C.S.) 1032
Present: Saiduzzaman Siddiqui, Sh. Ijaz Nisar and Mansurr Alam, JJ
UNITED BANK LIMITED through President
versus
SHAHMIM AHMED KHAN and 41 others
Civil Appeal Nos. 1487 to 1528 of 1998, decided on 25th May, 1999.
(On appeal from the judgment of Federal Service Tribunal (Karachi), dated 284‑1998 passed in Appeals Nos. 139‑K, 165‑K to 174‑K, 180‑K to 186‑K, 196‑K, 197‑K, 204‑K, 216‑K, 217‑K, 221‑K, 224‑K, 225‑K, 230‑K, 231‑K, 559‑K to 569‑K, 788, 789 and 940‑K all of 1998 respectively).
(a) United Bank Limited (Staff) Service Rules, 1981‑‑‑
‑‑‑R. 15(1)‑‑‑Constitution of Pakistan (1973), Arts.212(3) & 25‑‑‑Service Tribunals Act (LXX of 1973), S.2‑A‑‑‑Bank employees‑‑‑Compulsory Retrenchment Scheme‑‑‑Payment of benefits for retrenched employees‑‑ Orders of reinstatement of such employees by Service Tribunal ‑‑‑Validity‑‑ Leave to appeal was granted by Supreme Court to employer Bank to examine question of law as to whether, in spite of the fact, that the employees were deemed to be civil servants for the purpose of the Civil Servants Act, 1973, they remained employee of a Corporation and, therefore, in the absence of any statutory rules, the relationship between the Bank and the employees was that of master and servant; that Bank was entitled to downsize the number of the staff in view of the economic stress; that the Bank was entitled to reorganize its business in order to run it more efficiently and if, in the process, some members of the staff had become redundant, Bank was entitled to terminate their services, that Service Tribunal had enunciated various points of law in its judgment contrary to the laws enunciated by the Supreme Court; that Service Tribunal had erred in ordering the reinstatement of retrenched employees and also the continuation of respondents that even if there was some error on the part of Service Tribunal in enunciating the legal position on various points, but the conclusion, namely, that the Retrenchment Scheme was illegally applied to the employees, was correct and Scheme was, inter alia, violative of Art.25 of the Constitution and also was in breach of principle of natural justice.
Raziuddin v. chairman, Pakistan International Airlines Corporation and 2 others PLD 1992 SC 531; United Bank Limited v Ahsan Akhtar and others 1998 SCMR 68; K. Rajendran and another v. State of Tamil Nadu and others AIR 1982 SC 1107; Zeal Pak Cement Factory Ltd., Hyderabad v. The Chairman, West Pakistan Industrial Court, Lahore and others PLD 1965 SC 420 and Pakistan Petroleum Workers Federation v. Burmah‑Shell Oil Storage and Distributing Co. of Pakistan Ltd. PLD 1961 SC 497 ref.
(b) Service Tribunals Act (LXX of 1973)‑‑
‑‑‑‑S. 2‑A [as inserted by Service Tribunals (Amendment) Act (XVI of 1997)]‑‑‑Interpretation, scope and object of S.2‑A, Service Tribunals Act, 1973‑‑‑Bank employees‑‑‑Effect of S.2‑A, Service Tribunals Act, 1973 on such employees‑‑‑Provisions of S.2‑A, Service Tribunals Act, 1973 had not changed the status of the employees of the Bank into civil servant for any other purpose‑‑‑Employee of the Bank notwithstanding the fact that they were deemed to be in the Service of Pakistan and a civil servant for the purposes of Service Tribunals Act, 1973 to avail the remedy by way of appeal before the Service Tribunal in respect of their terms and conditions of service, continued to be governed by their existing terms and conditions of employment with the Bank‑‑‑Change in the forum of remedy could not alter their terms and conditions of service‑‑‑Only effect of insertion of S.2‑A, in the Service Tribunals Act, 1973 was that instead of ordinary remedy available to an aggrieved employee of the Bank in respect of his terms and conditions of service, he became entitled to take his grievance before the Service Tribunal established under Art. 212 of the Constitution, which alone could determine such dispute now.
Section 2‑A, Service Tribunals Act, 1973 which has been introduced in the Act through amendment, declares the service of any authority, corporation, body or organisation established by or under a Federal law and which is owned or controlled by the Federal Government or in which Federal Government has any share or interest, as the Service of Pakistan and every person holding a post under such authority, corporation, body or organisation, shall be deemed to be a civil servant for the purpose of the Act.
The intention of the Legislature is quite manifest. The Legislature by introducing section 2‑A, in the Act, only wanted to provide a right of appeal before the Service Tribunals to an aggrieved employee of a corporation, authority, body or organisation established under a Federal Law or which is owned or controlled by the Federal Government or in which the Federal Government has a controlling share or interest. It is significant that while section 2‑A, has been introduced in the Act which deals with the rights of appeal of civil servants, no corresponding amendment has been made in the Civil Servants Act, which determines the terms and conditions of service of civil servants. If the Legislature intended to confer on the employees of Corporation controlled by the Federal Government, the status of a civil servant, they could have provided so by introducing appropriate amendments in the relevant service laws governing the Federal Government employees. In the absence of such amendments, the laws applicable to Federal Government employees could not automatically extend to the employees of the Bank. The contention that if the intention of Legislature was only to provide a remedy :o an aggrieved employee of the Bank before the Service Tribunal, it was not necessary to declare the service of the Bank as the Service of Pakistan as this purpose could be achieved by simply declaring such employees as civil servants for the purpose of the Act, is misconceived.
The Service Tribunals established under Article 212 of Constitution of Pakistan (1973), through Act, of appropriate Legislature, has exclusive jurisdiction to take cognizance of matters relating to terms and conditions of persons who are or have been in the Service of Pakistan including disciplinary matters. Therefore, in order to oust the jurisdiction of ordinary Courts and to confer exclusive jurisdiction on the Service Tribunal in respect of matters relating to terms and conditions of service of bank employees, it was necessary that the employment under the bank be first declared to be the Service of Pakistan. The declaration in section 2‑A, of the Act to the effect that the service under an authority, corporation, body or organisation established by or under a Federal Law or which is owned and controlled by the Federal Government or in which Federal Government has a controlling share or interest, shall be deemed to he in Service of Pakistan and the persons holding any post in such authority, corporation or body were deemed to be civil servants for the purpose of the Act, was meant only for the limited purpose of conferring a right on the aggrieved employee of such organisation/corporation to avail the remedy of appeal before the Service Tribunal. Therefore, insertion of section 2‑A, in the Act did not change the status of the employee of the bank into civil servant for any other purpose. The employees of the bank notwithstanding the fact that they were deemed to be in the service of Pakistan and a civil servant for the purpose of the Act to avail the remedy by way of appeal before the Tribunal in respect of their terms and conditions of service, continued to be governed by their existing terms and conditions of employment with the bank. The change in the forum of remedy could not alter their terms and conditions of service. In spite of above declaration by the Legislature under section 2‑A of the Act that the employee will be deemed to be civil servant for the purpose of the Act, the corporate status of the bank was not affected or changed.
Before the introduction of section 2‑A, in the Act, the service of the bank employees were governed under Rules, which were framed by the Board of Directors of the Bank. The rules governing employment of the employees with the bank had no statutory backing.
The introduction of section 2‑A, in the Act, did not change the status of the employees of the Bank into civil servants in so far their terms and conditions of service were concerned. In spite of introduction of section 2‑A, in the Act, they continue to be governed by the same terms and conditions of service, which applied to them before introduction of section 2‑A, in the Act. The only effect of introduction of section 2‑A, in the Act was that instead of ordinary remedy available to an aggrieved employee of the bank, in respect of his terms and conditions of service, he became entitled to take his grievance before the Service Tribunal established under Article 212 of the Constitution, which alone could determine it now.
Mst. Zaiba Mumtaz v. First Women Bank Ltd. Civil Petition No.62‑K of 1999, decided on 6‑4‑1999 and Zeal Pak Cement Factory v. Chairman, West Pakistan Industrial Court PLD 1965 SC 420 ref.
(c) Constitution of Pakistan (1973)‑‑‑
‑‑‑‑Art. 25‑‑‑Equality of citizens‑‑‑Determination of terms and conditions of service of employees of all the financial institution in Pakistan‑‑‑Reasonable classification‑‑‑No reasonable basis can be laid down for classifying the employees of all the financial institutions of the country into one category to determine their terms and conditions of service which may be based on divergent considerations.
(d) United Bank Limited (Staff) Service Rules, 1981‑‑‑
‑‑‑R. 15(1)‑‑‑Constitution of Pakistan (1973), Art. 212‑‑‑Bank employees‑‑ Compulsory Retrenchment Scheme‑‑‑Validity‑‑‑Exercise of retrenchment of employees was undertaken by the Bank after study made with the help of an Expert Group and in the light of the findings and recommendations of the Study Group and Board of Directors of the Bank‑‑‑Bank gave effect to the Retrenchment Scheme on the basis of "last come first go"‑‑‑Bank being a commercial organisation had to be run on commercial consideration‑‑ Bank having suffered continuous losses for the last several years, it was open to the management to recognize its working to improve its commercial viability which included the right to dispense with the services of the staff which was found in excess of necessity‑‑‑No exception could be taken to the retrenchment of the employees if such an action of Bank was motivated by commercial considerations and for reasons to run the Bank on profitable lines‑‑‑Such an action could only be brought under challenge by aggrieved employees if it could be shown that the action was not based on commercial considerations on which the Bank was being run, but was motivated by some extraneous consideration‑‑‑Nothing was available on record to conclude that action taken by the Bank was based on any mala fide consideration‑‑‑So long the action of retrenchment of employees by the Bank was not opposed to any statutory provisions or it came in conflict with any settled rule of law or it was mala fide, it could not be objected to on the ground that the retrenchment could be avoided by some other alternative method by the Bank.
Zeal Pak Cement Factory v. Chairman West Pakistan Industrial Court PLD 1965 SC 420 and Parry & Co. v. Judge Second I. T., Calcutta AIR 1970 SC 1334 ref.
(e) United Bank Limited (Staff) Service Rules, 1981‑‑‑
‑‑‑‑R. 15(1)‑‑‑Bank employees‑‑‑Compulsory Retrenchment Scheme‑‑Principle of "last in first go"‑‑‑Applicability‑‑‑Service Rules applicable to employee had not provided that a person promoted to a higher post/grade continued to hold lien on the lower post and that he also had the right to revert to the lower post in event of retrenchment‑‑‑Effect‑‑‑Contention that while retrenching the employees, the Bank should have kept in view the right of reversion of employees who were recently promoted to the higher grade from the lower grade was not tenable in circumstances.
Utility Stores Corporation v. Punjab Labour Appellate Tribunal PLD 1987 SC 447 ref.
(f) United Bank Limited (Staff) Service Rules, 1981‑‑‑
‑‑‑‑R. 15‑‑‑Retrenchment‑‑‑Termination of the service of an employee is one of the modes of retrenchment‑‑‑Application of provisions of R.15, United Bank Limited (Staff) Service Rules, 1981, cannot be restricted only to the case of termination of service of an individual employee‑‑‑No specific rule having been provided in United Bank Limited (Staff) Service Rules, 1981 dealing with retrenchment, general provision of termination of service contained in R. 15 of the said Rules, was applicable‑‑‑Mere fact that as a result of retrenchment, services of large number of employees were to be terminated, would not make R.15 bf the Rules, inapplicable in such cases.
(g) United Bank Limited (Staff) Service Rules, 1981‑‑‑
‑‑‑‑R. 15(1)‑‑‑Service Tribunals Act (LXX of 1973), S. 2‑A‑‑‑Bank employees‑‑‑Compulsory Retrenchment Scheme‑‑‑Notice to employees‑‑‑Not necessary‑‑‑Employees terminated under the Retrenchment Scheme did not carry any stigma and were eligible for future employment as and when such contingency arose therefore, in terms of R.15, United Bank Limited (Staff) Service Rules, 1981, they were not entitled to any notice of hearing before termination of their employment‑‑‑Reasons of termination of service had been set out in detail in the Retrenchment Scheme, which was circulated to all the employees of the Bank in advance, therefore, employees could not urge that they were not informed of the reasons for termination of their services‑‑ United Bank Limited (Staff), Rules, 1981, which was non‑statutory in nature and not in conflict with fundamental rights of Constitution, continued to govern the service of the employees, notwithstanding the fact that under S.2‑A, of the Service Tribunals Act, 1973, their services were declared to be one in the Service of Pakistan and they were deemed to be civil servant of Pakistan and they were deemed to be civil servant, for the purposes of Service Tribunals Act, 1973.
Board of Trustees, Port of Bombay v. Dilipkumar AIR 1983 SC 109 distinguished.
(h) Service Tribunals Act (LXX of 1973)‑‑‑
‑‑‑‑‑Preamble‑‑‑Non‑statutory rules could be enforced through Service Tribunal.
Mrs. M.N. Arshad's case PLD 1990 SC 612 ref.
Delhi Transport Corporation v. D.T.C. Mazdoor Congress AIR 1991 SC 101 distinguished.
(i) United Bank Limited (Staff) Service Rules, 1981‑‑‑
‑‑‑‑R. 15‑‑‑Bank employee‑‑‑Compulsory Retrenchment Scheme‑‑‑Concept of Adal‑o‑Ahsan in Islam‑‑‑Application‑‑‑Rule 15, United Bank Limited (Staff) Service Rules, 1981, though vested the Bank with the power to dispense with the service of an employee of the Bank by serving him three months' notice or pay in lieu thereof but the Bank in Compulsory Retrenchment Scheme allowed substantial benefit to the retrenched employees, therefore, it could not be contended that the exercise of power by the Bank was opposed to the Islamic principles of Adal‑o‑Ahsan.
Federation of Pakistan v. Public‑at‑Large PLD 1988 SC 202 ref.
Bacharya Dr. Durga Das Basu; Yick Wo v. Hopkns 188 US 356 and Slaughter House's case 83 US 36 distinguished.
Raja Muhammad Akram, Senior Advocate Supreme Court and Ch. Akhtar Ali, Advocate‑on‑Record for Appellant (in all Cases).
A. Mujeeb Pirzada, Advocate Supreme Court and K. Wahab, Advocate‑on‑Record for Respondent (in C.As. Nos. 1487 to 1505 of 1998).
Abid Hassan Minto, Advocate Supreme Court for Respondents (in C. A. No. 1506 to 1516 of 1998).
Muhammad Akram Sh. Senior Advocate Supreme Court for Respondent (in C.As Nos. 1517 to 1528 of 1998).
Dates of hearing: 28th, 29th, 30th April and 3rd May, 1999.
JUDGMENT
SAIDUZZAMAN SIDDIQUI, J.‑‑‑We intend to dispose of above mentioned 42 civil appeals tiled with the leave of this Court by a common judgment as the questions of law and facts raised in these appeals are identical and they also arise from the one and the same leave granting order, dated 6‑10‑1998.
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 reads 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, non‑discriminatory 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:
(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 post retirement 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 Q 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 monthly 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 /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. l 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 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 F 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‑III. Out of the total 5416 retrenched employees, 42 are respondents, in the above 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 is 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…
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