The Industrial Relations Advisers,

Management & Labour Laws Consultants

 

Room 3, 1st floor, Falaknuma Building, Near The Laboratory & Haroon Radio, Abdullah Haroon Road, Karachi

Phone: 2727266 & 2729770 Fax: 2729770 (SM Iqbal) Cell: 0333-2314892 Email: iqbalblund@hotmail.com 

 


 

 

                    No. C-80                                                      Date: 25-08-2001

 

CIRCULAR

 

Claim by the Employers of Return/Refund of Contribution taken illegally by S.E.S.S.I in view the latest decision of the  Supreme Court

 

1-  Originally under Section 2(8)(f) and the then Section 20(4)(a) of the Provincial Employees Social Security Ordinance, 1965 there were the Wage limit of Rs. 500/- p.m. and Rs. 20/- per day respectively. On exceeding this limit the employees went outside the Scheme of the Ordinance and no Contribution was payable in respect of such employees.

 

2- The said Limit was raised to Rs. 1,000/- p.m. by amendment on 23-12-1975 but inadvertently the Wage limit of Rs. 20/- p.d. under Section 20(4)(a) instead raising correspondingly to Rs.40/- p.d. remained unchanged. The employers could have taken benefit of this but they paid Contribution on Wages in excess of Rs. 20/- p.d. till the employee did not go outside the Scheme by exceeding the Wage limit of Rs. 1,000/- p.m. However S.E.S.S.I on 14-05-1981 raised this limit to Rs.40/- p.d. by a Gazette Notification dated 14-05-1981 and on 27-07-85 the said Wage limit was raised to Rs. 1,500/- p.m. and Rs. 60/- per day respectively.

 

3-  Some controversies were raised by the Sindh Employees Social Security Institution which eventually went to the Supreme Court and it also included  liability of payment of Contribution by the employers and the same were decided by the Supreme Court on 20-10-1987 reported at PLD 1988 SC 1, S.E.S.S.I v/s Dawood Cotton Mills Ltd. according to which and as understood by all including the S.E.S.S.I the employees went outside the Scheme on exceeding the Wage limit given under section 20(8)(f) and no contribution was payable in respect of such employee and the same was followed by S.E.S.S.I and the employers.

 

4- Late in  1991 using the said decision of the Supreme Court, S.E.S.S.I started claiming that the employee did not go outside the Ordinance even if  exceeded the then Wage limit of Rs.1500/- p.m. or Rs. 60/- p.d. but he would still be covered and no Contribution would be payable on so much wages of the employee in excess of Rs. 1,500/- p.m. or Rs. 60/- p.d. due to which a large number of cases went to the Social Security Court and the Sindh High Court. In the meanwhile by further amendment the said Wage limits were raised to Rs. 3,000/- p.m. and Rs.120/- p.d. A Single Bench of the Sindh High Court in 1997 PLC-473 the view of S.E.S.S.I briefly accepted but another bench in the case reported at 2000 PLC-62 accepted the employers view. About three dozen cases were heard and decided by another Single Bench of the Sindh High Court accepting the view/contention of S.E.S.S.I which is reported at 2001 PLC 245. Several employers and S.E.S.S.I went to the Supreme Court against both the decisions bearing No.CA-879, 880, 882, 346, 347, 348, 357, 349 to 356/2001 which has decided these cases by its common Order/decision announced on 27-07-2001.

 

5-  The Hon’ble Supreme Court has clarified its said decision reported at PLD 1988 SC 1 and held that the employee on exceeding the Wage limit of Rs. 1,500/- p.m. in Section 2(8)(f) did not qualify to be an employee under the Ordinance, he went outside the Ordinance/Scheme and no Contribution was payable in respect of such employee till the Labour Laws (Amendment) Ord. 1993 (25-09-1993) and Labour Laws (Amendment) Act, 1994 (13-01-1994) which repealed and substituted the Amendment Ordinance of 1993 raising the Wage limit to Rs. 3,000/- p.m. or Rs. 120/- per day.

 

(N.B: By the said Amendment of 1993 & 1994 the employees whose wages were Rs. 3,000/- p.m. or Rs. 120/- p.d. or who are subsequently appointed on wages exceeding Rs. 3,000/- p.m. or Rs. 120/- p.d. were/are not covered by the Ordinance but if an employee who is covered by the Ordinance evenafter the said amendments of 1993 & 1994 and subsequently his Wages exceed Rs. 3,000/- p.m. or Rs. 120/- p.d. he still remains covered but no contribution would be payable on his so much of wages as is in excess of Rs. 3,000/- p.m. or Rs. 120/- p.d.)

 

The Supreme Court in this decision also repelled/rejected the contention of S.E.S.S.I that the amendments of 1993 & 1994 raising the Wage limit of Rs. 3,000/- p.m. and a Proviso has retrospective effect and once again reiterated its said decision at PLD 1998 SC. 1.

 

6- From this decision of the Supreme Court it is clear that misinterpreting the decision of the Supreme Court and making the employers to pay Contribution in respect of all such employees who had exceeded the Wage limit of Rs. 1,500/- p.m. or Rs. 60/- p.d. prior to the said amendments of 1993 & 1994 was illegal and all such employers are entitled to claim Return/Refund of all Contribution paid by them to S.E.S.S.I for such employees including any Increase of 50% paid by them on such contribution for any period. Such claims be made by the employers as soon as possible but within 6 months from 27-7-2001 to avoid use of the limitation of 6 months given in Section 25 of the Ordinance by S.E.S.S.I. The employers who have to make such claim may write an interim letter to S.E.S.S.I stating that they have such claim, working out the amount and would submit detail statement soon after working out the amount of their claim of Return/Refund of the amount which be submitted as soon as possible.

 

7- This decision of Supreme Court may be seen on our Web Site given above on this Circular. Please feel free to seek any further clarification.

 

 

 

 

                                                        (S. M. Yaqoob & S. M. Iqbal)

                                                                    Industrial Relations Advisers &

                                                                        Labour Laws Consultants