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 IN THE SUPREME COURT OF PAKISTAN

(APPELLATE JURISDICTION)


 

             PRESENT

 

                             MR. JUSTICE SH. RIAZ AHMED

                             MR. JUSTICE QAZI MUHAMMAD FAROOQ

                             MR. JUSTICE JAVED IQBAL

 

CIVIL APPEALS No. 879, 880 & 882 OF 2000 AND 346 TO 357 OF 2001.

 

(On appeal from the judgments dated 28.9.1999 and 11.12.2000 of the High Court of Sindh, Karachi passed in Miscellaneous Appeals No. 5, 14, and 45/96 (in the first judgment) and 3/99, 4/99, 5/95, 6/95, 12/95, 13/97, 18/97, 27/97, 48,96, 49/96 and 29/95 (in the second judgment).

 

 

Cas-879, 880 & 882/2000

 

The Commissioner, Sindh Employees

Social Securities Institution and another.                        ……     Appellants.

 

                                                    VERSUS

 

1.   M/s. e.m. Oil Mills and Industries,

Ltd., S.I.T.E., Karachi.                                              (in CA-879/2000)

 

2.   M/s. Maqbool Company Ltd. Karachi.                         (in CA-880/2000)

 

3.   M/s. AGFA Gevaert Pakistan Ltd.                              (in CA-882/2000)

 

                                                                                 ……….     Respondents.

 

 

Cas-346 to 357/2001

 

1. Johnson & Johnson Pakistan

    (Pvt.), Limited, Karachi                                                (in CA-346 & 347/2001)

 

2. Reckitt Benckiser Pakistan Limited,

    Karachi.                                                                     (in CA-348 & 357/2001)

 

3. Cornpak Limited, Karachi.                                            (in CA-349/2001)

 

4. Shaheen Airport Services, Karachi.                               (in CA-350/2001)

 

5. Singer Pakistan Limited, Karachi.                                 (in CA-351/2001)

 

6. Muller & Phipps Pakistan (Private)

    Limited, Karachi.                                                         (in CA-352/2001)

 

7. National Refinery Limited, Karachi.                                (in CA-353/2001)

 

8. Aventis Pharma (Pakistan) Limited,

    Karachi.                                                                      (in CA-354/2001)   

 

9. Novartis Pharma (Pakistan) Limited,

    Jamshoro.                                                                   (in Cas-355 & 356/2001)

 

                                                                                      ……     Appellants.

 

                                                            VERSUS

 

The Commissioner, Sindh Employees

Social Securities Institution and another.                            ……. Respondents.

 

For the Appellants:                       

Mr. Khalid Habibullah, ASC.                                            (in Case 879, 880 & 882/2000)         

Mr. M. Shabbir Ghaury, AOR

 

and for respondents:                                                       

(absent)                                                                         (in Case 346 to 357/2001)

 

For the appellants:                       

Mr. Abdul Karim Khan Kundi, ACS.                                  (in Case 346 to 357/2001)

Mr. M.S. Khattak and Raja Abdul

Ghafoor, AORs.

 

For the respondents:                   

Mr. Muneeb Ahmed, ASC.                                                (in Case 879 & 880/2000)          

Miss Wajahat Niaz, AOR (absent).

 

For the respondents:                   

Mr. Abdus Samad, ASC.                                                   (in CA 882/2000)                       

Mr. Ahmadullah Faruqi, AOR (absent)

 

Date of hearing:                                                                20th June, 2001.

 

 

JUDGMENT 

  1. QAZI MUHAMMAD FAROOQ, J.- By this common judgment we intend to dispose of the above-mentioned 15 appeals, by leave of the Court, directed against two divergent judgments on one and the same subject rendered by two learned Judges in Chambers of the High Court of Sindh, Karachi. One set of appeals consists of three civil appeals bearing No. 879, 880 and 882 of 2000 which have arisen from the judgment dated 28.9.1999 and the second is comprised of 12 civil appeals bearing No.346 to 357 of 2001 which are directed against the judgment dated 11.12.2001.

  1. The dispute between the parties relates to payment of the prescribed contribution under the Employees Social Security Institution Ordinance, 1965, hereinafter referred to as the Ordinance, for a specified period in respect of a certain category of employees by the respondents in the first set of appeals and appellants in the second set who are notified establishments. There are some variations on facts and same is the position in relation to the periods of default but the question of law, highlighted in the leave granting orders, involved in all the cases is common. The genesis of the dispute lies in the demand raised by the petitioners pursuant to a clarification circulated on 18.11.1991 on the strength of the judgment of this Court reported as PLD 1988 SC 1 that an employee whose wages exceed Rs.1500/- per month shall continue to be a secured person and contribution in his respect shall be payable upto his daily wages of Rs.60/- per day in accordance with Section 20(4)(a) of the Ordinance. The Demand Notice for payment of contribution amounting to Rs.112980/- for the period from December 1991 to January 1992 in respect of the employees whose wages had exceeded Rs.1500/- per month was resisted by the respondents in Civil appeals No. 879, 880 and 882/2000 on factual grounds as well as on the legal ground that the employees whose was exceeded Rs.1500/- per month were not covered by the definition of “employee” contained in Section 2(8)(f) of the Ordinance. They filed a complaint before the Commissioner, Sindh Employees Social Security Institution on 23.7.1992 but their view point that a secured employee whose wages exceed Rs.1500/- per month ceases to be a secured employee and the employer is not liable to pay contribution on his behalf did not prevail and the complaint was rejected on 3.7.1994. The decision was challenged before the Social Security Court No.1, Karachi through an appeal but the same was dismissed on 10.1.1996. While the matters were pending before the said forum the Labour Laws (Amendment) Ordinance 1993 was promulgated whereby Section 2(8) of the Ordinance was amended in the manner that the ceiling of Rs.1500/- was enhanced to Rs.3000/- and a proviso was inserted to the effect that an ‘employee’ shall not cease to be an ‘employee’ for the reason that his monthly wages exceed Rs.3000/-. The judgments rendered by the Social Security Court No.1, Karachi were challenged through Miscellaneous appeals which were allowed by a learned Judge in Chambers, vide judgment dated 28.9.1999, with the findings, inter alia, that clause (f) of subsection (8) of Section 2 of the Ordinance as it stood at the relevant time excluded persons employed on wages exceeding Rs.1500/- from the ambit of the expression ‘employee’, contribution became payable in respect of an employee drawing wages not exceeding Rs.3000/- from the date of enforcement of the Labour Laws (Amendment) Ordinance, 1993 and the very insertion of the proviso to section 2(8)(f) indicated that under the un-amended clause an employee drawing wages exceeding the specified amount would not be treated as an employee for the purpose of the Ordinance, the law laid down in PLD 1988 SC 1 was in fact against the appellants and the crucial amendment made in the Ordinance in 1993 can be treated as a piece of remedial legislation but it cannot be applied retrospectively because the legislature itself had given it prospective effect and if its application is made retrospective it would nullify the very basis on which proviso to the aforementioned clause was added.

  1. The judgment giving rise to the second set of appeals was passed on 11.12.2000 whereby the Miscellaneous appeals preferred by the establishments were dismissed with the observations, inter alia, that the learned First Sindh Labour Court/First Sindh Social Security Court had rightly held that the provisions contained in Provincial Employees Social Security Ordinance, 1965 are applicable to the employees whose wages have exceeded the ceiling and the Institution is entitled to recover the contribution in respect of the said workers inasmuch as the proviso to Section 2(8)(f) of the Ordinance being a part of definition section is declaratory and at the same time is beneficial, curative, remedial and welfare legislation and as such has to be given retroactive effect.

  4.     Leave to appeal was granted in the first set of appeals on 26.7.2000 in the following terms:-  

“(i) To examine the scope of clause (f) of subsection (8) of Section 2 of Provincial Employees Social Security Ordinance 1965, with reference to the object of the Ordinance.

 

(ii)       Whether the dictum  laid down by this Court in the case reported as Sindh Employees Social Security Institution Vs. Dawood Cotton Mills Ltd. (PLD 1998 SC 1) is attracted to the circumstances of this case.”

  Leave in the second set of appeals was granted on 27.3.2001 in the same terms.

 

5.  Mr. Khalid Habibullah, ASC, learned counsel for the petitioners in the first set of appeals and respondents No.1 and 2 in the second set of appeals addressed lengthy arguments. The main trust of his argument was that the impugned judgment was contrary to the law laid down by this Court in Sindh Employees’ Social Security Institution Vs. Dawood Cotton Mills Ltd (PLD 1988 SC 1) that on exceeding the prescribed wage limit the contribution would be payable upto the prescribed limit and excess to it would be exempted, the employees whose wages exceed the prescribed limit will remain secured and contribution would be payable on wages upto Rs.60/- per day, the word ‘employee’ has been used in respect of initial recruitment and if once an employee is secured he shall continue to be a secured person, the amendments have been held to be prospective without determining their precise nature and the amendments are remedial, declaratory or clarificatory in nature and it is well settled that a remedial, clarificatory in nature and it is well settled that a remedial, clarificatory and declaratory amendment operates retrospectively. Reliance was placed on Shaheen Airport Services Vs. Sindh Employees Social Security Institution (PLD 1994 SC 881) wherein it was held that the Ordinance is a specie of a statute which was enacted by the State with the object of promoting social and economic well-being of the people and, therefore, it is a beneficial enactment intended to provide social security to the workmen covered by the provisions of the same and hence it is to be construed liberally and if two constructions are possible, one which extends the benefit of the Ordinance to more workmen and the other which limits such benefit, the former is to be preferred. Reference was also made to The Punjab Cooperative Bank Ltd. Vs. The Republic of Pakistan and 128 others (PLD 1964 SC 616) wherein it was held that a definition clause or section is, as a rule, of a declaratory character.

 

6.   Mr. Abdus Samad Khan, ASC, learned counsel for the respondents in the first set of appeals and Mr. Abdul Karim Khan Kundi, ASC, learned counsel for the appellants in the second set of appeals, on the other hand, contended with vehemence that before promulgation of the Ordinance no contribution was payable in respect of those employees whose wages exceeded Rs.1500/- per month, the word ‘employee’ used in clause (f) of subsection (8) of Section 2 of the Ordinance referred to both initial employment as well as to an employee whose wages exceed the ceiling during the course of employment, a plain reading of the proviso added to clause (f) of subsection (8) of Section 2 of the Ordinance leads to the conclusion that it is intended to apply prospectively and not retrospectively, the construction placed on the amendment in the judgment dated 11.12.2000 is flawed because in the event of practical application it shall lead to an anomalous, inequitable and discriminatory result and the judgment of this Court in the case of Dawood Cotton Mills (supra) supported the stance taken by their clients.

 

7.   Before adverting to the points taken note of in the leave granting order and the rival contentions it will be pertinent to mention that the dispute relates to a specified period preceding the enforcement of Labour Laws (Amendment) Ordinance, 1993 and Labour Laws (Amendment) Act 1994. It is also necessary to mention that the Ordinance was promulgated on 4.6.1965 as the West Pakistan Employees Social Security Ordinance, 1965. The word ‘Provincial’ was substituted for West Pakistan by P.O. 4 of 1975. In the un-amended Ordinance the expression ‘employee’ was defined in subsection (8) of Section 2 and clause (f) thereof was couched in the words “any person employed on wages exceeding one thousand rupees per mensem”. The words “one thousand five hundred” were substituted for the words “one thousand” by Labour Laws (Amendment) Act, 1985. The words “three thousand” were substituted for the words “one thousand five hundred” by Labour Laws (Amendment) Ordinance, 1993 and Labour Laws (Amendment) Act, 1994 and a proviso was also added that an employee shall not ceased to be an employee for the reason that his monthly wages exceed three thousand rupees. The amended Section 2(8)(f) is worded thus”

 

“2. Definition:- In this Ordinance, unless the context otherwise requires, the following expression shall have the meanings hereby respectively assigned to them, that is to say-

 

(8) “employee” means any person working, normally for at least twenty-four hours per week, for wages, in or in connection with the work of any industry, business, undertaking or establishment, under any contract of service or apprenticeship, whether written or oral, express or implied but does not include-

 

(f)    any person employed on wages exceeding three thousand rupees per mensem.

 

[Provided that an employee shall not cease to be an employee for reason that his monthly wages exceed three thousand rupees.]”

 

There is yet another  relevant provision of the Ordinance i.e. clause (a) of subsection (4) of Section (20) which having been referred to in PLD 1988 SC 1 requires mention at this stage. In the original Ordinance it was expressed in the terms that “no contribution shall be payable on wages which are in excess of rupees twenty per day”. Through subsequent amendments the level of wages was raised to rupees sixty and rupees one hundred and twenty per day and a proviso was also added that no contribution shall be payable on so much of an employee’s wages as is in excess of one hundred and twenty rupees per day or three thousand rupees per month. Section 20 as amended by the Labour Laws (Amendment) Act of 1994 reads as under:- 

“20. Amount and payment of contribution.- (1) Subject to the other provisions of this Chapter, the employer, shall in respect of every employee, whether employed by him directly or through any other person pay to the institution at such times, at such rate and subject to such conditions as may be described:

[Provided that no contribution shall be payable on so much of an employee’s wages as is in excess of one hundred and twenty rupees per day or three thousand rupees per month]”

8.   The fate of all the appeals essentially hinges on the interpretation and application of the judgment of this Court reported as Sindh Employee’s Social Security Institution Vs. Dawood Cotton Mills Ltd. (PLD 1988 SC 1). Brief facts of that case are that demand made by the Institution on the Mill in respect of certain payments made to its employees were challenged by the Mill through an appeal wherein it was pleaded, inter alia, that some of the employees drawing more than Rs.20/- per day were not covered by the Ordinance. The appeal was dismissed by the concerned appellate court as a result of which an appeal was filed before the High Court of Sindh, Karachi which was partly allowed and the case was referred back to the Institution with the observations that the Mill was not liable to pay the contribution in regard to the employees whose wages are more than Rs.20/- per day because the employees whose wages exceed Rs.20/- per day are to be excluded in computing the amount of contribution in view of subsection (4) of section 20 of the Ordinance. Aggrieved by the judgment of the High Court the Institution filed a petition for leave to appeal which was granted to examine whether the Mill was not liable to make contribution in respect of the employees who are covered by the definition of employee but the wages being drawn by them exceed Rs.20/- per day. The appeal was allowed and the direction by the High Court to the Institution for further investigation into the formulated question was withdrawn with the following observations:- 

“It does not require or permit the exclusion of “an employee” vis-à-vis the contribution simply because he is receiving more than Rs.20/- as wages per day. On the other hand, a more natural construction of his provision would mean that the amount “in excess of Rs.20 per day paid as “wages” to an “ employee” would not qualify for contribution to the Institution, i.e. the amount corresponding to the excess. Therefore, if an employee was getting Re.1 in excess of Rs.20/- per day as wages, contribution would be payable on the wages up to Rs.20/- per day; but no contribution would be payable on the excess wages, i.e. Re.1 per day. Thus interpreted there would be no clash between the definition of “employee” as contained in Section 2 and Section 20(4)(a) of the Ordinance. In doing the proper exercise for discovering whether any amount payable as wages is liable to be subjected to the contribution, it would first have to be seen whether the employee falls within the definition as contained in Section 2(8). After this, if it is found that a certain employee is covered by the definition the liability to the contribution would have to be determined under Section 20(4)(a) read with the other provisions of the relevant law which deal with the amount of wages payable to an employee.”

9.    The appellants in the first set of appeals i.e. the Institution and the appellants in the second set of appeals, namely the establishments both have claimed that the dictum supports their viewpoint. It was urged by Mr. Khalid Habibullah with great vehemence that notwithstanding the quantum of wages mentioned in the un-amended clause (f) of subsection (8) of Section 2 of the Ordinance an employee shall remain secured and contribution would be payable upto the amount mentioned in Section 20 thereof. The learned counsel representing the establishments took the stance that the law laid down in the said authority leaves no room for doubt that unless a person falls within the definition of the term ‘employee’ the establishment is not liable to make contribution envisaged by Section 20 of the Ordinance. The plea of the Institution was considered and referred in the impugned judgment giving rise to the first set of appeals but in the impugned judgment dated 11.12.2000 reference to the law laid down in the said authority was made in passing and relief was granted to the Institution mainly for the reason that proviso to Section 2(8)(f) of the Ordinance being declaratory, beneficial, curative, remedial and welfare legislating would apply retrospectively. Be that as it may, in view of the observations “In doing the proper exercise for discovering whether any amount payable as wages is liable to be subjected to the contribution, it would first have to be seen whether the employee falls within the definition as contained in Section 2(8). After this if it is found that a certain employee is covered by the definition the liability to the contribution would have to be determined under Section 20(4)(a) read with the other provisions of the relevant law which deal with the amount of wages payable to an employee” (underling is ours) highlighted above there is no difficulty in holding that the viewpoint of the establishments has an edge over that of the Institution and law laid down in the authority is fully attracted. An employee whose wages exceeded Rs.1500/- per month did not qualify to be an employee for he purpose of the Ordinance and as such no contribution was payable in respect of such employee during the period preceding the promulgation of Labour Laws (Amendment) Ordinance 1993 and Labour Laws (Amendment) Act, 1994.

 

10.  Adverting to the second aspect of the matter we find that according to its preamble the object of promulgation of the Ordinance was to introduce a scheme of social security for providing benefits to certain employees or their dependents in the event of sickness, maternity, employment, injury or death and for matters ancillary thereto. Initially the provisions of the Ordinance were applicable to a class of employees earning wages upto Rs.1500/- per month but subsequently the limit was raised by the Labour Laws (Amendment) Ordinance, 1993 and Labour Laws (Amendment) Act, 1994 to Rs.3000/- in view of the statutory increase in the wages. The definition of “employee” as contained in the un-amended Section 2(8)(f) of the Ordinance is worded thus:-

“2. Definition.- In this Ordinance, unless the context otherwise requires, the following expression shall have the meanings hereby respectively assigned to them, that is to say-

(8)        “employee” means any person working, normally for at least twenty-four hours per week, for wages, in or in connection with the work of any industry, business, undertaking or establishment, under any contract of service or apprenticeship, whether written or oral, express or implied but does not include-

(f)         any person employed on wages exceeding one thousand rupees per       

            mensem”.

We cannot persuade ourselves to agree with the contention raised by the learned counsel for he Institution that the above definition of ‘employee’ covers only initial appointment. The definition refers to initial appointment at wages exceeding the ceiling mentioned therein as well as he employees whose wages exceed the ceiling during the course of employment and the ceiling is to be kept in view while applying he formula for payment of the contribution envisaged by section 29(4)(a) and elucidated by the aforementioned judgment of this Court. Needless to mention that Section 2(8)(f) and Section 20(4)(a) of the Ordinance are to be interpreted harmoniously.

 

11. The scope of the un-amended Sections 2(8)(f) and 20(4)(a) of the Ordinance is comparatively limited and cannot be enlarged by giving retrospective effect to the amendments made therein on the grounds that the same are remedial, the proviso added to Section 2(8)(f) being a part of definition section is declaratory and eh Ordinance being a beneficial statute its provisions must be construed liberally. As a general rule every statute is deemed to be prospective unless by express provision or necessary implication it is given retrospective effect. The acid test for ascertaining whether a statute or an amendment operates prospectively or retrospectively is the legislative intent. The language of the amending Ordinance and the Act and their terms neither make it manifest that the Legislature intended the amendments to operate retrospectively nor the intention can be gathered by necessary implication. The rationale is obvious inasmuch as he amendments have affected vested rights and created new obligations.

 

12. According to Asbury's Laws of England: Volume 44 (4th Edition) a declaratory statute is a statute which either resolves doubts on a particular point or restates the law on a particular subject. This definition of a declaratory statute leads to the irresistible conclusion that a declaratory provision does not purport to change the law. Notwithstanding their placement the amendments in question cannot be termed as declaratory for the simple reason that they have created new obligations and changed the existing law considerably. It is true that the statutory increase in the wages was not incorporated in the Ordinance but the existing law did not suffer from any legal defect in view of the law laid down in the case of Dawood Cotton Mills (Supra), therefore, the amendments are not purely remedial. Be that as it may, the amendments cannot be held to be retroactive in operation even if the same are presumed to be remedial because they land to affect vested rights. In any event giving retrospective effect to the amendments would tantamount to nullifying the binding effect of the dictum laid down in PLD 1988 SC 1, which squarely applies to the facts and circumstances of the present cases.

For the foregoing reasons, Civil Appeals No.879, 880 and 882 of 2000 are dismissed and Civil Appeals No.346 to 357 of 2001 are allowed, the impugned judgment dated 11.12.2000 is set aside and the appeals filed in the High Court are dismissed. Parties to bear the own costs.

   

                                                                   Sd/- She. Riaz Ahmed, J.

                                                                   Sd/- Qazi Muhammad Farooq, J.

                                                                   Sd/- Javed Iqbal, J.

 

Announced on 27.7.2001

At Quetta 

                                                                  Sd/- She.. Riaz Ahmed, J.