P L D 1991 Supreme Court 862 (PLP)

AJMAL MIAN, J.‑‑‑This is an appeal with the leave of the Court against the judgment dated 10‑1‑1990 passed by a learned Single Judge of the High Court of Sindh in Miscellaneous Appeal No. 8 of 1989, fled by the respondent against the decision dated 6‑12‑1988 passed by the Social Security Court No. 3, whereby the appeal filed by the appellants was allowed and the order of the Commissioner, Sindh Employees Social Security Institution, Karachi, was reversed, allowing the same and setting Aside the above order of the Social Security Court No. 3 and restoring the above order of the Commissioner. Leave to appeal was granted to consider the question, whether the amount of educational scholarship granted to the employees by the appellants, can be considered part of wages for the purpose of contribution under the Provincial Employees Social Security Ordinance, 1965, hereinafter referred to as the Ordinance, although the Settlement between the parties says that it shall not be so considered.

2. The facts to be noted are that the Director, Sindh Employees' Social Security Institution, Sukkur Directorate, Sukkur, by his letter dated 13‑14988 demanded the contribution of social security on the amount of Rs. 185 being the amount of educational scholarship given by the appellants to their workers under the Settlement dated 1‑9‑1987, hereinafter referred to as the settlement. The above demand was resisted by the appellants through their reply dated 21‑1‑1988 and it was pointed out that under the settlement, it was agreed that the above educational scholarship amount would not be treated as wages for the purpose of any facility under the settlement or law. The appellants‑ filed a complaint under section 25 of the Ordinance before the Commissioner, which was dismissed by his order dated 7‑9‑1988 and it was held that the above amount of Rs.185 per month was part of the wages in terms of section 2(30) of the Ordinance and, therefore, the appellants were liable to make social security contribution thereon with effect from 1‑2‑1987. Thereupon, the appellants filed Appeal No. 03 of 1988, which was heard by the and Labour Court, Karachi, and was allowed by the aforesaid judgment dated 6‑12‑1988 and whereby the aforesaid order of the Commissioner was set aside. It was held that in view of the above observation contained in the judgment of this Court in the case of Sindh Employees' Social Security Institution and another v. Dawood Cotton Mills Ltd. PLD 1977 SC 177 and the judgment of a Single Judge of the Sindh High Court in the case of Messrs Dawood Cotton Mills Ltd., Karachi v. Social Security Institution, Karachi PLD 1978 Kar. 744, the above educational scholarship amount was not part of the wages. Against the above judgment, the respondent filed aforesaid miscellaneous appeal, which was allowed by the learned Judge in chambers, whereby it was held that the same was part of wages. After that, the appellants filed a petition for leave to appeal, which was granted to consider the above question.

3. In support of the above appeal, Mr. Khurshid Anwar Sheikh, learned Advocate Supreme Court appearing for the appellants, has vehemently contended that the payment of above scholarship amount by the appellants was in fact an ex gratia payment and that it cannot be treated as part of wages in terms of section 2(30) of the Ordinance. His further submission was t ' hat if this Court would approve the construction placed by the High Court, it would discourage an employer from making such payment or incurring such expenses which would defeat the very object of the Ordinance, which was enacted for the benefit of the employees. On the other hand, Mr. SA. Sarwana, learned Advocate Supreme Court appearing for the respondent, has submitted that the educational scholarship amount was not paid by the appellants ex gratia but it was a contractual obligation under the settlement and, therefore, falls within the ambit of the definition of the term "wages" given in section 2(30) of the Ordinance.

4. Both the counsel have referred to the definition of the term "wages" given in clause (30) of section 2 of the Ordinance and, therefore, it will be advantageous to reproduce the same, which reads as follows:‑‑ "(30) "wages" means remuneration for service paid or payable in cash or in kind to a secured person, not being less than remuneration based on the minimum rates of wages declare([ under the Minimum Wages Ordinance, 1961 (XXXIX of 1961), without taking account of deductions for any purpose, under a contract of service or apprenticeship, expressed or implied, and shall be deemed to include any dearness allowance or other addition in respect of the cost of living and any payment by the employer to a secured person in respect of any period of authorised leave, illegal lock‑out or legal strike, but does not include‑‑ (a) any payment for overtime; or (b) any sum paid to the person employed to defray special expenses entailed by the nature of his employment; or (c) any gratuity payable on discharge ; or (d) any sum paid as bonus by the employer;" A perusal of the above definition of the term "wages" indicates that it means remuneration for service paid or payable in cash or in kind to a secured person, not being less than remuneration based on the minimum rates of wages declared under the Minimum Wages Ordinance, 1961 without taking account of deductions for any purpose, under a contract of service or apprenticeship, expressed or implied. It may further be noticed that above definition includes any dearness allowance or other addition in respect of the cost of living and any, payment by the employer to a secured person in respect of any period 6o authorised leave, illegal lock‑out or legal strike. However, it excludes‑‑ (a) any payment for overtime; or (b) any sum paid to the person employed to defray special expenses entailed by the nature of his employment; or (c) any gratuity payable on discharge; or (d) any sum paid as bonus by the employer. From the above definition of the term "wages", it is obvious that i includes remuneration for service paid or payable in cash or in kind excluding the items mentioned in above clauses (a) to (d). It must, therefore, follow, that unless the appellants can bring the payment of the above educational scholarship amount within the purview of any of the above excluded items, the same would bb covered by the definition of the term "wages" given in the Ordinance. Mr Khurshid Anwar Sheikh, learned counsel for the appellants, has even not attempted to demonstrate that the above educational scholarship payment falls under any of the items covered by above. Clauses (a), (b), (c) and (d) of the definition "Wages". However, he has relied upon the following cases:‑‑ (i) Sindh Employees Social Security Institution and another v. Dawood I Cotton Mills Ltd. PLD 1977 SC 177; in which he has relied upon the following observation:‑‑ We cannot, however, agree With the learned counsel for the appellant that the definition ‑should be so extended as to include therein every payment made by the employer to an employee. The definition being clear and unambiguous, its extension in the manner suggested by MA Sarwana would be unwarranted. Even otherwise, such an extension ca‑.a produce absurd results. There may be a case, for instance, where an employer agrees to make an ex gratia or charitable grant for that marriage of the employee's children, or scholarship for their children. Such payments could not be regarded as wages merely because they are made by an employer to his employee. The statutory definition being clear, payments not covered by it cannot be included." In the above case, it was held that the view taken by the High Court that ex gratia payments made during the days of the stoppage of work in June‑July 1972 do not fall within the definition of the term "wages" as contained in the Ordinance, was unexceptional. (ii) Messrs Dawood Cotton Mills Ltd., Karachi v. Social Security Institution, Karachi PLD 1978 Karachi 744; The above case was decided by one of us (Ajmal Mian, J.) sitting as S.B. in the Sindh High Court, in which the question in issue was, whether payments for festivals, casual and sick leave, motorcycle allowance, amenities to labour, rewards and subsidy to canteens, were covered by the definition of the term "wages" given in section 2(30) of the Ordinance. It was held that the above item, namely, payments for festival holidays, casual and sick leave and conveyance allowance, were covered by the definition of the term "wages", but amenities to labour, rewards and subsidy to canteens, were in the nature of ex gratia payments or ex gratia expenses and, therefore, were not covered by the above definition. In the context of the latter item, the following observations were made, upon which reliance has been placed by Mr. Khurshid Anwar Sheikh‑‑‑ "The object of the Social Security Ordinance is to promote the welfare of the working class. This Court cannot place construction on any provision of the Ordinance which may defeat the very object of it. If all the payments and expenses incurred by an employer for the welfare and well‑being of his employees are to be included within the definition of wages for the purpose of computing the contribution to be paid by ‑the employer, this may discourage a good employer from making such payments or incurring such expenses, which in fact will defeat the very object of the Ordinance. I am of the view that all the expenses which are being incurred by an employer for the welfare and well‑being of his employees which he is not obliged to incur either under his contractual or statutory obligation are to be excluded for computing the wages under the Ordinance." On the other hand, Mr. Sarwana has referred t6 para. 5 of demand No.1 and para. 1 of demand No.18 to point out that under above para.5, the appellants agreed to continue to give scholarships to the children of the employees under the Abdul Hayee Scholarship Scheme, and whereas under above demand No. 18, it has been agreed to pay Rs. 185 per month to every employee covered by settlement. It may be pertinent to reproduce the above paras, which read as follows:‑‑ He has also referred to the case of Sindh Employees' Social Security Institution v. Amin Fabrics Limited 1983 PLC '182, in which one of us (Nasir Aslam Zahid, J.), while construing the definition of the term "wages" under section 2(30) of the Ordinance, held that the "Conveyance reimbursemeat" paid to employees as conveyance allowance and not as payment to cover or defray conveyance expenses for any special or extraordinary assignment, was covered by the definition of the term "wages".

6. Mr. Khurshid Anwar Sheikh has also given too much emphasis on the factum that under the above‑quoted portion of the settlement in respect of demand No.18, it has been agreed between the parties that the above educational scholarship payment of Rs. 185 per month was not to be treated as a part of wages. Suffice to observe that the parties by their agreement cannot include an item within the ambit of the definition of the term "wages which is not included by the statute and similarly by their express agreement, they cannot exclude an item which is in fact covered by the definition of the term "wages" under the statute.

7. We are inclined to hold that if an employer pays any amount to an employee in discharge of his contractual or statutory obligation for the service of the employee, it will be covered by the definition of the term "wages" given in above clause (30) of section 2 of the Ordinance notwithstanding that the parties may provide in the settlement that it is not to be treated as part of wages unless under some statutory provision , it can be so provided. However, we may also observe that if an employer occasionally without being under a contractual or statutory obligation, makes ex gratia payment to his employees for their well‑ being, the same will not be covered by the above definition of the term "wages". To illustrate the above point, an example may be given, namely, if an employer pays Rs.5,000 as a financial insistance to his one of the employees for the marriage of his daughter or for enabling him to perform Haj Without any contractual or statutory obligation, it would be an ex gratia payment. The above view which we are inclined to take, is in line with the above two cases relied upon, by Mr. Khurshid Anwar Sheikh.

8. In the present case, though in the above‑quoted portion of the settlement it has been provided that the above payment of educational scholarship of Rs. 185 per month will not be treated as part of wages, but factually it falls within the ambit of the definition of the term "wage" given in clause (30) of section 2 of the 'Ordinance as it is founded on the contractual obligation and cannot be excluded under sub‑clauses (a), (b), (c) and (d) of clause (30) of section 2 of the Ordinance, referred to hereinabove.

9. We are, therefore, of the view that the above appeal has no merits. It is, accordingly, dismissed with no order as to costs. M.BA./C‑86/S Appeal dismissed.