1984 PLP 663 (PLC)

(3) ... ... ... ... ... ... ... (4) The arrears of contributions may not be realised from any em ployer for the period during which he had made alternative arrangements for affording the necessary benefits to the em ployees and had made a contribution in that behalf at least equal to the rate prescribed under the Ordinance and the Rules and Regulations framed thereunder. Otherwise, the realisation of arrears would mean a double levy on the employer, with out any corresponding benefits to his employees. However, the existence of any such adequate alternative arrangements must be established to the satisfaction of the Social Security Institution."

6. In pursuance of the above decision of the Supreme Court, the Director of the Institution held an inquiry in respect of the employees working at the Head Office of the Employers in respect of whom con tributions under the Ordinance were to be made by the Employers. After such inquiry the Director of the Institution addressed a letter, dated 16th August, 1977 saying that Rs. 32,771.80 were recoverable from the Em ployers on account of contributions in respect of the workers at the Head Office. In addition to the above amount a further amount of Rs. 16,385.90 was also demanded as increase at 1/2% by way of penalty under section 23 of the Ordinance on the ground that the Employers had failed to make contributions in respect of their Head Office employees within the stipulated period. Against this letter the Employers made representation to the Director of the Institution saying that they were not liable to pay any amount as increase by way of penalty, because non‑payment of con tributions in respect of the Head Office employees was due to a genuine misunderstanding as to applicability of the notification under section 1(3) to them and that the contributions had become payable in pursuance of the order of the Supreme Court only after the Director had, after holding inquiry, determined the amount of contributions as contained in the letter of the Director, dated 16th August, 1977. The Employers, however, accepted their liability in respect of the amount of contributions i.e. Rs. 32,771.80 as contained in the letter of the Director and request ed him to allow the Employers to pay this amount in 6‑monthly instalments.

7. The Director of the Institution, acting as Commissioner of the Institution, wrote to the Employers i.e. the present respondent by his letter, dated 28th August, 1977 that "Commissioner has been pleased to order that the amount of arrears i.e. Rs. 32,771.80 may be recovered from Messrs Kohinoor Chemical Co. Ltd. in 6‑monthly instalments and increase amounting to Rs. 16,385.90 be recovered in 8‑monthly instal ments. It is not possible to waive the increase in contributions". In compliance with the above letter the Employers deposited the amount of contributions only, but made further representation against the demand of increase of Rs. 16,385.90. This representation was rejected by the Director of Institution by his letter, dated 22nd February, 1978. The respondent was further directed to deposit the amount of increase within 7 days.

8. Against the above order of the Institution the respondents filed appeal before Social Security Court No. 1, Karachi under section 59 of the Ordinance, being Appeal No. 14 of 1978. After hearing the parties the learned Social Security Court held that there was no default in payment of contributions on the part of the respondents and as such the increase by way of penalty under section 23 of the Ordinance could not have been demanded by the Institution. Thus, the appeal was allowed by the Court on 22nd June, 1978. Hence the present miscellaneous appeal under section 64 of the Ordinance by the Institution.

9. The present appeal is only in respect of demand of Rs. 16,385.90 which is sought to be recovered by the Institution by way of penalty under section 23 of the Ordinance which is reproduced hereunder :‑‑‑ "

23. Increase of unpaid contribution and recovery of contribution, etc. as arrears of land revenue :‑‑ (1) If any employer fails to pay on the due date the contribution payable by him under subsection (1) of section 20, the amount so payable by him shall be increased by such percentage or amount as may be prescribed : Provided that in no case shall such increase exceed fifty per centum of the amount due : Provided further that no part of such increase shall be payable by, or the liability to pay the same be passed on by the employer to, his employees. (2) Without prejudice to any other remedy, the amount of the con tribution due, together with the increase provided for under subsection (1), may be recovered as arrears of land revenue."

10. The learned Security Court was of the opinion that the non-payment of contributions in respect of the Head Office employees on the part of the respondents was not deliberate. It was under a genuine mis understanding created by the wordings of the notification under section 1 (3) of the Ordinance which specifically made the provisions of the Ordinance applicable to only the workers of the factory of the Employers situated in Sher Shah Road, SITE, Karachi. This mis understanding, according to the learned Security Court was removed by the order of the Supreme Court whereby it was held that the liability of employees of the establishment of the Employers working at the Head Office, if working in connection with the business of the Employers, shall be deemed to be covered by the notification. It was further held that, according to the directions of the Supreme Court, the liability of the workers of the Head Office was subject to inquiry made by the Officer of the Institution, who had to determine as to which of the workers were working in connection with the business of the establishment. After hold ing such inquiry the Director of the Institution had come to the conclusion that the amount of contributions in respect of the workers of the Em ployers at Head Office for the relevant period would come to Rs. 32,771.80. This liability of the respondents was determined by the Director of the Institution vide his letter, dated 16th August, 1977 addressed to the respondents. It was further held that the respondents shall not be deemed to have made any default, if they paid the amount of contributions in compliance with the demand contained in the letter, dated 16th August, 1977. The claim of increase was thus rejected.

11. It may be stated that before the appeal was decided by the Security Court on 21st June, 1978 the Institution made a statement in writing on 3rd June, 1978 saying that the impugned order regarding in crease is withdrawn without prejudice to the Institution's right to start fresh investigation into the liability of the respondents about the actual amount of contributions in the light of the judgment of the Supreme Court and thereafter to make the demand accordingly. The reason for withdrawing the impugned order was that proper inquiry by the Director of Institution was not made about the liability of the respondents to determine the amount of contribution. The prayer contained in the letter, dated 3rd June, 1978 was rejected by the learned Security Court on the ground that the Institution had already determined the liability of the respondents after thorough inquiry and that there was no scope for fresh inquiry.

12. Mr. S. A. Sarwana, learned counsel for the appellant has argued that in view of the letter of the Institution, dated 3rd June, 1978 with. drawing the impugned order, the learned Security Court should have dismissed the appeal as having become infructuous. He has relied on section 21 of the General Clauses Act in support of his plea that the authority who is empowered to pass an order is also empowered to with draw, amend and vary that order. The argument is misconceived, because the authority who is empowered to pass an order can withdraw the order only if a decisive step in pursuance of that order has not been taken. If the order has been acted upon and vested rights have accrued in pursuance of that order, then locus poenitentiae shall not be available to that authority. In support of this view reference may be made to the case of Pakistan v. Muhammad Himayatullah Farukhi (P L D 1969 S C 407.). The question as to what extent the principle of locus poenitentiae is available to an authority, was considered in the above case and answered with the following observations :‑ "There can hardly be any dispute with the rule that apart from the provisions of section 21 of the General Clauses Act, locus poenitentiae, i.e. the power of receding till a decisive step is taken, is available to the Government or the relevant authorities. In fact, the existence of such a power is necessary in the case of all authorities empowered to pass orders to retrace the wrong steps taken by them. The authority that has the power to make an order has also the power to undo it. But this is subject to the exception that where the order has taken legal effect, and in pursuance there of certain rights have been created in favour of any individual, such an order cannot be withdrawn or rescinded to the detriment of those rights." In the present case the impugned order has been acted upon partly. So far as the principal amount of contributions as mentioned in the im pugned order is concerned, the order was acted upon by the respondents and the amount was deposited as per direction of the Commissioner in instalments. So far as the other part of the impugned order regarding payment of the increase under section 23 of the Ordinance is concerned, a right of appeal had accrued to the Employers who had actually challeng ed it in appeal before the Security Court. Under these circumstances no power was left with the Commissioner/ Director of the Institution to with draw the impugned order during pendency of the appeal of which the same order was subject‑matter.

13. Mr. S. A. Sarwana then argued that under section 58 of the Ordinance the Institution could review a decision given by it under section

57. No doubt the power of review has been given to the Institu tion, but it is to be exercised subject to the proviso that "no decision shall be reviewed without giving the person or persons concerned an opportunity of being heard and adducing evidence in support of or against the decision". Moreover condition precedent for exercising power of review is that some new facts must have been brought to the notice of the Institution. Nothing has been said in the letter of the Institution, dated 3rd June, 1978 about the discovery of any new fact which would have necessitated withdrawal of the impugned order in exercise of powers of review under section

58. All that has been said in this letter is that the matter required further investigation and determination of the arrears of contributions and, therefore, the impugned order was withdrawn. This order could hardly be said to have been passed in compliance with the requirement of section

58. Neither any notice was issued to the respon dents before passing this order, nor it has been mentioned that any new fact has come to the notice of the Institution. The statement in writing, dated 3rd June, 1978 made to the Security Court, therefore, cannot be deemed to have been made under section 58.

14. Mr. S. A. Sarwana has further urged that it was proved that the Employers had failed to make contributions in respect of the employees working in the Head Office and therefore, they had become liable to pay the increase under section 23 of the Ordinance. He has also relied on the case of Rashid Textile Mills Karachi v. Commissioner of SESSI in which a learned Single Judge of this Court held that even if an employer fails to make payments of contributions under the law under bona fide misunderstanding, he shall be liable to pay increased contributions under section 23 of the Ordinance. However to another case SESSI v. Silver Industry (1982 P L C 1062) referred to by the learned counsel for the respondents, it has been held by a learned Single Judge of this Court that the penal provisions to levy increase under section 23 (1) of the Ordinance shall be attracted in case of inexcusable neglect or omission on the part of Employer and if it is pointed out by the Employer that there was no such failure on his part, then he shall not be liable to pay increase.

15. In the present case the question of liability of the working at the Head Office of the Employers was highly controversial. Even the Supreme Court had, in Civil Appeal No. K‑13/76 decided that the deter mination of the liability of the Employers in respect of the workers working in the Head Office, required inquiry on the part of the Institutions. Thus, the liability to pay contributions in respect of the workers of the Head Office on the part of the Employers, in terms of the directions of the Supreme Court would accrue only after the Institution had made inquiry and determined the amount of the contributions. This amount was determined first by the Institution in compliance with the order of the Supreme Court vide order of the Director of Institution contained in his letter, dated 16th August, 1977. This order was then confirmed by the Commissioner vide his letter, dated 29th August, 1977 whereby payment of the Contributions in instal ments was granted but the request of the Employers to cancel the demand of increase was rejected. The Employers had made further representation against the rejection of the request regarding cancellation of the demand of increase which was disposed of by the Director of the Institu tion finally vide his letter, dated 22nd February, 1978 which was subject -matter of appeal before the Security Court. Hence the liability to pay the contributions on the part of the Employers before 16th August, 1977 did not accrue. According to the directions of the Supreme Court, the Institution was bound to make an inquiry and determine the amount of contributions payable by the Employers m respect of the workers working in the Head Office in connection with the business of the employers. It was only after the Institution had held an inquiry and determined the amount and intimated the Employers about it, that the liability to pay contributions would commence. Had the respondents failed to pay the contribution after it was finally determined by the Institution as a result of the inquiry, then only they would have been liable to pay the increased contribution by way of penalty under section 23 of the Ordinance. But the Employers did not commit any default in payment of the contribution after 16th August, 1977 which was paid in instalments in terms of the orders of the Commissioner, dated 20th August, 1977. The learned Security Court was, therefore, quite justified in accepting the appeal of the Employers in respect of the increased contributions.

16. Mr. S. A. Sarwana has further argued that the enquiry made by the Director in pursuance of the order of the Supreme Court about the liability of the Employers, was not properly held, hence the Institution was entitled to hold fresh inquiry in compliance with the directions of the Supreme Court and redetermine the liability of the Employers. This objection was rightly rejected by the learned Security Court. The order of the Supreme Court was quite specific and unambiguous in respect of the inquiry which was to be conducted by the Institution. The order of the Supreme Court containing the above direction is dated 23rd Decem ber, 1978. The Director of the Institution thereafter held the inquiry and took about 8 months to complete it on 16th August, 1977. He incor porated the result of his inquiry in his letter of the above date which has been referred to above and which is Annexure 'B' to the appeal filed by the Institution before the Security Court. It cannot be said that even during the period of 8 months the Director of the Institution was unable to comply with the direction of the Supreme Court regarding the re quisite inquiry. Even after the letter, dated 16th August, 1977 for about 10 months the Institution remained silent about the manner of the inquiry. On 3rd June, 1978 during the pendency of the first appeal before the Security Court, the Institution woke up all of a sudden to realise that the inquiry conducted by the Director of the Institution was not in accor dance with the directions of the Supreme Court and, therefore, the im pugned order contained in the letter of the Director of the Institution, dated 16th August, 1977 which was confirmed by that Order, dated 22nd February, 1978 and which was impugned before the Security Court, was liable to be withdrawn. Thus, the Institution itself, even after 2 years of the decision of the Supreme Court, was unable to decide as to what actually was the amount of contributions payable by the Employers under the Ordinance. Under these circumstances the Employers have rightly pleaded that their liability to pay contributions commenced only after the Institution had made inquiry and the amount of contributions determined. A thorough inquiry had already been made and the amount had been determined. The Institution was not entitled to withdraw the result of the inquiry after 2 years of the decision of the Supreme Court under the plea that they have not held proper inquiry as per directions of the Supreme Court. To allow the Institution to hold a fresh inquiry now, would amount to give to the Institution the advantage of its own default. The Institution had sufficient time at its disposal to hold the inquiry. Such inquiry was held and the result of it was not withdrawn or reviewed before the Employers challenged that order before the Security Court. Even before the Security Court, the statement in writing regarding with drawal of the impugned order i.e. result of the inquiry, was made when the case was fixed for judgment. The Institution thus cannot be allowed to take advantage of its own default and plead that the case should be re manded to the Institution for fresh inquiry.

17. The last argument of Mr. S. A. Sarwana is that the impugned order was passed by the Director of the Institution and not the Com missioner of the Institution and as such no appeal was maintainable under section 59 of the Ordinance before the Security Court. This objection was not raised in first appeal before the Security Court. It cannot be allowed to be raised before this Court. Moreover, it is not correct to say that the order against which appeal was filed before the Security Court was not the order of the Institution. The letter, dated 20th August, 1977 whereby instalments were allowed in respect of the principal amount of contributions was signed by the Director Contributions "For Com missioner". It shall be deemed that this order was issued by the Com missioner of the Institution. The subsequent letter, dated 22nd February, 1979, which contains the impugned order, was only a reiteration of the order of the Commissioner of the Institution contained in the earlier letter, dated 20th August, 1977. Hence the impugned order, in fact, was the order of the Commissioner, who, according to section 18(2)(a) is Chief Executive of the Institution. There is no substance in the argument that the impugned order was not the order of the Commissioner or that appeal against that order was not maintainable before the Security Court. This appeal must also be dismissed for the reason that it does not involve a substantial question of law. This miscellaneous appeal is second appeal under section 64 of the Ordinance from the appellate order of the Security Court passed under section 59 of the Ordinance. Subsection (2) of section 64 lays down that an appeal shall lie to the High Court from an order of Social Security Court, if it involves a substantial question of law. Learned counsel for the appellant has been unable to show that any substantial question of law is involved in this appeal. None of the grounds which have been urged in support of the appeal and which have been disposed of above, amount to substantial question of law. For the above reasons I hold that there is no substance in this appeal which is dismissed with no order as to cost. M. Z. M. Appeal dismissed.