2026 PLP 41 (PLC)

INAAM AMEEN MINHAS, J.

Through the instant writ petition, the petitioner has assailed the decision dated 27.12.2011 passed by the Adjudicating Authority of respondent No.1 i.e. Employees Old-Age Benefits Institution ( EOBI ), whereby the complaint under section 33 of the Employees Old Age Benefits Act, 1976 ( EOB Act ) filed by the petitioner was dismissed. The petitioner has also assailed the order dated 23.04.2012 passed by the Appellate Authority of EOBI, whereby the appeal filed by the petitioner against the decision of the Adjudicating Authority was dismissed.

2. The facts, in brief, leading to the filing of the instant writ petition are that the petitioner for security arrangements relating to its offices and Base Transceiver Station Sites ( BTS Sites ), entered into Security Service Agreements with a number of Private Security Services Companies ( Security Companies ) for the purpose of its security requirements, one such service was the provision of security guards for the protection of client s offices, personal and BTS sites. The petitioner was approached by EOBI vide letter dated 25.03.2010, whereby confirmation was sought regarding the registration of the employees of Security Companies, who were deployed at the petitioner s BTS sites. Thereafter, EOBI vide its letter dated 13.04.2010 sought a list of contractors who were providing security guards to the petitioner for its BTS sites and copies of the agreements executed between the petitioner and the Security Companies. Subsequently, EOBI vide letter dated 17.04.2010 again sought copies of the agreements executed between the petitioner and the Security Companies and further demanded that the Security Companies engaged by the petitioner should be directed to pay the contributions and that unregistered Securities Companies be registered with EOBI and pay the contributions. In this letter EOBI also stated that upon failure, the liability to pay the employers and employees share of contributions shall fall on the petitioner. The petitioner vide its letter dated 28.04.2010 provided the names of the Security Companies to EOBI. Thereafter the petitioner vide its letter dated 15.07.2010 informed EOBI that all of its permanent employees are registered with it since 2005 and contributions for its insurable employees were being duly made. Subsequently, EOBI issued Show-Cause Notice No.IDR/R&C/2010/2909, dated 26.11.2010, under section 79 of the Land Revenue Act, 1967 ( SCN ) whereby the petitioner was directed to show cause as to why the amount of Rs.238,960,800/- as dues of contributions under section 9 of EOB Act should not be recovered from the petitioner as arrears of land revenue. The petitioner replied the SCN on 23.12.2010 seeking withdrawal of the same while explaining that such contributions are not liable to be paid by the petitioner. After submission of the reply to the SCN, a demand notice under section 81 of the Land Revenue Act, 1967 was issued by EOBI on 06.04.2011. Again on 05.05.2011 EOBI issued a demand notice under section 12(3) of the EOB Act, wherein Rs.238,960,800/- were demanded as contribution payable to EOBI on behalf of petitioner s employees. On 06.06.2011 EOBI on the basis of warrant of Distraint bearing Reference No. IDR/2011/15 issued under section 83 of the Land Revenue Act, 1967 sealed the petitioner s Head Office in Islamabad. The said warrant of Distraint stated that the petitioner was a defaulter on account of land revenue amounting to Rs.238,960,800/-.

3. The petitioner, being aggrieved, filed Writ Petition No. 1843 of 2011, which was disposed of by this Court vide order dated 17.06.2011, directing EOBI to de-seal the petitioner s office and to refrain from taking coercive measures while hearing the petitioner s complaint under section 33 of the EOB, Act. The petitioner, thereafter, filed a complaint on 05.07.2011 under section 33 of the EOB, Act, wherein the SCN dated 26.11.2010, Demand Notices dated 06.04.2011 and 05.05.2011 were assailed and the petitioner sought for the Security Companies to be held as employers of the security guards. Adjudicating Authority of EOBI on 27.12.2011 dismissed the complaint, which order was assailed by the petitioner through an appeal under section 35 of the EOB Act before Appellate Authority of EOBI, which was dismissed vide decision dated 23.04.2012 and the petitioner was held liable to pay contributions amounting to Rs.238,960,800/- for the period from July, 2004 to June, 2010.

4. The learned counsel for the petitioner contended that the petitioner has never directly engaged or employed security guards, either expressly or impliedly, but has lawfully contracted with independent and duly registered Security Companies, that alone employ, control and supervise the security guards, therefore, the liability rests squarely with the Security Companies for deposit of the contributions and even otherwise the Security Companies are themselves registered with EOBI and have furnished indemnities confirming their liability. The learned counsel submitted that there exists no employment nexus between the petitioner and the security guards, which precludes the application of the EOB Act to the petitioner in relation to them and that EOBI has committed a fundamental error of law by repeatedly equating Security Companies with contractors or any other person contemplated under the EOB Act, and by mischaracterizing the services rendered by such companies as the supply of labour rather than specialized and regulated security services.

5. The learned counsel for the petitioner further contended that the functioning and operations of such Security Companies are heavily regulated by provincial statutes due to the unique nature of the services that they render and any contrary finding would be a flawed interpretation which would disregard the statutory framework governing private Security Companies and would lead to untenable conclusions, such as imputing to a telecommunications operator the obligations of a licensed security agency.

6. Conversely, the learned counsel for the EOBI has supported the impugned decisions by contending that the petitioner squarely falls within the ambit of the term employer as defined under section 2(c) of the EOB Act. It was further submitted that EOB Act, being a piece of beneficial legislation enacted for the welfare of employees, must be construed in a manner consistent with its remedial object and underlying spirit. The learned counsel also argued that in view of the concurrent findings recorded by the forums below of competent jurisdiction, this Court should not exercise its supervisory jurisdiction.

7. I have given anxious consideration to the arguments of the learned counsel for the parties and perused the record with their able assistance.

8. Tersely, the petitioner impugns the decisions of the EOBI, whereby the security guards deployed at BTS Towers, through various Security Companies were deemed to be employees of the petitioner, and therefore the petitioner being the employer was held liable to pay Rs. 238,960,800/- as contributions. It is apparent that the petitioner has not disputed payment of contributions due for the insurable employment of its employees rather the petitioner s contention is that it is not liable to pay contributions for the security guards. While considering this background and the grounds raised by the parties, following questions need adjudication by this Court:- (i) Whether the security guards deployed at the sites of the petitioner are to be regarded as the employees of the petitioner, or whether they remain, in law and in fact, the employees of the independent Security Companies through whom their services have been engaged? (ii) Whether the impugned orders are unsustainable in law?

9. In order to adjudicate the first question, it is essential to examine the statutory framework regulating the relationship of employment and payment of contribution particularly in circumstances where the services of workers are engaged through a third-party. The governing law is Employees Old Age Benefits Act, 1976, relevant portion is reproduced below:-

2. Definitions. In this Act, unless the context otherwise requires,-- [(bb) employee means any person employed, whether directly or through any other person, for wages or otherwise, to do any skilled or unskilled, supervisory, clerical, manual or other work in, or in connection with the affairs of, an industry or establishment, under a contract of service or apprenticeship, whether written or oral express or implied, and includes such person when laid off ;] [(c) employer , in relation to an industry or establishment, means any person who employs, either directly or through any other person, any employee, and includes (i) in the case of an individual, an heir, successor, administrator or assign; (ii) a person who has ultimate control over the affairs of an industry or establishment, or where the affairs an industry or establishment are entrusted to any other person (whether called a managing agent, managing director, manager, superintendent, secretary or by any other name), such other person; and

10. A bare perusal of the definitions reveal that the term employee includes any person engaged for wages or otherwise, whether employed directly by the principal employer or through any other person acting on his behalf. Likewise, the expression employer , when used in relation to an industry or establishment, is sufficiently wide to encompass any person, who employs a person either directly or through an intermediary or contractor. When these definitions are harmoniously construed, it unequivocally follows that the workers performing duties through a contractor, agent, or any such intermediary, whose services are availed by any establishment, fall within the purview of the term employee for the purposes of statutory contribution.

11. This Court shall now see whether the security guards deployed at the sites of the petitioner are to be regarded as the employees of the petitioner, or whether, under the law, they remain the employees of the independent Security Companies. Under existing laws these Security Companies are duly registered with the Securities and Exchange Commission of Pakistan (SECP) and seek necessary clearances from the Ministry of Interior and acquire requisite licenses. It may be noted that the functioning and operations of such Security Companies are heavily regulated by provincial statutes due to the unique nature of the services which are specialized and therefore operate under stringent legal regulations. In the instant matter the Security Companies engaged by the petitioner are registered in different provinces where the provincial statutes govern the regulatory framework of Security Companies in their respective jurisdictions. For instance, in Punjab they operate under Punjab Private Security Companies (Regulation and Control) Ordinance, 2002. Similarly, Khyber Pakhtunkhwa Private Security Companies Ordinance, 2002 in Khyber Pakhtunkhwa and Baluchistan Private Security Companies Ordinance, 2001 in Baluchistan. All these statutes contain similar provisions, which lay down licensing procedures, requirements, uniforms, training, penalties, conditions for arms/ammunition, etc. For reference, section 13 of the Punjab Private Security Companies (Regulation and Control) Ordinance, 2002, which governs employment of staff by the licensee, is reproduced hereunder:-

13. Employment of staff by licensee, etc. (1) The licensee may, in the conduct of his business, employ as many persons as he may consider necessary to be security guards and members of staff and shall at all times during such employment be responsible for the good conduct of each and every person employed by him. (2) The licensee shall not employ as a security guard any person who (a) has been convicted of any offence involving fraud or moral turpitude or dismissed from Government Service on charges of misconduct; or (b) is, in the opinion of the Licencing Authority, not a fit and proper person to be employed as security guard. (3) Notwithstanding anything contained in subsection (1), no person shall be employed by a licensee as a security guard until he has submitted to the Licencing Authority a statement containing complete particulars and other information of such person on the prescribed form and the Licencing Authority has conveyed its no objection in writing to the recruitment of such security guard by the licensee. (4) Every licensee shall maintain a list of all the persons employed by him with their full particulars and antecedents at the place of his business. (5) Every licensee shall, before deploying the security guard, get the security guard registered at the local police station of the area of his deployment. (6) Every licensee shall make arrangements for insurance of every security guard employed by him, with a registered insurance company, in respect of serious injury sustained amounting to disability or death of security guard in the discharge of his duties.

12. The above referred section delineates a comprehensive regulatory framework governing the employment, supervision and welfare of personnel engaged by a licensed security company. This provision imposes upon the licensee a continuing obligation to ensure the integrity, discipline and lawful conduct of all individuals employed in connection with its operations. Subsection (1) affirms the licensee s discretion to engage staff as deemed necessary, yet couples it with an unequivocal responsibility for their good conduct. Subsection (2) creates a statutory bar against the employment of individuals, whose background reflect moral unfitness, specifically those convicted of offences involving fraud or moral turpitude, dismissed from government service on grounds of misconduct, or otherwise considered unsuitable by the Licensing Authority. Subsection (3) introduces a mandatory pre-employment clearance mechanism, requiring the submission of each prospective guard s particulars and the issuance of a written no objection by the licensing authority prior to engagement, thereby institutionalizing preventive oversight. Subsections (4) and (5) further extend administrative control by mandating the maintenance of an updated employment register and requiring police registration of every deployed guard, ensuring traceability and public accountability. Finally, subsection (6) embeds a welfare element by obligating the licensee to secure insurance coverage for every guard against disability or death arising in the line of duty.

13. Under the existing framework across the provincial jurisdictions, security companies assume the unequivocal status of employers of their respective security personnel, possessing complete administrative and financial control over them, who are responsible for the employment, hiring, training and equipping of the security guards and provide uniforms, issue arms and ammunition, deploy personnel to various sites, manage work shifts and determine leave schedules. Moreover, the security companies bear legal responsibility for the actions of their employees in the course of their duties irrespective of the establishment where they are deployed. Significantly, many security guards, at the time of their employment, are unaware of the specific locations or clients to whom they will be deployed. In fact, even upon the termination of a particular service contract between the security company and its client, the guards employment relationship with the security company remains intact. This continuity of service underscores that the guards are not the employees of the beneficiary establishment but remain in the employment of the security company, which bears exclusive responsibility for their management, control and welfare. The legal import of this arrangement reinforces the principle that the existence or termination of a client contract does not alter the employer employee relationship subsisting between the security company and its guards. Likewise, the security company may deploy guards to multiple clients, all of whom are served under the aegis of the same employer-employee relationship.

14. Furthermore, the law mandates that security companies register with social security institutions, arrange group insurance for the guards under their employment and duly pay contributions. This reflects that security companies constitute independent legal and operational establishments vested with the full spectrum of employer s authority ranging from recruitment, training and supervision to the regulation of discipline, payment of wages and maintenance of service records. Thus, to absolve the beneficiary i.e. the Security Companies of liability for social welfare contributions in such a scenario would not only be legally indefensible, but would also undermine the integrity of the existing regulatory framework governing the security services industry. Therefore, these entities cannot by any reasonable interpretation be reduced to the role of mere intermediaries or middlemen.

15. In order to reinforce this conclusion, it is necessary to examine how superior Courts have interpreted the relationship between a principal employer and contract labour, particularly in determining upon whom the statutory obligation to deposit welfare contributions lies. It is necessary to see the law as interpreted by the superior Courts on the matter since this judicial interpretation provides the framework for assessing whether, in fact, the security guards can be treated as employees of the petitioner or of the Security Companies. There is no cavil to the preposition that the obligation to deposit such contributions squarely rests upon the principal employer, for which the Courts have applied the financial or administrative control test. In the case of Messers Bolan Mining Enterprises v. Board of Trustees, EOBI and others, (2010 SCMR 1573) the august Supreme Court considered the question and applied the test with whom such employee is performing his duties and found Bolan Mining liable on the admitted position that the employees are under the administrative and financial control of the employer . Similarly in Nestle Milk Pak Ltd. v. Board of Trustees, EOBI, Karachi, (2005 PLC 19) Lahore High Court held Nestle Milk Pak Ltd. liable to pay contributions, observing that there existed concurrent findings of fact establishing that Nestle Milk Pak exercised the authority to hire and dismiss the employees. Moreover, there was a categorical finding that the effective control over the employees vested in Nestle Milk Pak Limited. Hence, there remains no dispute to the proposition as evident from the plain statutory wording and the plethora of case laws on the matter that the liability of contributions falls upon the principal employer, who exercises effective financial and administrative control over the employees.

16. The entire bunch of case law relied upon by the learned counsel for EOBI applies the control test for determining the existence of an employment relationship. However, none of these precedents pertain to private security agencies or to the engagement of security guards. While the control test is often employed to determine the status of employment, it is not the sole or conclusive test. In a case of res integra, a balanced and pragmatic approach must be adopted, upon due consideration of all relevant factors. An integration test is one of the relevant tests and in the present case more appropriate. The integration test assists in determining whether a person performing services is to be regarded as an employee of an alleged employer; it examines whether the work performed is an integral part of the employer s business and whether the worker is assimilated into the organization as one of its regular members. Unlike the control test , which focuses primarily on supervision of manner and method, the integration test looks to the totality of the relationship, it takes into account the character of the work in relation to the enterprise, the manner of engagement, who recruits and pays, who has disciplinary and managerial authority, who supplies equipment and training and whether the worker is treated as part of the principal employer s internal organization (payroll, appraisal, benefits, rostering and the like). No single factor is decisive; the question is whether, when all facts are weighed, the employee is functionally part of the employer s business or remains the operative of an independent concern.

17. This Court shall now apply the integration test enunciated above to the instant matter. It is evident from the record that the Security Companies are independent contractors and were engaged by the petitioner under formal agreements to provide security services. The core activity of the petitioner is provision of GSM/telecommunication services and is wholly distinct from the specialized security function performed by the guards. The protection of BTS sites is an ancillary, outsourced service and is not part of the petitioner s commercial core. The mere fact that the petitioner directed the deployment of guards at specific locations does not establish an employer-employee relationship, particularly when the guards were engaged and remunerated by the Security Companies under the contractual framework governing such services. Outsourcing a specialized service does not, by itself, convert the petitioner into the employer of the guards.

18. Moreover, the guards were provided pursuant to security services agreement between the petitioner and the Security Companies. Under the contractual framework the Security Companies having complete discretion are responsible for hiring, dismissal, payment of wages, and all other benefits due towards the guards under the social security and labor laws. These agreements explicitly set out the responsibility of registration with the Social Security and Employees Old Age Benefits Institution on the Security Companies and establishes their liability to discharge all legal obligations towards the said guards. Further, recruitment, payment, routine supervision, disciplinary authority and terms of employment also rests with the Security Companies under the contractual framework and the petitioner s role is limited to specifying locations and security requirements rather than exercising managerial control over how the guards are employed, trained, disciplined or remunerated. Thus, it transpires that the petitioner has no lien, control, or right over such guards, who were neither employed by nor placed on the payroll of the petitioner, but rather remained the employees of the respective Security Companies. Hence all the factors indicate non-integration and points towards the Security Companies that exercise effective financial and administrative control over the employees.

19. This Court shall now address the second question. It is manifest that the proceedings before the EOBI Adjudicating and Appellate Authorities were conducted in disregard of due process of law. It is evident from the record that EOBI vide its letter dated 17.04.2010, directed the petitioner to direct the Security Companies, who are already registered to pay the contributions and those companies, who are not registered with EOBI to get registration and pay the contributions. Notably, EOBI provided an ultimatum that in case the petitioner failed to do the needful, it would assume that the security guards are employees of the petitioner. Threefold elements are reflected i.e. firstly, the impugned decisions passed by EOBI are against their initial view that the Security Companies were liable to pay the contributions. The record reflects that these Security Companies are themselves registered as an establishment with EOBI with the nature of economic activity classified as Security Services . They are duly making contributions in respect of their employees, including security guards. It can, therefore, be safely concluded that this fact was well within the knowledge of EOBI, however, the same was mechanically disregarded.

20. Secondly, the necessary parties, i.e., the Security Companies, were neither impleaded by EOBI, nor were the salary sheets of the security guards produced to establish whether the guards were being paid by the petitioner or the Security Companies. Thirdly, the petitioner furnished the indemnities of the Security Companies accepting responsibility by them for contributions of the guards before EOBI. The indemnities explicitly stated that all the security personnel provided by the Security Companies were directly managed, controlled, administered and employed by them. However, these facts were neither considered nor addressed by the EOBI s Appellate Authority, which amounts to illegality apparent on the face of the record.

21. The impugned decisions imposing the contributions liability upon the petitioner in respect of the security guards at BTS sites, without first adjudicating the clear and material question of who in fact employed and paid the guards, is legally unsustainable. The facts such as the contractual engagement of the Security Companies, registered status of those companies with EOBI, indemnities on record, absence of payroll or salary evidence, lack of hiring/disciplinary/promotion control by the petitioner and the distinct regulatory framework governing security services leads to the conclusion that the guards were not assimilated into the petitioner company and were not its employees within the meaning of the EOB Act.

22. The Security Companies, in their capacity as direct employers of the security guards, cannot and should not be overlooked in determining liability for Employees Old Age Benefits contributions. The attempt to shift this responsibility solely to the party procuring the security services would constitute a legal oversight with potentially far-reaching consequences.

23. In view of the above discussion, the instant petition is allowed. The impugned decisions dated 27.12.2011 and 23.04.2012, passed by Adjudicating Authority and Appellate Authority, EOBI are set aside. The SCN dated 26.11.2010 and Demand Notices dated 06.04.2011 and 05.05.2011 are declared illegal and unlawful.

24. Before parting with this judgment, it is imperative to note that EOB Act is a beneficial legislation designed to afford employees and workers a social safety net by offering them benefits, therefore, the authority/EOBI retains the liberty to issue fresh show-cause notices, if so advised, in respect of contribution payable for the security personnel employed by the Security Companies, strictly in accordance with the law. UN/202/Isl. Petition allowed.