2003 PLP 189 (PLC)

(d) Provincial Employees' Social Security Ordinance (X of 1965)

Ss.20(1) & 23(1)

Failure to pay contribution

Charging extra/additional amount

Scope

Increase under S.23(1) of the Ordinance was permissible, when employer failed to pay contribution payable under S.20(1) of the Ordinance

Where legality of contribution was challenged for a period prior to date of registration, then no wilful default in payment of contribution could be attributed to employer

Employer would not be liable to pay such increase in absence of intentional omission or wilful abstention from performing legal obligation as to payment of contribution. Khalid Habibullah for Appellant. Abdul Muqtadir Khan for Respondents. The appellant, Sindh Employees' Social Security Institution (herein-below to be referred to as "the Institution") through this Miscellaneous Appeal under section 64 of the-Provincial Employees Social Security Ordinance, 1965 (hereinbel6w to be referred to as "the Ordinance") has assailed the order dated 6-10-1997 passed by the learned Social Security Court No.2, Karachi under section 59 of the Ordinance setting aside the decision of Commissioner rendered on 24-2-1988 under section 57 of the Ordinance.

2. The facts leading to this appeal are that the Government of Sindh by a notification dated 28-7-1982 published in the Sindh Government Gazette on 8-8-1982 under section 1(3) of the Ordinance applied the provisions of the Ordinance to the employees and employers of a number of establishments including Messrs Fuji Color Pakistan Laboratories Limited situated at 37/D, Block 6, PECHS, Karachi (Serial No.44). It is the case of appellant Institution that the respondent Messrs Fuji Color Pakistan Laboratories is a Private Limited Company duly incorporated under Companies Ordinance, 1984 having its registered office at Lahore and photo-finishing setup and laboratories in Lahore, Rawalpindi, Karachi, Peshawar, Faisalabad, Multan, Hyderabad and various other prominent cities throughout Pakistan which fall within the term establishment as defined under section 2(11) of the Ordinance and that they started photo-finishing setup and- laboratory at 25 Sainjees Hotel, Thandi Sarak, Hyderabad (subsequently at House No.525/2 near GPO Cantonment Hyderabad) from January, 1983, but failed to register their employees with the appellant for social security benefits. They also failed to pay the statutory contribution for the employees. The appellant's Directorate at Hyderabad, by their letter dated 6-4-1987, called upon the Hyderabad Laboratory establishment to pay contribution in respect of employees working in or in connection with the affairs of Karachi establishment/Fuji Color Pakistan Laboratory (Pvt.) Limited Karachi which was already notified and registered with City Directorate, Karachi but the respondent took the plea that separate notification be issued and then they would make payment from the date mentioned in the Gazette notification. The appellant did not accede to this contention and maintained that contribution Was payable in respect of all employees working in connection with the work of notified Karachi establishment even at its Hyderabad establishment and fresh notification was not a statutory requirement. The Hyderabad Directorate of the appellant, in the meantime, worked out the question of contribution on the basis of information available and demanded a sum of Rs.59,488 towards arrears of contribution from January, 1983 to April, 1987. The respondent filed a complaint under section 57 of the Ordinance against the demand of above amount maintaining their earlier stand that appellant/institution has to grant separate registration and to issue Gazette notification for Hyderabad Laboratory. The appellant's Director filed his comments and the Commissioner, by his decision dated 24-2-1988, held that the respondents were liable to pay contribution from 1984. The respondent impugned the said decision by filing appeal which was heard and allowed.

3. I have heard learned counsel for parties and perused the material on record.

4. Main contention raised on behalf of the appellant/Institution is that the respondent is a notified Institution within the meaning of section 1(3) of the Ordinance, and since the Karachi establishment of Messrs Fuji Color Pakistan Laboratories (Pvt.) Limited has been duly notified vide notification dated 28-7-1982 and the Hyderabad Laboratories of Messrs Fuji Color Pakistan Laboratories (Pvt.) Limited is not a different entity, the latter is liable to pay contribution. Mr. Abdul Muqtadir Khan, learned counsel for respondent however, vehemently opposed this legal contention and on the lines of the impugned judgment argued that Messrs Fuji Color Pakistan Laboratories (Pvt.) Limited situated at 525, near GPO Cantonment Hyderabad is a distinct and separate entity and has, also been registered as such, therefore, in absence of a specific notification issued in that behalf under section 1(3) of the Ordinance, the said laboratory at Hyderabad cannot be treated as an individual establishment.

5. It is interesting to note that in the impugned judgment the Appellate Court has resorted to interpretation of term 'employee' used in section 2(8) of the Ordinance and has drawn a conclusion that it was for the appellant/Institution to establish that the persons working at Hyderabad Laboratories actually were working in connection with the work of Karachi Laboratories for which there is no evidence. Learned Appellate Court has lost sight of an important aspect that originally the cause was prosecuted on behalf of the Hyderabad Laboratories through an application made by Karachi Laboratories of respondent which was decided by the Commissioner on 24-2-1988 as the original forum, therefore, under the normal rules and procedure it was for Messrs Fuji Color Pakistan Laboratories (Pvt.) Limited, Karachi to make out their case and not the Institution; consequently, when the main party failed to discharge its burden the thrust could not be shifted to the other side.

6. Notwithstanding, the above procedural drawback, it may be noted that the First Appellant Court had taken cognizance of the fact that owner of both the concerns at Karachi and Hyderabad is one and. the same, yet the view taken by it was that looking to the law laid down by the Hon'ble Supreme Court Kohinoor Chemical Company Limited v. Sindh Employees Social Security Institution (PLD 1977 SC 197) the Court is not concerned with the definition of 'employer'. In this background Mr. Khalid Habibullah, learned counsel for Institution pointed out that the case ought to have been examined in the light of the observations of Hon'ble Supreme Court in the subsequent judgment MacDonald Layton Constain Limited v. Punjab Employees Social Security Institution (PLD 1991 SC 1055) wherein the view taken by High Court has been approved. It has been held therein that once an establishment is notified for the purposes of applying the Ordinance to it, all its employees wherever working in connection with its affairs shall be ipso facto covered by its mischief and no separate notification was needed for an outside place.

7. The crux of the case, thus, turns on determination of the point whether the employees at Hyderabad Laboratory work in connection with the affairs of the establishment which has been duly notified, that is to say. Messrs Fuji Color Pakistan Laboratories (Pvt.) Limited. 37/D, Block-6, PECHS, Karachi. Who has to prove the important details relating to affairs of both establishments, is the predominant question. In this regard, this Court will bear in mind the golden rule that since the Ordinance aims at ameliorating the lot of certain employees by providing benefits to them or their dependants in the event. of sickness, maternity employment or injury or death and for matters ancillary thereto, beneficial construction is to be made while interpreting any provision of the Ordinance. In principle, this view is based on settled law that while construing a beneficial enactment, the Court has to take into consideration the object for which it was enacted and the mischief which it intended to suppress and in doing so if two, possible constructions of a provision emerge from a provision of such a statute then one that favours the class of persons for whose benefit the law has been enacted would be preferred. The precedents Sindh Employees Social Security Institution v. Spencer & Company (Pak.) Limited (1998 SCMR 440) and Shaheen Airport Services v. Sindh Employees Social Security Institution (1994 SCMR 881) may be quoted with advantage. Burden of establishing a point of fact which may likely deprive the employee of their intended benefit shall, therefore, not be put on the employees or the Institution; more so, when the main application has been instituted on behalf of the employers. The employer has to shoulder the onus by proving that the laboratory at Hyderabad is inescapably a different entity having no concern with the notified laboratories at Karachi.

8. Owner of both the laboratories is the same person. Both the laboratories at Karachi and Hyderabad are being run under the name shown in column-2 of the Gazette Notification dated 28-7-1982 i.e., Messrs Fuji Color Pakistan Laboratories (Pvt.) Limited. No account books or other documentary evidence has been furnished to prove as to who is enjoying the profits and facing the loss, if any. The original forum namely the Commissioner has rightly noted that Hyderabad Laboratory is in the administrative control of the notified establishment at Karachi, as is evident from their letter dated 13-8-1987. I have gone through this letter. The respondents have admitted in unambiguous terms that M/s. Fuji Color Pakistan Laboratories (Pvt.) Limited has spread its operating net work to 07 different laboratories established in Pakistan namely: Lahore, Rawalpindi, Karachi, Faisalabad, Peshawar, Hyderabad and Multan and all the! establishments are operating under the administrative control of the Directors having its headquarters now at Karachi. Letters dated 10-5-1987 and 7-7-1987 also extend support to the above factual position. This admission was enough to bring the case with the fold of the rule laid down to MacDonald's case (PLD 1991 SC 1055) as the workers at Hyderabad shall be deemed to be working in connection with the affairs of the establishment that holds the administrative control. Merely because the sales, accounting, manpower etc., is of separate identity, the establishment will not be taken as a separate entity, it would still be practically under the administrative control of Messrs Fuji Colour Pakistan Laboratories (Pvt.) Limited, Karachi. However one proposition is abundantly clear that had the laboratory at Hyderabad been a separate entity they would have, in their own right and capacity, challenged the order of contribution passed by the Institution. In their independent capacity or as a separate entity they have never come I forward and it is all along Messrs Fuji Color Pakistan Laboratories (Pvt.) Limited who filed the main application and against whom the order has been passed by the Commissioner on 24-2-1988. The aforementioned order shows that even the main application instituted under section 57 of the Ordinance has been signed and filed by the Assistant Manager (Personnel and Administration) of the respondent's establishment at Karachi. Again, the appeal was also filed before the Social Security Court at Karachi by a party with the following identity/designation. Messrs Fuji Color Pakistan Laboratories (Private) Limited a incorporated under Companies Ordinance, 1984, having its registered office at 2-Gardee Trust Building, Napier Road, Lahore.: ...... ...... Appellant

9. The laboratory at Hyderabad, in its separate and distinct status, did not figure at all, If it is to be argued that Messrs Fuji Color Pakistan Laboratories (Pvt.) Limited at Hyderabad is a separate and independent entity then the first appeal under section 59 of the Ordinance before Social Security Court having not been filed by the aggrieved party. was not maintainable and liable to be dismissed on that score alone. They should have come in their own capacity which essentially they could not do, as right from the beginning they have remained unconcerned and the matter was being dealt with and perused by the persons who were at the helm of affairs in the Headquarters situated at Karachi namely the notified establishment as already pointed out. Consequently, on over all consideration of the ambient circumstances, I am inclined to hold that Messrs Fuji Color Pakistan Laboratories (Pvt.) Limited, Hyderabad falls within the domain of notified establishment mentioned at serial No.44 of the said Gazette Notification issued by the Government of Sindh on 28-7-1982. The First Appellate Court i.e. they Social Security Court had taken an erroneous view in holding the Hyderabad laboratory as a separate entity. To this extent, the 1st appeal under section 59 of the Ordinance (No. 1 of 1988) was wholly without merits and was liable to be dismissed.

10. Learned counsel for appellant made a submission in the alternative that the respondent was not liable to pay the increase demanded by the appellant. On perusal of letter dated 8-8-1987 addressed to the respondent and Messrs Fuji Color Pakistan Laboratories (Pvt.) Limited, Thandi Sarak, Hyderabad it is noted that under this letter the Director, of the appellant has called upon them to arrange payment of the contribution dues including the increase as already communicated to them. The increase is permissible under section 23(1) of the Ordinance and a plain reading of the aforementioned provision of law shows that it is to be charged when the employers fail to pay the contribution payable under section-20(1) of the Ordinance on the due date. Thus, an extra amount is additionally to be charged in case of default in payment of the contribution by the employer. In the circumstances discussed in this judgment, it is evident that legality of the contribution was being questioned for a period prior to the date of registration. In any event, no wilful default in payment of contribution could be gathered from the conduct of the respondent. Indeed, failure to pay, in absence of intentional omission or wilful abstention from performing the legal obligation as to payment of contribution, is lacking in this case, the respondent, is, therefore, not liable to pay the increase within the meaning of subsection (1) of section 23 of the Ordinance.

11. Consequently, while allowing this appeal, the impugned appellate order passed by the Social Security Court No.2, Karachi is set aside and the order passed by the Commissioner on 24-2-1988 is maintained subject to the modification that the increase within the contemplation of subsection (1) of section 23 of the Ordinance may not he charged. Since there were conflicting judgments of the lower forums, the costs shall be borne by the parties themselves.

12. These are the reasons for the short order announced on 16-9-2002. H.B.T./S-240/K. Appeal allowed: