2006 PLP 71 (PLC)

ZIA PERWAZ, J.

This Appeal under section 64 of the Social Security Ordinance, 1965 is directed against the impugned Judgment of the First Social Security Institution Court in Appeal No.36/1997, dated 31-8-2002. Facts relevant to the case are that M/s Haroon Motors Limited was incorporate as a limited company. In pursuance to the Economic Reforms Ordinance 1972, the Company was nationalized. By Gazette of Pakistan dated 19-2-1973, its name was changed as Republic Motors Limited, Karachi. At the time of denationalization on 31-1-1986, it was carrying on business under the name of Republic Motors Limited and was subject to contribution under the Social Security Ordinance. On denationalization the undertaking was purchased/transferred to new owners "M/s. Hinopak Motors Limited". The amount of social security was paid by M/s Hinopak Motors Limited with effect from 1-2-1986 upto the month of May, 1994. Therefore, from August, 1994 onwards the payment was discontinued after demand of increased amount of contribution in pursuance to the re-enactment of XXIII of 1993 whereby the limit of the amount was raised from Rs.1500 per month to Rs.3000 per month and a proviso was added in section 2(8)(f) for the Ordinance. It was followed by a subsequent enactment of Ordinance VII of 1994, Ordinance XXXIII of 1994 and thereafter Act No.11 of 1994 was promulgated. On failure of the Appellant to make payment of contribution, a notice dated 15-8-1994, under section 81 of the Land Revenue Act was served on the Appellant, calling upon them to make payment of a sum Rs.56,525.44 towards contribution and an amount of Rs.38,828 for June, 1994 together with the increase for April, and May, 1994 amounting to Rs.17,697.44, making a total of Rs.56,525.44 On failure of the Appellant to make payment, the Respondents issued letters dated 6-7-1994, 31-7-1994, 5-9-1994 and 7-9-1994. The Appellant, being aggrieved by the notice, preferred a complaint under section 57 the Ordinance, on 18-8-1994 before the Commissioner, Social Security Institution, and aggrieved by the decision dated 21-8-1997 passed thereon, preferred Appeal No.36/97, before the First Social Security Institution Court. It was dismissed by the impugned Order dated 31-8-2002.

3. Pre-admission notice was issued to the Respondents. Mr. Khalid Habibullah, Advocate, appeared on behalf of the Respondents. As learned counsel for both the parties have advanced their respective arguments in detail, I propose to admit and dispose of this Appeal by this order.

4. Mr. Khalid Imran learned counsel for the Appellant, has attacked the impugned Order on the ground that after the denationalization of Republic Motors, a new company started functioning under the name and style of "Hinopak Motors Limited". Which, not being a notified establishment within the provisions of section 1 (3) of the said Ordinance is not liable to any contribution. His next contention is that the notice issued under the provision of section 81 of the ,Land Revenue Act, 1967; is not maintainable. It is without prior adjudication of the demand. and in this case no inquiry was conducted in pursuance to the provisions of the Ordinance XXIII of 1993 whereby the levy was extended to employees drawing salaries upto Rs.3000 per month. The learned counsel emphasized particularly on the word "continue" used in the preamble of notification dated 6-7-1986. The learned counsel further argued that after the establishment was renamed the demand would be illegal as it would amount to retrospective operation of the notification. Referring to section 1(3) of the Ordinance, he also contended that mere publication of S.R.O. No.89 in the Gazette of Pakistan dated 7 August, 1986 would not create a liability. The learned counsel further contended that the demands raised in the illegal manner would not make the Appellants liable to continue to pay the contribution as there could be no estoppel against statute. He also contended that after the taking over of the assets of the Republic Motors Limited, the Appellant terminated most of its employees and their. services were acquired by Al-Khair Services, a contractor, providing manpower to the Appellant.

5. In support of his contentions, learned counsel relied on the case of Agri Auto Industries Limited v. Employees' Old-Age Benefits Institution and others (1990 PLC 21), Commissioner, Sindh Employees Social Securities Institution and another v. E.M. Oil Mills Industries Limited, Karachi and others (2002 SCMR, 39), Jupiter Textils Mills Limited, Karachi v. Director, Hyderabad Directorate and another (1997 PLC 473), and Kohinoor Chemical Company Limited and another v. Sindh Employees Social Security Institution and another (PLD 1977 SC 197) and Treasurer of Charitable Endowments for Pakistan v. Central Board of Revenue and others (PLD 1981 Kar. 357).

6. On the other hand, Mr. Khalid Habibullah, Advocate has vehemently opposed the contentions of the learned counsel for the Appellant. He' contended that mere change of ownership will not exclude the Appellant from payment of contribution. He also contended that since there is an in-built procedure provided in the Ordinance, therefore no adjudication for determination of the claimed amount is necessary and the notice has been validly issued. He relied on the case of Pir Muhammad v. Government of Sindh and others (1990 MLD 869) and Kohinoor Chemical Company Limited and another v. Sindh Employees' Social Security Institution and another (PLD 1977 SC 197). He further contended that the Appellant is also responsible for the contribution in respect of those employees provided by contractor. That after the amendment dated 25-1-1993 an employee covered under the net of social security on the basis of his salary at the time of his initial appointment, shall continue to remain under the cover even if subsequently his wages exceed the maximum limit prescribed by law. He has relied on the case of Jupiter Textiles Mills Ltd v. Director, Hyderabad Directorate and another (1997 PLC 473).

7. Mr. Agha Zaffir, learned counsel appealing on behalf of the State, adopted the arguments advanced by Mr. Khalid Habibullah, Advocate for the respondents.

8. I have heard the learned counsel for the parties and have gone through the record and case-law cited before me.

9. Taking up the first plea raised by the learned counsel for the Appellant, that since no notification under section 1(3) of the Ordinance has been issued in respect of the Appellant, therefore, the Appellant is not liable to pay any contribution, it may be mentioned that initially it A Was Haroon Industries Limited which was declared as an establishment vide notification dated 15-10-1968, issued under section 1(3) of the Ordinance and published in the Gazette of Pakistan. In the year 1973. Haroon Industries Limited was nationalized and renamed as Republic Motors Limited. The Appellant, on incorporation in the year 1986, took over the Republic Motors Limited and started the same business in the same premises with the same employees. It is further evident by the letter dated 12-2-1986 from Republic Motors Limited on the Director, Sindh Employees Social Security Institution, Karachi which reforms the Institution that all the employees concerned with automobile activities have been terminated and have been appointed afresh by M/s Hinopak Motors Limited which is now functioning within the same premises. By Gazette Notification dated 6-7-1986, the Government of Sindh, Labour and Corporation, made the Ordinance applicable to the employees and employers of the renamed establishment i.e. the Appellant, with effect from the date after the establishment was renamed. Therefore, the establishment remained and continued as a notified establishment even after the ownership changed hands. As the establishment was already declared as a notified establishment, there was no need for issuance of a fresh notification under section 1(3) of the Ordinance as mere change of ownership of an establishment would not affect payment of contribution in respect of the employees working therein when all other relevant factors remained unchanged. The subsequent change was also duly notified vide Notification No. Lab. (1)23-13/96-11 dated 6-7-1986 published in the Sindh Government Gazette dated 7-8-1986. The relevant portion of the preamble of the notification dated 16-7-1986 require examination. It reads as under:-- "Whereas the Provincial Employees' Social Security Ordinance, 1965 was applied to the employers and employees of the establishment mentioned in column 3 of the schedule below vide notification mentioned in the column 4 thereof. And whereas the said establishments have been renamed as given in column 5 of the said schedule with effect from the date mentioned in column 6 of the said schedule. And whereas it is expedient that the said Ordinance should continue to be applied to the employees of the said establishment as aforesaid. Now, therefore, in exercise of powers conferred by subsection 3 of section 1 of the said Ordinance, the Government of Sindh are pleased to:

1. Apply the said Ordinance to the employees and employers of the renamed establishment with effect from the date, the establishment has been renamed as aforesaid and;

2. Order that the employees of the said establishment and their dependents shall be entitled to the benefits to the extent and in the manner provided in sections 35 to 45 of the said Ordinance with effect from the said date."

10. Thus, for the purpose of payment of contribution under the Social Security Ordinance the Appellant stepped into the shoes of Republic Motors Limited. Therefore, the contention of the learned Counsel that fresh notification under section 1(3) of the Ordinance was required to be issued after the establishment was renamed and transferred to the Appellant, has no merits. This view is supported by judgment in an identical case reported as Pak Suzuki Company Limited v. Commissioner, Social Security Institution and another (2003 PLC 129) and the case of Pakistan Shipping Corporation v. Sindh Employees' Social Security Institution '(1981 PLC 9) and Sindh Employees' Social Security Institution v. M/s. Al-Muhammadi Tiles Industry (1981 PLC 73).

11. It was contended that services of most of the employees were terminated and their services was acquired by Al Khair Services, contractors providing manpower services to the Appellant, they were no more employees of the Appellant. In this regard the provisions of section 20(1) of the Ordinance are relevant, which 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 a contribution at such times, at such rate and subject to such conditions as may be prescribed." The word `employer' used in the above quoted provision of sub-section (1) of section 20 of the Ordinance, has been defined to mean the case of works executed or undertaking carried on by any contractor or licensee on behalf of the State, the contractor or licensee working for the State, and in every other case the owner of the industry, business undertaking on establishment in which an employee works and includes any agent, manager or representative of the owner." Thus, it would be seen that while in the case of works executed or undertakings carried on by the contractor or licensee for the State, such contractor of licensee, as the case may be, is the employer while in every other case it is the "owner" who is the employer. Since the Appellant falls in the later category, therefore, the Appellant is responsible for the contribution in respect of secured employees whether employed directly or through any other person. This point has been dilated upon by a Full Bench of the apex Court in the case of Sindh Employees Social Security Institution v. Consolidated Sugar Mills Limited (1989 SCMR 888) and held has under: "The definition of 'employer' has to extremely relevant features for understanding its meaning and scope. Firstly, in the case of Works and undertakings on behalf of the State, the contractor or the licensee carrying on the work has been made the employer. Secondly, 'in every other case that is in which State's interest is not in the industry, business, undertaking or establishment in which an employee works' has been made the employer. On these two features, without for the present examining the concept of employee, the respondent being the owner would be the employer."

12. Accordingly, it is held that even for those employees whose services were acquired by the contactor and who have been working for the Appellant, the responsibility for contribution in respect thereof rests with the Appellant.

13. Next, it was contended by the learned counsel for the Appellant that the notice dated 15-8-1994; issued under section 81 of the Land Revenue Act, is illegal as the amount claimed therein has not been adjudicated upon or determined in any judicial process. The question of determination of sums recoverable as arrears of land revenue was discussed in the case of Pir Muhammad v. Government of Sindh and others (1990 MLD 869), wherein it was held that before any such amount/money becomes recoverable as arrears of land revenue the requirement, except where there is an in-built procedure, as for instance, on behalf of arrears of taxes, rates, tolls and fees, is that a notice or hearing is to proceed the determination and it is only then that claimed amount can be treated to be arrears for the purposes of recovery as arrears of land revenue. However, in the background of the present case, it has no force since the Appellant, according to the averments in the memo. of appeal, acquired the assets of Republic Motors Limited, It started the same business in the same premises with the same work force, as depicted by the above referred letter of Republic Motors Limited. And more importantly, it paid a sum of Rs.41,798 in March, 1994 and continued payment of contribution, up to July, 1994. Thereafter Appellant stopped payment in respect .of workers whose salaries exceeded Rs.1500 per month. Thus, the amount of contribution payable by the Appellant was already determined and there was no need for determination of the same afresh. The learned counsel for the Appellant relied on the case of Agri Auto (Supra) wherein it was held that before directing recovery as arrears of land revenue, it was obligatory that the amount to be realized from petitioner should have been determined, it was further held that the hasty and hostile manner in which proceedings for recovery by way of land revenue are being pressed without properly determining the amount due, is not only unjust but also smells of mala fides. However in the instant case the facts were entirely different inasmuch as the petitioner was regularly paying contribution in respect of its insured employees and record thereof was inspect by the concerned officials. Thus when the petitioner received a demand calculated on short average of contribution at the rate of Rs.4,313 for the period from September, 1982 to February 1989, later on without disclosing the basis for arriving at the above rate of shortfall, Respondent No.2 issued a notice under section 81 of the West Pakistan Land Revenue Act, 1967. But, in the case in hand the Appellant stopped the contribution which it was making and it has not been' shown that any excess amount was demanded. Thus the cited case is of no help to the Appellant.

14. The question of controversy with respect to the employees who were drawing salaries in excess of the maximum amount of a secured worker as stipulated in the Ordinance has been dealt with by a learned Single Judge of this Court in the case of Jupiter Textile Mills Limited (supra) whereas it has been held that the concept of employment/ engagement/appointment is an initial appointment. In case a person is employed initially with a salaries excess of Rs.1500 (the limit then applicable which has since been increased), the employer is not liable to pay the contribution in respect of such employee. However, the employer is liable up to the sum of Rs.1500 when he was covered under the net of social security. Thereafter, in view of the amendment effected in pursuance of Ordinance XXIII of 1993, dated 25-9-1993, whereby the wage limit at that time was enhanced of Rs.3000 per month, in addition to a proviso reading "Provided that an employee shall not cease to be an employee for the reason that his monthly wages exceed three thousand G rupees" he shall continue to remain under the cover even after his wages exceed Rs.1,

500. The employer in such cases, shall pay 7% contribution up to the maximum limit of wages and not for the remaining amount drawn over the above the maximum limit. Thus, it is well-settled that it is the initial salary at which an employee has been appointed which would determine whether he ,is covered under the social security net or not and the subsequent increase of his salary would not take him out of the social security net subject to the above restriction.

15. The contention that there could not be estoppel against statute/law, the appellant cannot make to continue to pay the contribution, is entirely misconceived as the earlier contributions were made by the Appellant and before it by its predecessors-in-interest, strictly in accordance with the law. Although it had been mentioned that constitutional Petition has been filed by the Appellant, challenging the recovery as well as vires of the Act, however, this Court has not been apprised of the rate of the same. In this regard the learned counsel has relied on the case of Treasurer of Charitable Endowments for, Pakistan v. Central Board of Revenue and others (PLD 1965 SC 357), wherein, after detailed examination of the authorities on the subject, inter alia, it was held that any admission on consent on the part of a party if not in consonance/conformity with the relevant provisions of law, shall not constitute an estoppel against such party. However, in the present case there was no admission or consent which was not in circumstance/ conformity with the relevant provisions of law. Mere fact that the Appellant was a new company, when the business undertaken by the Appellant was not a new business, cannot wash away the privileges available to the employees who were re-employed in the new company under the same terms and conditions. The Appellant itself continued for a considerable period to pay contribution for about 500 workers.. Prior to the Appellant, Republic Motors Limited, whose assets were acquired by the Appellant, also used to pay contribution for about 500 workers before its closure. Thus, the payment of contribution made by the Appellant was in accordance with law. Therefore, the question of estoppel does not arise at all.

16. The point of validity of payment of contribution in pursuance to the aforesaid notification has already been challenged by the present Appellant and the matter rests with the decision of the Division Bench of this Court whereby their contention has already been dismissed. The case is already reported as Hinopak Motors Limited v. The Federation of Pakistan and others (2005 PLC 116 = 2005 CLC 452). In this case the Appellant herein has challenged the promulgation of Ordinance XXIII of 1993 dated 25-9-1993, whereby the Appellant become liable to make contribution in respect of all employees upto the wage limit of Rs.3000 per month and its subsequent re-promulgation through Ordinance VII of 1994 on 31-1-1994 and Ordinance XXXIII of 1994 on 12-5-1994 and its passage as an Act of Parliament by way of Act II of 1994 on 29-6-1994. It was contended on behalf of the Appellant that the legislative power of the Parliament could not be usurped by the President through repeated? re-promulgation of Ordinance. Consequently, contributions in respect of employees drawing wages between Rs.1500 to Rs.2000 could at least not be claimed for the period between 13th January, 1994 when Ordinance XXIII of 1993 was repealed and 29th June, 1994 when an Act of Parliament was enforced. This aspect of the present case does not call for any further discussion as the point raised has already been examined by a Division Bench of the Court in a petition filed by the Appellant, reported as Hinopak Motors Limited v. The Federation of Pakistan and others (SBLR 2005 Sindh 18).

17. The upshot of the above discussion is that all the questions of law raised by the learned counsel for the Appellant as envisaged under I section 64(2) of the Ordinance, have already been decided by the superior Courts and no fresh ground for interference with the impugned judgment on a point of law is made out. Accordingly, this Appeal is I dismissed together with the listed applications. H.B.T./H-61/K??????????????????????????????????????????????????????????????????????????????????? Appeal dismissed.