with IR M/s Ghazi Security Guards Pvt Ltd Vs EOBI

JUDGMENT SHEET

IN THE PESHAWAR HIGH COURT,

PESHAWAR

(Judicial Department)

Writ Petition No. 5372-P of 2024 with IR.

M/S Ghazi Security Guards Private Limited vs Chairman Board of Trustees Employees’ Old Aga Benefits Institution and others Date of hearing: 22.01.2026

For petitioner Barrister Ghazi Khan Khalil For Respondents M/s Mukhtar Ahmad Maneri, Advocate. (EOBI) Muhammad Riaz Khan Paindakhel, AA.G for official respondents of the Provincial Government.

JUDGMENT

IJAZ ANWAR, J. This Writ petition has been filed under Article 199 of the Constitution of Islamic Republic of Pakistan (“The Constitution”), with the following prayer:-

“It is, therefore, most humbly prayed that on the acceptance of this writ petition, may it please this Honorable Court to:

a) Declare the impugned decision dated 16.09.2024 rendered by the Chairman EOBI, demand notice dated 16.10.2024 and impugned decision dated 05.01.2023 of the worthy Adjudicating Authority-III may kindly be set aside and be declared illegal, unlawful and arbitrary & may graciously be quashed/set aside. Consequently, the respondents may graciously be restrained from any adverse/ coercive action against the petitioner.

b) Declare that the petitioner, being manpower contractor, is not employer of the workers/security guards deployed at the Clients’ premises under the provisions of the EOBI Act. c) Quash the Demand Notice dated 04.05.2023 issued by the EOBI Officials being without following the necessary audit and procedural requirements mandated by the EOBI Act and EOAB (verification) Regulations, 2007. d) Direct the respondents may graciously be restrained from any adverse / coercive action against the petitioner.

e) Grant any other relief that this Hon’ble Court deems fit and just in the circumstances of the case.”

2.Learned counsel for the Petitioner contends that the Petitioner is a duly registered manpower contractor providing security personnel to various clients and has been validly registered with Employees’ Old-Age Benefits Institution (“EOBI”) since 15.06.2012 in respect of twelve insured persons who are its own employees, for whom contributions have regularly been deposited in accordance with law. He submits that the impugned decision of the Chairman of the Appellate Authority dated 16.09.2024, the impugned order passed by Adjudicating Authority-III dated 05.01.2023, and the recovery notice dated 16.10.2024, whereby a contribution of Rs. 2,954,250 has been demanded in respect of 101 alleged insured persons, are wholly without lawful authority, inasmuch as the said

persons were neither employees of the Petitioner nor under its administrative or financial control. The petitioner further contends that its role is merely that of a contractor, whereas the clients are the principal employers and, therefore, liable to pay the contributions. It is argued that the assessment has been made without conducting any lawful audit in terms of sections 2, 10 and 12 of the Employees Old Age Benefits Act 1976 (“EOB Act”), and that the complaint and appeal preferred under sections 33 and 35 of the Act were dismissed without proper application of judicial mind. Placing reliance upon settled precedents of the Supreme Court delineating the distinction between principal employer and contractor, learned counsel maintains that liability, if any, rests upon the principal employer and not upon the Petitioner, therefore the impugned actions are liable to be declared illegal and set aside. He placed reliance on Judgments reported as “Sindh Employees, S.S.I. Vs Consolidated Sugar Mills Ltd” (1989 SCMR 888), “Messrs Bolan Mining Enterprises Vs Board of Trustees, EOBI” (2010 SCMR 1573), “Metropolitan Steel Corp. Ltd Vs

Employees Old-Age Benefits Institution” (2016 PLC 499), “Messrs Sui Southern Gas Company Limited Vs Registrar of Trade Unions” (2020 SCMR 638), “Sami Pharmaceutical (Pvt.) Ltd Vs Province of Sindh” (2021 PTD 731), “Human Resources Solutions (Pvt.) Ltd. Vs Federation Of Pakistan” (2021 PTD 933), and “Sindh Revenue Board Vs Messrs. Quick Foods Industries (Pvt.)” (2023 SCMR

3.Comments were sought from the respondents, who opposed the relief sought in the writ petition.

Learned counsel for the EOBI contended that the petitioner squarely falls within the statutory definitions of employer and establishment under the EOB Act and is therefore obliged to register its employees and deposit contributions. It was submitted that inspections were lawfully conducted under Section 12 read with the Employees Old Age Benefits Verification Regulations, 2007. It was further argued that, despite repeated visits by the Institution officers, the petitioner failed to produce the requisite record of its several hundred deployed employees; consequently, the assessment was

rightly made under Section 12(3) of the EOB Act on the basis of available material, rendering the impugned demand notice lawful. It was also submitted that the appellate authority, after due consideration, has passed a well-reasoned order. He placed reliance on the judgments reported as “Mst.

Sakina Bibi v. Adjudicating Authority, Employees’ Old-Age Benefits Institution, Lahore” (2012 PLC 419), “Sindh Employees Social Security Institution v. Mehran Sugar Mills Ltd.” (2019 PLC 1), “Lahore Race Club v. Deputy Director, Employees’ Old-Age Benefits Institution” (1998 SCMR 1571), and “Hashoo Steel Industries Limited v. Board of Trustees, EOBI” (2004 PLC 121).

4.Arguments heard and record perused.

5.The controversy in the present writ petition revolves around the following three questions for determination:

1.Whether petitioner, as a manpower contractor supplying security guards to various clients, falls within the statutory definition of employer under the Employees Old Age Benefits Act, 1976 and is consequently liable to pay EOBI contributions in respect of such guards;

2.Whether the clients at whose premises the guards are deployed constitute the actual

employers responsible for payment of contributions;

3.Whether the impugned demand and appellate orders fastening liability upon the petitioner are lawful and within jurisdiction.

6.It is necessary, for proper determination of the issues involved, to first examine the legal status of the petitioner. The record reflects that the petitioner is a private limited company duly incorporated under the Companies Ordinance, 1984,1 having been issued a certificate of incorporation on 5 September 1992 (page 20 of the paper book).

Although the Memorandum and Articles of Association have not been placed on record, the nature and object of the company are clearly ascertainable from the licence issued in its favour by the Home and Tribal Affairs Department for operation within the Province of Khyber Pakhtunkhwa under the Khyber Pakhtunkhwa Private Security Companies Ordinance,

2002(‘Ordinance 2002’), which forms part of the record (page 21 of the paper book). The petitioner is thus a duly incorporated and licensed private The Companies Ordinance 1984 is now replaced by Companies Act

security company authorised to provide security services in the Province under the said Ordinance.

7.The Ordinance, 2002 is a regulatory statute whereby a private security company, being a company registered under the Companies Ordinance, 1984 and engaged, for consideration, in providing security guards or security arrangements, may function only under a valid licence issued by the competent authority. It expressly prohibits any person from carrying on, maintaining, or providing such security services without a licence (section 5),2 prescribes the procedure for grant and renewal through application, verification and conditions, with validity for the prescribed period and renewal on prescribed fee (section 6), and mandates exhibition of the licence or certified copy at the principal place of business and each branch (section 8). The Ordinance, 2002 further regulates employment by the licensee by making him responsible for the good conduct of all staff (section Secion5. Prohibition of maintenance of a company without a licence. No person shall carry on the business of a private security company or maintain or provide security guards or security arrangements for consideration, unless he holds a licence for the purpose issued under this Ordinance.

12(1)),3 disqualifying persons convicted for moral turpitude or dismissed from Government service for misconduct (section 12(2)),4 and, crucially,

providing that no person shall be employed as a

security guard unless the licensee submits complete particulars of such person to the Licensing Officer and obtains no objection in writing prior to

recruitment (section 12(3)),5 with corresponding

duties to maintain and furnish updated lists and

antecedents to the Licensing Officer and local police (sections 12(4)–(5)).6Under the Ordinance, 2002, a licence means a licence granted under the Ordinance to carry on the business of a private security

company by providing, for consideration, security guards or security arrangements for the protection of persons or property, and a licensee is the holder of Employment of staff by the licensee. (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 to 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 or otherwise any person who has been convicted of any offence involving moral turpitude or dismissed from Government service on charges of misconduct.

(3)Notwithstanding anything contained in sub-section (1), no person shall be employed by a licensee as a security guard until he has submitted to the Licensing Officer a statement containing compete particulars and other information of such person in the prescribed form and the Licensing Officer has conveyed his 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)The licensee shall provide such list and the changes, if any, made therein to the Licensing Officer and to the Officer in charge of the nearest police station, and shall intimate any change of management to the Licensing Officer and officer in charge of nearest police station.

such licence. A private security company is defined as a company registered under the Companies Ordinance, 1984, engaged in providing security services for consideration and functioning under a valid licence issued by the competent authority, while a security guard7 includes any watchman or other person engaged by the licensee for protection of persons or property. Section 12 of the Ordinance expressly contemplates employment of security guards by the licensee, thereby establishing that the licensee recruits and engages such personnel for deployment to its clients. The statutory scheme thus recognises the licensee, as the employer of the security guards engaged and provided under the licence. The Ordinance further mandates that the petitioner, as licensee, shall furnish complete particulars of all security guards employed by it and submit updated lists, together with any subsequent changes, to the Licensing Officer and to the officer in charge of the nearest police station. These obligations unequivocally demonstrate that the licensee recruits, maintains, and controls the security Section 2(i). “security guard” includes any watchman or other person engaged by the licensee for the protection of persons or property or to prevent the theft or robbery at the protected places.

guards engaged for deployment. Thus, once the petitioner obtained a licence to operate under the Ordinance, it assumed the statutory responsibilities of an employer, and therefore squarely falls within the definition of employer in relation to the security guards so engaged.

8.Since the controversy primarily pertains to liability for EOBI contributions, it is now necessary to examine the EOB Act. Prior to the enactment of the EOB Act, various labour statutes were in force providing remedial and welfare protections, yet none afforded comprehensive coverage against the contingencies of old age, invalidity or death in the form of pensionary security for workers and their dependents. Recognizing this legislative gap, and in line with comparable social security regimes in other jurisdictions, and in order to achieve the objective of Article 38 (C)8 of the Constitution, by providing for compulsory social insurance, the Employees’ Old-Age Pension Ordinance, 1972 was first promulgated. This was followed by the

38.Promotion of social and economic well-being of the people. The State shall: - (c) provide for all persons employed in the service of Pakistan or otherwise, social security by compulsory social insurance or other means;

Employees Old Age Benefits Ordinance, 1975, which was ultimately replaced by the Employees Old Age Benefits Act, 1976,9 assented to on 15 April 1976 and published in the Official Gazette on 19 April 1976. Though the Act came into force at once, contributions became payable with effect from 1 July 1976, from which date it was implemented.

9.Upon a careful reading of the EOB Act, it is evident that registration under the Act is mandatory for every industry or establishment to which the Act applies. In terms of section 2(4), the Act applies to every industry or establishment employing five or more persons, and by virtue of section 3, all employees in such industry or establishment shall be compulsorily insured. An insured person10 means an employee who is or was in insurable employment, and insurable employment means employment under a contract of service or apprenticeship in respect of which contributions are payable under the Act. Section 11(1) further mandates that every employer shall, within thirty days of the Act (Act XIV of 1976)

2(i). “insured person” means an employee who is or was in insurable employment;

becoming applicable, communicate to the EOBI the prescribed particulars of the establishment and every insured person, whereupon registration is effected under section 11(3). The Federal Government is mandated to establish a body corporate known as the Employees Old Age Benefits Institution (EOBI) for administration of the scheme (sections 4 and 6). The EOBI is an autonomous Institution works under the control of Ministry of Overseas Pakistanis and Human Resource Development, Government of Pakistan. Thus, registration is not optional but obligatory. As regards contribution, section 9(1) provides that contributions shall be payable every month by the employer in respect of every person in his insurable employment at the prescribed rate, presently five percent of wages. The contribution is in the nature of fee and not a tax.11Sub section (3) expressly prohibits the employer from deducting or recovering any portion of the employer share from the wages of the insured person. In addition, section 9B stipulates that the insured person shall also pay a monthly contribution at the prescribed rate,

PLD 2017 SC 28, 2014 PLC 40, 2013 PLC 134.

presently one percent of wages. Consequently, both employer and employee contribute, but the principal statutory liability to deposit the contribution rests upon the employer, who cannot shift that burden to the employee. Section 12 empowers authorised officials of the EOBI to inspect employer records, require production of documents, and, in case of failure to maintain or produce records, to assess contributions on the basis of such evidence as may be found satisfactory. The statutory framework thus creates a compulsory contributory insurance scheme administered by the Institution, fastening primary liability upon the employer in respect of employees in insurable employment.

10.The petitioner contends that it merely acts as a manpower contractor and is not the employer of the security guards; hence, it does not fall within the statutory definition of employer. This plea, however, must be examined in light of the definitions contained in section 2of the EOB Act. The definition of “employer,” as contained in Section 2(c) of the EOB Act, is reproduced hereunder for ready reference:

“Section 2 (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;”

This definition is self-explanatory which means that an employer is any person who directly or indirectly employs workers or has ultimate control over the affairs of an establishment. According to Black’s Law Dictionary (Eight Edition),12 employer means a person who controls and directs a worker under an express or implied contract of hire and who pays the worker’s salary or wages. Similarly, in Black’s Law Dictionary, the term “control”13 means: “The direct or indirect power to direct the management and policies of a person or entity, whether through ownership of voting securities, by contract, or otherwise; the power or authority to manage, direct, or oversee”. It is further defined as: “To exercise power or influence over, to regulate or govern, to have a controlling interest in.” In simple terms, “control” denotes the power to manage, direct, Black’s Law Dictionary, (eight edition) pages 564-565 Black’s Law Dictionary (Eight Edition) Page 353

influence, or govern a person or organization, whether directly or indirectly. This aspect, in relation to the Petitioner Company, shall be examined in juxtaposition with the definition of employee. Employee is defined under section 2(bb) in the following terms:

2(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; Provided that a director of a limited company or of a corporation set up under any law shall not be treated as an employee under this Act, irrespective of his wages or emoluments.

The definition makes it clear that employment may be direct or through another person, thereby including workers engaged through a contractor.

However, the essential requirement is that the person must perform work in, or in connection with the affairs of, the industry or establishment. In Metropolitan Steel Corporation,14 the Court held that an employer is liable to pay EOBI contributions for workers engaged in connection with the affairs of the establishment, even when such workers are hired through contractors. In the case of Sindh Metropolitan Steel Corporation Ltd. v. EOBI (2016 PLC 499)

Employees Social Security Institution,15 the court observed that the owner of an establishment is liable to pay the contribution in respect of his employees engaged through the contractors in or in connection with the work of the notified establishment. In the case of Lahore Race Club,16The Supreme Court ruled that the definition of employee under the EOB Act is wide and includes part time and casual workers, provided they perform work in or in connection with the affairs of the establishment. The mere fact that workers are employed for limited hours or days does not exclude them from the definition of employee. Accordingly, the position of security guards must be examined on this touchstone, namely whether their services fall within the expression affairs of the industry or establishment, or whether they stand outside its scope.

11.The determination of the true status of employees has consistently remained a central point of controversy before the courts. For this purpose, Sindh Employees Social Security Institution Vs Mehran Sugar Mills

(2019 PLC 1)

Lahore Race Club Vs Deputy Director EOBI (1998 SCMR 1571)

the jurisprudence has evolved the control test, which has been lucidly discussed in the case of Fauji Fertilizer Company.17 The relevant paragraphs are reproduced below for ready reference.

“16. The crux of the above case-law is that: --

(a)the word 'employed by the factory' are wide enough to include workmen employed by the contractors of the company;

(b)the employees of the contractor shall be the employees of the company if the contractor engaged the workers for running of the affairs of the company and not for some other independent work which has no concern with the production of the company;

(c)if the employees are working in a department of the company which constituted one of the principle organs of the company, the machines belong to the company, the raw material is supplied by the company and the said department is controlled by the supervisors of the company, the employees of the contractor shall be the employees of the company;

(d)the employees, engaged directly or through a contractor, would be deemed to be the employees of the company for whose benefit they perform functions;

(e)even though 'control' test is an important test, it is not the sole test; a multiple pragmatic approach weighing up all the factors for and against the employment has to be adopted, including an ""integration" test; and

(f)if the contract is found to be not genuine and a device to deprive the employees from their legitimate rights/benefits, the so-called contract employees will have to be treated as employee of the company.

17.Normally, the relationship of employer and employee does not exist between a company and the workers employed by the Contractor; however, in the case where an employer retains or assumes control over the means and method by which the work of a Contractor is to be done, it may be said that the relationship of employer and employee exists between him and the employees of the contractor. Further, an employee who is involved in Fauji Fertilizer Company Ltd Vs National Industrial Relations Commission (2014 PLC 10 Supreme Court)

the running of the affairs of the company; under the direct supervision and control of the company; working within the premises of the company, involved directly or indirectly in the manufacturing process, shall be deemed to be employees of the company.

18.In the instant case, the employees of the contractor were involved in running the affairs of the company such as filling and loading of urea bag as well as cleaning of machines and floors, therefore, for all intents and purposes, they are employees of the company through the contractor.” (Underlining is ours)

In simple words, the workers of Contractor may be treated as employees of the company if the company controls or supervises their work and they perform duties that are part of the company’s main operations. In the case of General Manager Pakistan International Airline,18 the Baluchistan High Court held as follows:

“6. We have heard the respective contentions of the learned counsel for the parties and carefully gone through the record. Sole question to be decided is, whether respondents are employees of the petitioner (as claimed by them) or of Contractor (as allegedly by the petitioners)? To determine the real status of a worker, as to he/ she is employee of establishment/ Industry/ Company ("Company") or a Contractor, Superior Courts, in a number of cases, have introduced the following criteria/test:--

(i)Whether the company has administrative control over the worker?

(ii)Whether the company based for the work done by the worker?

(iii)Whether the company has the power to reinstate and dismiss the worker?

(iv)Is the work required to be performed by workman of a permanent nature and is it related to process of manufacturing before the finished goods were sent into market?

General Manager Pakistan International Airline Vs Matiullah (2017

PLC 148)

(v)Whether payment for the worker's services was made by the company?

(vi)Whether the goods, that the worker helped to manufacture, when marketed, brought proceeds to the company itself?

(vi)(sic) The duration the worker had been performing his duties and providing labour in connection with the manufacturing process?

(vii)Whether the contractor is a genuine person and has not been set up merely to deny the worker of the benefits under the labour laws?”

(Underlining is ours)

Thus, the relevant factors to be considered include company control and supervision, who pays for and benefits from the work, who has the authority to hire or dismiss the worker, whether the work is permanent and part of the manufacturing process, the duration of the worker service, and whether the contractor arrangement is genuine or merely a device to deny labour law benefits. These principles were relied upon in the case of ICI Pakistan Limited,19 where the Court further held:

31.This does not seem reasonable as an 'industry' or 'establishment' (as per the definitions ascribed to the said terms under the EOB Act, 1976) can potentially enter into a number of agreements with other independent legal entities for the provisions of services ranging from transportation, distribution, marketing, security, technical to legal, to name a few. Surely the intent of the Legislature could not be that the industry or establishment would become the employer of all the employees of the independent contractor by virtue of the service agreement entered into by the industry or establishment with the independent contractor. To my mind the intention of the Legislature was to ensure that 'employers' as defined in the EOB Act, ICI Pakistan Limited Vs Appellate Authority (2024 PLC 188)

1976 do not avoid contribution under the said act for their own 'employees' by employing them through another entity. Therefore, a line needs to be drawn to differentiate between the case where employees are employed through another entity and a case of service agreements with independent contractors where under services are being procured which no doubt will be performed by employees but such employees who are employed by the independent contractor. (Underlining is ours) The Court held that every worker of a contractor cannot be treated as an employee of the company or establishment, as companies often enter into agreements with independent legal entities for the provision of services such as transportation, distribution, marketing, and security. In The Case of Crescent Textile Mills Limited,20 the Lahore High court held:

“It is to be seen whether employees of a contractor can be termed as employees and, therefore, dues are to be deposited with the respondent No.3. It cannot be held that employees who are employed by a contractor for the job in the Industry or establishment are not covered by the above said definitions. The question raised by the petitioners in these petitions has been dealt with by the superior Courts in number of cases. First of all, I would like to discuss the case reported as 1989 PLC 434. The judgment was passed by Saad, Saood Jan J: as he then was. He relied upon PLD 1976 Lahore 1169. Distinction was drawn between the contractor who has been engaged to procure the necessary labour or to use, from general expression manpower for the establishment and a contractor who has been entrusted to perform a certain function or functions for the establishment. It has been held that in the former case even though the worker has not been directly employed by the establishment yet they are completely under its control and supervision. The Crescent Textile Mills Limited Vs Board of Trustees, Employees Old Age Benefits Institution (2003 PLC 41)

establishment can regulate and formulate their principles, wages, hours of week, leave and mode of performance of their duties and in case the establishment finds their work unsatisfactory it can terminate their services by sending them back to the contractor but in the other case where the contractor has been engaged to perform certain functions and has to be paid according to the work done by him, the persons employed by him are admittedly not to be treated as workers for the establishment for in such a case the establishment has no control over them nor can it regulate their terms and conditions of employment.”(Underlining is ours) The crux is that workers of Contractor are treated as employees of the establishment if the contractor only supplies manpower and the establishment controls their work and employment terms. If the contractor performs an independent job and the establishment has no control over the workers, they are not employees of the establishment. In the Consolidated Sugar Mills21 case, Sind Employees’ Social Security Institution (SESSI) demanded contributions from the mill for workers engaged through contractors. The Social Security Court and the Sindh High Court held that such workers were employees of the contractors, not the mill. However, the Supreme Court reversed this finding, holding that under the relevant statutory definitions, the owner of an establishment is liable to pay Sind Employees Social Security Institution V. Consolidated Sugar Mills Limited, (1989 SCMR 888)

contributions for all workers falling within the definition of “employee,” even if engaged through a contractor. The contractor is treated as the “employer” only in the limited statutory category of works executed on behalf of the State, and courts cannot extend that treatment to non-State cases. The petitioner’s reliance on this precedent is misplaced as the workers, though recruited through contractors, were performing duties on the mill’s premises in connection with its core business; hence, the mill was held liable. In the present case, the security guards are recruited and employed by the petitioner, a duly licensed security company, and their engagement is in furtherance of the petitioner’s own business of providing security services, notwithstanding that they are deployed at the premises of various clients. Unlike a situation where a contractor merely supplies manpower to perform the core functions of the principal employer, namely the very work for which the establishment or industry has been created, the security guards here do not perform the substantive operational work of the client establishment. They render a supportive

service of protection and safeguarding. The petitioner therefore cannot be equated with a mere intermediary contractor who only recruits workers for the principal employer. Rather, the petitioner remains the actual employer, and the matter is distinguishable on this factual and legal footing. The august Supreme Court has held that the question, whether one was employed or not within the ambit of section 2(bb) of the EOB Act would be determined by the facts and circumstances of each case.22

12.In Messrs Bolan Mining Enterprises v. Board of Trustees, EOBI (2010 SCMR 1573), the Supreme Court held that persons engaged through a contractor, but who in fact perform their duties in and for the establishment of the principal employer under its administrative and financial control, fall within the ambit of “employee” under the EOB Act.

Applying the control test, the Court emphasized that the determinative consideration is not the source or mode of recruitment, but the entity with whom the Crescent Textile Mills Limited Vs Board of Trustees, Employees Old Age Benefits Institution (2003 PLC 41)

employee actually works and by whom he is controlled. Consequently, the principal employer having ultimate control over the affairs of the establishment remains legally bound to make contributions under section 9 of the Act in respect of such employees, and the interposition of a contractor does not dilute or shift that statutory liability.

However, the present case stands on a different footing: the petitioner’s role is not confined to that of a mere contractor or intermediary, but extends to the continuing engagement, supervision, and control of the security guards concerned. Therefore, the ratio of Bolan Mining Enterprises (supra) is attracted only to the extent it articulates the control test; beyond that, the precedent is distinguishable on the facts and does not govern the remaining controversies in their entirety.

13.The consistent view of the superior courts is that the EOB Act, being a beneficial social welfare legislation, must receive a purposive interpretation so as to prevent employers from evading statutory liability through artificial arrangements or outsourcing mechanisms. Such practices are often

adopted as tactics to avoid responsibility by engaging workers through contractors, resulting in a situation where workers are treated like a “rolling ball”, with the employer shifting responsibility to the contractor and the contractor shifting it back to the employer. Ultimately, it is the workers who suffer. This not only defeats the purpose of the law but also undermines the constitutional mandate contained in Article 38(c) of the Constitution, which requires the State to secure social security and welfare for workers. However, it is equally settled that every worker employed by a contractor cannot automatically be regarded as an employee of the company or establishment. Companies often enter into agreements with independent legal entities for specialized or ancillary services such as transportation, distribution, marketing, security, technical assistance, or legal services. Workers engaged by such independent contractors for these specialized tasks cannot be treated as employees of the principal establishment. Only those workers who are performing work in connection with the affairs of the establishment, and in respect of whom the

control test and other relevant tests (as discussed above) are satisfied, may be considered employees of the establishment for the purposes of the EOB Act. Moreover, section 12 of the EOB Act obligates the employer to furnish particulars of its employees/insured persons. If the

employer/contractor/petitioner withholds the deployment details (i.e., the client establishments), the EOBI cannot ascertain or verify where the employees are actually working.

14.Admittedly, the Petitioner Company provides uniforms, arms, and identifying insignia of the security company; receives payment from the clients; and disburses salaries to the security guards after deducting its agreed share. The Petitioner Company also retains the authority to remove or replace security guards whenever necessary or upon receiving any complaint. These controlling elements clearly establish that the Petitioner Company exercises far greater control over the security guards than the clients to whom they are assigned. The clients merely approach the company for the provision of security services; they neither recruit

nor appoint the guards. The recruitment, verification of antecedents, and engagement are undertaken solely by the Petitioner Company. The contractual relationship exists between the company and the client, not between the guard and the client. Wages are paid by the Petitioner Company to the guards, while the client pays consideration to the company under the service contract. The power to discipline or terminate rests with the company; at best, the client may request replacement on grounds of performance or credibility but cannot itself remove the guard from service. These cumulative indicators establish that the company retains ultimate control over the guards and that the clients are merely recipients of services. In the present case, the Petitioner Company is also statutorily responsible under the Ordinance, 2002 to register security guards, verify their qualifications, eligibility, antecedents, and conduct, and furnish such particulars to the Licensing Officer and the officer in charge of the nearest police station. The guards are initially recruited, verified, and registered by the Petitioner Company, and thereafter their services are

deployed to clients under contractual arrangements entered into by the Petitioner Company.

Consequently, after applying the control test, the Petitioner squarely falls within the statutory definition of employer.

15.On 12.06.2025, after hearing the parties, we observed that liability for payment of EOBI contributions could not be conclusively determined without hearing the principal employer, as asserted by learned counsel for the petitioner. Learned counsel was directed to place on record the names of the establishments to whom the workers were contracted out during 2015 to 2017. Instead of furnishing those names, certain contracts were filed through C.M. No.148-P/2026. Upon perusal, it transpires that overall control and supervision of the employees remained with the petitioner, including matters of recruitment and deployment, posting and transfer, payment of salary, termination and removal, disciplinary control, statutory compliance, and payment of ESSI and EOBI contributions. This factual position has also been concurrently recorded by the forum constituted under the Employees Old

Age Benefits Act, 1976. For determining the status of an employee and the corresponding liability to pay contribution, the control test shall be applied. A contract available at page 260 reflects that the petitioner undertook to provide security services, with an express stipulation that the deployed personnel must be registered with Social Security and EOBI and that proof thereof shall be furnished to the client. The agreement further provides that the contractor shall make its own arrangements for engagement of labour and comply with all applicable laws and regulations; that if the employer is dissatisfied with any employee, removal shall be effected by the contractor; and that the contractor shall be responsible for registration under the EOB Act and for payment of EOBI and Social Security contributions in respect of all employees deployed, with proof to be submitted along with monthly invoices. The contracts also make the petitioner responsible for disciplinary control over the employees. These terms show that recruitment, supervision, disciplinary authority, statutory compliance, and payment of contributions remained

with the petitioner, while the client merely received services. The control test, therefore, points to the petitioner as the employer for purposes of liability under the EOB Act. The nomenclature in the contract describing the petitioner as contractor and the client establishment as employer is not determinative. In substance, the petitioner is a security service provider and the other party is a client engaging services for consideration. The security guards are recruited, appointed, and deployed by the petitioner and form part of its workforce, and performance of duties at the premises of different clients does not shift the employer employee relationship. Even if, for administrative convenience, the client reimburses the contribution component, the primary statutory obligation to ensure registration and payment of contributions in respect of these guards remains with the petitioner, and contractual terminology or reimbursement arrangements cannot override the mandate of the Act.

16.The nature of the work in question is not that of ordinary labour supply. Security services, by their

very character, require specialized recruitment, verification of criminal record, assessment of conduct, and continuous supervision. Under the Khyber Pakhtunkhwa Private Security Companies Ordinance, 2002, the petitioner is under a statutory obligation to register its guards, maintain their particulars, and furnish requisite details to the licensing authority and the nearest police station.

Such regulatory requirements clearly demonstrate that the petitioner exercises direct control and bears legal responsibility over the guards engaged by it.

This statutory framework elevates the role of the petitioner beyond that of a mere contractor or intermediary. The clients merely avail security services upon payment, whereas the employer– employee relationship subsists between the petitioner and the guards. The cases of Bolan Mining Enterprises and Consolidated Sugar Mills(Supra) are distinguishable on this count. In those matters, labour was supplied for execution of work directly connected with the principal employer’s industrial operations, and the labour was integrated into the establishment’s production

process. In the present case, however, the petitioner does not merely act as an agent or middleman securing labour for the clients’ core business.

Rather, it provides specialized security services through guards who are recruited, regulated, and controlled by it in terms of statutory obligations.

Therefore, the special and regulated nature of security services further reinforces the conclusion that the petitioner is the actual employer and cannot disclaim liability under the EOB Act by describing itself as a contractor. As held in Messrs Abdul Aziz Noor Muhammad v. EOBI,23 workers employed by an independent contractor to perform contractual work are not employees of the factory where there is no privity of contract and no control or supervision by the factory. Therefore, the client factory is not liable to pay EOBI contributions in respect of such contractor workers.

17.The petitioner has sought to recharacterize its business by describing itself as a mere contractor and its clients as principal employers, ostensibly to evade statutory liability for contributions. This Messrs Abdul Aziz Noor Muhammad v. EOBI (1983 PLC 198)

formulation is neither borne out by the statutory scheme nor supported by the factual matrix. The clients engage the petitioner for provision of security services upon agreed consideration; the contractual relationship exists between the client and the company, not between the client and the individual guard. The guards are recruited, appointed, paid, supervised, and, if necessary, terminated by the company. The client is merely a recipient of services and does not enter into any contract of service with the guards. The terminology of principal employer and manpower contractor, as employed by the petitioner, appears misconceived and designed to shift statutory responsibility to its clients, contrary to the substance of the arrangement and the governing law. We are, thus, fully satisfied in our mind that the petitioner’s establishment is liable for payment of the contribution in respect of their employees who are contracted to different establishments; they are also responsible to provide full details of such contracts to EOBI establishment besides if they have agreed in their contracts about the responsibility for payment of contribution on the

person to whom such employees have contracted out, the name of such establishment and the agreement/contract shall also be provided to the

EOBI.

18.The decisions relied upon by the learned counsel for the petitioner in support of his stance, reported as Sindh Revenue Board vs Quick Food Industries (2023 SCMR 1776), Human Resources Solutions (Pvt) vs Federation of Pakistan (2021 PTD 933), Sami Pharmaceutical (Pvt.) Ltd and others Vs province of Sindh (2021 PTD 731), Sui Southern Gas Company Limited Vs Registrar of Trade Unions (2020 SCMR 638),Messrs Service Sales Corporation Vs Assistant Director (2001 SCMR 1599),Metropolitan Steel Corporation Vs EOBI (2016 PLC 499),are fond to be either distinguishable or not relevant with the issue involved in the instant petition.

19.Therefore, in light of the detailed discussion and reasons recorded hereinabove, the answer to Question No.1 is in the affirmative. The petitioner squarely falls within the definition of “employer” as

provided under the Employees’ Old-Age Benefits Act, 1976, and the Khyber Pakhtunkhwa Private Security Companies Ordinance, 2002.As regards Question No.2, the same is answered in the negative. It has been held that the petitioner, being the employer of the security guards recruited, controlled, and deployed by him, is responsible for payment of EOBI contributions in respect of such employees, notwithstanding the fact that they were deputed at the premises of various client establishments. Insofar as Question No.3 is concerned, in view of the answers to Questions No.1 and 2, it necessarily follows that the impugned orders and demand notices have rightly fastened liability upon the petitioner, who is the actual employer and service provider. The client establishments, in the given factual matrix, are merely recipients of services and cannot be treated as employers of the guards for the purposes of contribution under the Act.

20.Thus, in view of the foregoing discussion, it is concluded that:

i. The employer–employee relationship shall be determined from the real nature of control, supervision and integration, and not from contractual labels.

ii. Where a licensed private security company recruits, trains, deploys, pays and disciplines security guards, it shall ordinarily be deemed to be their employer.

iii. An establishment obtaining security services through such licensed company is, in the ordinary course, a recipient of services and not the employer of the deployed guards.

iv. The statutory duties imposed upon a security company under the Khyber Pakhtunkhwa Private Security Companies Ordinance, 2002 are strong indicators of such company’s control and responsibility over the guards.

v. The true employment relationship shall be determined by applying recognised tests, including the control test, integration test and overall economic reality.

vi. A licensed security company performs an independent, statutory-regulated role under the Ordinance of 2002; such role is distinct from the client’s industrial/establishment affairs, and is not to be treated as a mere intermediary or contractor. vii. All security guard companies shall revise their contracts with their clients in light of this judgment so that the responsibility for contribution is clearly rationalized and aligned with the law.

viii. The practice of concealing security guards, whether by the security company or by those to whom they are assigned, shall be stopped forthwith. ix. The EOB Act being a beneficial statute, its obligations cannot be avoided through contractual arrangements designed to defeat its purpose.

21.For the reasons stated above, this writ petition is devoid of merit and is, accordingly, dismissed.

The Additional Registrar (Judicial) is directed to forward a copy of this judgment to the Worthy Chief Secretary, Khyber Pakhtunkhwa, with the direction to apprise all private security companies holding licences under the Khyber Pakhtunkhwa Private Security Companies Ordinance, 2002 that payment/contribution of EOBI in respect of their deployed security guards is the responsibility of the licensed security company, and failure to comply may be treated as a ground for cancellation of the licence of operation, in accordance with law.

Announced

Senior Puisne Judge

Judge

Amjad Ali, DB Mr. Justice Ijaz Anwar, and Mr. Justice Wiqar Ahmad, Hon’ble Judges