M/s Haidri Beverages Pvt Ltd VS FOP, M/o Oversease Pakistanis & Human Resource Dev, & others

JUDGMENT SHEET

IN THE ISLAMABAD HIGH COURT, ISLAMABAD

JUDICIAL DEPARTMENT

W.P. No.1142 of 2021 M/s Haidri Beverages (Pvt.) Ltd.

Versus Federation of Pakistan and others

Date of Hearing: 15.04.2024.

Petitioners by: M/s Isaac Ali Qazi and Shazia Malik, Advocates.

Respondents by: Mr. Sarfraz Rauf, learned Assistant Attorney- General.

Mr. Ghulam Murtaza Khan, Advocate for W.W.F. in writ petitions No.1142/2021 and

Ms. Komal Malik Joyia, Advocate for W.W.F.

in writ petitions No.1318/2022, 1714/2021 and

MIANGUL HASSAN AURANGZEB, J:- Through this judgment, I propose to decide writ petitions No.1142/2021, 1714/2021, 1715/2021, 3593/2021 and 1318/2022 since they entail certain common features.

2.Through writ petition No.1142/2021 the petitioner, M/s Haidri Beverages (Pvt.) Ltd., impugns the notices dated 16.12.2016 and 01.09.2020 issued by the Workers” Welfare Fund (“W.W.F.”) whereby the petitioner was called upon to show compliance with the requirements of the Companies Profits (Workers” Participation) Act, 1968 (“the 1968 Act”), and to distribute the amount deposited in the Workers” Participation Fund (“WP Fund”) among the eligible workers, and thereafter to deposit the leftover amount in the Workers” Welfare Fund Trust Fund Account (G-06304). Furthermore, the petitioner was called upon to comply with its statutory obligation under Section 3(c) of the 1968 Act by furnishing its audited accounts duly signed by its auditors.

3.Learned counsel for the petitioners drew the attention of the Court to Section 4 of the 1968 Act which sets out the categories of workers amongst whom amounts from the WP Fund are required to

be distributed, and submitted that the said Section was amended through the Finance Act, 2007 by virtue of which a category of workers whose overall monthly wages exceeded Rs.15,000/- became entitled to be paid amounts from the WP Fund; that the amendment brought in the 1968 Act through the Finance Act, 2007 was declared ultra vires by the Hon”ble Supreme Court vide judgment dated 10.11.2016 reported as PLD 2017 SC 28; that as a result of this judgment, the distribution of amounts from the WP Fund account is to be made to workers whose salaries do not exceed Rs.10,000/-; that presently there is no worker employed in the petitioner”s establishment whose salary is Rs.10,000/- or less than Rs.10,000/-; that due to this fact, since 2016 the petitioner has neither filed its returns under the 1968 Act nor paid any amount to workers from the WP Fund; and that unless the amendment in the nature as provided in the Finance Act, 2007 is made in the 1968 Act, distribution of amounts from the WP Fund to the workers employed in the petitioner”s establishment cannot take place. Learned counsel for the petitioners prayed for the writ petitions to be allowed in terms of the relief sought therein.

4.On the other hand, learned counsel for W.W.F. submitted that the provisions of the 1968 Act not just provides for contribution to be made into the WP Fund but also the mechanism as to how the distribution of the amounts from the Fund is to be made to the workers employed by companies; that the petitioner”s plea is that since it cannot distribute amounts deposited in the WP Fund to workers having a salary of Rs.10,000/- or less per month, there is no need to make any contribution to the WP Fund; that the Schedule to the 1968 Act makes the Scheme defined by Section 2(e) of the said Act applicable to a company where any one of the conditions set out therein are fulfilled; that the petitioner fulfills the conditions which make the Scheme applicable to it; that the quantum of wages earned by a worker is immaterial for determining whether a worker is entitled to receive amounts from the WP Fund; that where the Scheme applies to a company it is obligatory for such company to

make contribution to the WP Fund whether or not amounts from the Fund can be distributed amongst workers; and that even if it is assumed that there is no worker employed by a company who is entitled to receive amounts from the WP Fund, a company to which the Scheme applies has to make contribution to the WP Fund since one of its eligible recipient is W.W.F. Learned counsel for W.W.F. prayed for the writ petition to be dismissed.

5.I have heard the contentions of the learned counsel for the contesting parties and have perused the record with their able assistance.

6.The 1968 Act was enacted to provide for the participation of workers in the profits of companies and for matters ancillary thereto. Section 3 of the said Act provides for the establishment of the WP Fund. It makes every company to which the Scheme applies liable to establish a WP Fund in accordance with the Scheme.1 It also makes such companies liable to pay every year into the WP Fund 5% of its annual profits.2 Furthermore, such companies are also required to furnish to the Federal Government and to the Board of Trustees constituted for the management and administration of the WP Fund its audited accounts for every year duly signed by its auditors.3 7. Section 2(e) of the 1968 Act defines a “Scheme” to mean the Scheme set out in the Schedule to the said Act. Paragraph 1 of the Schedule to the said Act provides inter alia that the Scheme applies to all companies engaged in industrial undertakings which satisfy any one of the following conditions:- “(i) The number of workers employed by the company at any time during a year is 50 or more.

(ii)The paid-up capital of the company as on the last day of its accounting year is Rs.20 lakhs or more.

(iii)The value of the fixed assets of the company (at costs) as on the last day of the accounting year is Rs.40 lakhs or more.”

8.It is not disputed that in terms of paragraph 1 of the Schedule to the 1968 Act, the petitioner was under an obligation to establish the WP Fund and did so.

Section 3(1)(a) of the Companies Profits (Workers” Participation) Act, 1968 Section 3(1)(b) of the Act ibid.

3 Section 3(1)(c) of the Act ibid.

9.Paragraph 2(1) of the Schedule to the 1968 Act makes the amount allocated or accruing to the WP Fund to be available to the company for its business operations. Paragraph 2(2) requires the company to pay to the WP Fund in respect of the amount in such Fund available to it for its business operations as interest at the rate of 2 1⁄2 % above the bank rate or 75% of the rate at which dividend is declared on the ordinary shares, whichever is higher.

10.Paragraph 3 of the Schedule to the 1968 Act makes all workers to be eligible to the benefits of the Scheme and to participate in the Fund except workers not completing six months of employment with the company during a year.

11.What is crucial for the purposes of the present case is that paragraph 4 of the Schedule to the 1968 Act provides for the categories of workers who are entitled to allocation of amounts from the WP Fund. Prior to the amendment in paragraph 4 by the Finance Act, 2007, the categories of workers who were entitled to be allocated amounts from the WP Fund were as follows:- “(i) Workers drawing average monthly wages of up to Rs.5,000/-.

(ii)Workers drawing average monthly wages between Rs.5,001/- and Rs.7,500/-.

(iii)Workers drawing average monthly wages between Rs.7,501/- to Rs.10,000/-.”

12.As a result of the amendment in paragraph 4 made through Finance Act, 2007, the categories of workers entitled to allocation from the WP Fund were as follows:- “1. Workers drawing average monthly wages not exceeding seven thousand five hundred rupees.

2.Workers drawing average monthly wages exceeding seven thousand five hundred rupees but not exceeding fifteen thousand.

3.Workers drawing average monthly wages exceeding fifteen thousand rupees.”

13.It is not disputed that the petitioner discharged its obligation of making contribution to the WP Fund from which allocations were made to the eligible workers in terms of the amended paragraph 4 ibid. However, the vires of the Finance Act, 2007 to the extent of amendment made in the 1968 Act were declared ultra vires by the

Hon'ble Supreme Court vide judgment reported as Workers” Welfare Fund Vs. East Pakistan Chrome Tannery (Pvt.) Ltd. (PLD 2017 SC 28).

14.After the said judgment of the Hon'ble Supreme Court, the petitioner has not made any contribution to the WP Fund. The petitioner justifies this by asserting that since none of the workers employed by the petitioner receive a monthly salary of less than Rs.10,000/- per month, and since allocation from the WP Fund cannot be made to any category of workers specified in paragraph 4 of the Schedule to the 1968 Act, there is no purpose in making any contribution to the WP Fund.

15.Indeed after the amendment made in the 1968 Act through the Finance Act, 2007 were struck down as ultra vires by the Hon'ble Supreme Court vide judgment reported as Workers” Welfare Fund Vs. East Pakistan Chrome Tannery (Pvt.) Ltd. (supra), the workers entitled to allocation of amounts from the WP Fund would be those as categorized by the un-amended paragraph 4 of the Schedule to the 1968 Act. Even if it is assumed that the petitioner does not employ any worker who is paid wages less than Rs.10,000/- per month, this would not absolve the petitioner from its obligation under Section 3(b) of the 1968 Act to pay every year into the WP Fund 5% of its profits during such year. It would also not absolve the petitioner from furnishing to the Federal Government, its audited accounts for every year duly signed by its auditors in terms of Section 3(c) of the said Act. The petitioner”s obligations under Section 3 of the 1968 Act are not contingent on the availability of the categories of workers to whom allocations could be made from the WP Fund. This is because in terms of paragraph 4(d) of the Schedule to the 1968 Act, any amount that is left out of the annual allocation after amounts / units have been allocated to the eligible workers are to be transferred to the Fund constituted under Section 3 of the Workers” Welfare Fund Ordinance, 1971.

16.The question as to whether a company is under an obligation in terms of Section 3(b) of the 1968 Act to make payment equivalent to 5% of its profits during a year regardless of whether there is any

worker in its employment who falls in a category so as to entitle him to the allocation of amounts from the WP Fund is no longer res integra. This question has been clearly answered by the Division Bench of the Hon”ble High Court of Sindh in the case of Aventis Ltd., Karachi Vs. Ministry of Labour, Manpower and Overseas Pakistanis (2011 PLC 1). In the said judgment, after making reference to Section 3 of the 1968 Act, it was held as follows:- “18. Reading of the above indicates that obligation to establish the fund and then pay 5% of profit to the Fund is obligation of every company to which the scheme applies. Thus if the scheme applies to a company, irrespective of any other fact or it is required to pay 5% of its profits to the fund. It may be noticed that obligation to pay to the fund accrues if the scheme applies to the company. There is nothing said in section 3 that every company to which the scheme applies and which has so many workers in its employment. We have already held above by referring to clause (1) of the scheme that since the company meets two of three alternate (and not concurrent) conditions laid down, the Act would be applicable to the company and the fact that in 2003 and 2004 the company had no worker in its employment as per definition of worker at that time is of no consequences in respect of creation of obligation on part of the company.

19.Crux of arguments of Mr. Qamaruddin Hassan, learned counsel for the petitioner was centered around interpretation of para 4(d) of the scheme. The said para reads as under:--- "4(d) of the Schedule.--- (d) Notwithstanding anything contained in this scheme, no worker shall, in any one year, be entitled out of the annual allocation to units exceeding rupees six thousand in value in so far as such allocation is relatable to clause (b) of subsection (1) of section 3. Any amount left out of the annual allocation after the units have been so allocated shall be transferred to the Fund constituted under section 3 of the Workers' Welfare Fund Ordinance, 1971 (XXXVI of 1971). No part of such amount shall be deemed to be included in the net asset value of the Fund established under this Act and no individual worker shall have any lien on this amount by virtue of holding any units."

Emphasis of learned counsel for the petitioner was on the words "any amount left out of annual allocation after the units have been so allocated". What the learned counsel contended was that amount can be left out only after units have been allocated and if units are not allocated there would be no amount left out and therefore there is no obligation on part of the company to transfer any amount to Workers' Welfare Fund. The contention must be repelled. It is accepted principle of statutory interpretation that legislation must be construed as a whole and it is not available to any person or any Court to pick out a part of the legislation and say, rest be damned, this is what this part means. The whole scheme of the Act is that employer is required to contribute to the fund. The law has designed such a scheme that part of the contribution is for the benefit of workers in that establishment and part of the fund is for benefit of workers in general and not necessarily in the company in

question. Obviously if there is no worker in the company one cannot interpret para. 4(d) to say workers across the country are also disentitled to their share of benefits just because part of the 5% cannot be distributed amongst workers of the company due to statutory provisions. Therefore words “left out” cannot be given a meaning which could negate the rests of the provisions of the statute. Words "left out" means whatever is surplus. It may be 0% and it may be 100%. Therefore, whatever is surplus which cannot be distributed amongst the workers out of allocation must necessarily be deposited in the Workers' Welfare Fund.”

17.Through notice dated 01.09.2020 from W.W.F. to the petitioner, the latter was required to furnish its audited accounts for the financial years 2016-17 to 2018-19 duly signed by its auditors failing which a penalty was to be imposed on the petitioner in terms of Section 5 of the 1968 Act. The petitioner has admittedly not complied with W.W.F.”s requirement to furnish such audited accounts. W.W.F. was well within its right to require the petitioner to show compliance with its statutory obligation under Section 3 of the 1968 Act. Continued default on the part of the petitioner in showing compliance with its obligation under Section 3 of the 1968 Act would expose it to the imposition of the penalty as indicated by W.W.F. in its notice dated 01.09.2020.

18.Even if in terms of paragraph 4 of the Schedule to the 1968 Act, as it stands today, no worker employed by the petitioner is entitled to receive allocations from the WP Fund, the amount deposited in such Fund by the petitioner under Section 3(b) of the said Act would be payable in terms of paragraph 4(d) of the Schedule to the 1968 Act into the Fund constituted under Section 3 of the Workers” Welfare Fund Ordinance, 1971. Therefore, W.W.F. was also well within its right to issue notice dated 16.12.2016 to the petitioner requiring the deposit of the leftover amount in the W.W.F. Trust Fund Account.

19.I am told that a Bill to amend the 1968 Act has been tabled in Parliament so as to inter alia amend the categories of workers set out in paragraph 4 of the Schedule to the 1968 Act, who are eligible to be made allocations from the WP Fund. It remains to be seen as to when the legislative process to amend the 1968 Act is completed until this done, the petitioner remains under an obligation to fulfill its

statutory obligation by making contribution to the WP Fund in terms of Section 3(b) of the 1968 Act.

20.In view of the above, I do not find any merit in these petitions, which are dismissed with no order as to costs.

(MIANGUL HASSAN AURANGZEB)

JUDGE

ANNOUNCED IN AN OPEN COURT ON 29.04.2024.

(JUDGE)

Sultan*