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Appeal No. KAR‑335‑ of 1980, heard on 9th October, 1980.

‑‑ Sched., Part I‑Requirement of establishing workers participation fund‑For companies only to which scheme applicable‑Making Act applicable‑Ipso facto would not unless so directed by Government make scheme applicable‑Company to which scheme applicable liable to contribute to fund only if it earned profit for relevant period‑Com pany producing account indicating loss‑No tangible evidence to re but such accounts and to prove profit‑Claim for workers participation fund, in circumstances, rejected.

Gul Ahmad Taxtile Mills Ltd. v. Pakistan 1979 S C M R 670 ; Zeal Pak Cement Factory Ltd. v. Cement Labour Association 1960 P L C 50 and Flour Mills Employees' Union v. Karachi Steamroller Flour Mills Ltd. 1964 P L C 594 rel.

‑‑ S. O. 10‑B‑Profit bonus‑Claim for‑Company not earning any profit for period in dispute‑Claim, in circumstances, rejected.

Mirza Muhammad Kazim for Appellant.

Mahmood A. Ghani for Respondent.

Date of hearing : 9th October, 1980.

These are 2 separate appeals by Workers' Union which is said to be the Collective Bargaining Agent in the respondent‑establishment, against a com mon order made by the learned IVth Labour Court on 5‑4‑1980, dismissing the appellant Union's 2 applications made under section 34, I. R. O., one claiming share in the profits of the respondent‑Company for the years 1975‑76 to 1977‑78, under the Companies Profits (Workers' Participation) Act, 1968 and the other for grant of profit bonus to the workers in the respondent‑establishment for the years 1976‑77 and 1977‑78, in accordance with the provisions of Standing Order 10‑C. The application for share in the profits was rejected on the ground that the number of workers in the respondent‑Company was less than 50, while the application for award of bonus was rejected on the ground that there was no evidence to show that the Company had earned any profit during the relevant years.

2. The Companies Profits (Workers' Participation) Act, 1968, hereinafter referred to as the Act, requires only these companies to establish a Workers' Participation fund to which the scheme set out in the Schedule to the Act applies. The scheme, as provided in paragraph 1 thereof, applies only to those companies which fulfil any one of the following conditions, and to such other companies as the Federal Government may notify in the official Gazette :‑

(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 account ing year is Rs. 20 lakhs or more ;

(iii) The value of the fixed assets of the Company (at cost) as on the last day of the committing year is Rs. 40 lakhs or more.

3. There is no evidence that the respondent‑Company fulfils any of the above conditions. It is also not shown that the scheme has been made appli cable to the respondent‑Company by any notification issued by the Federal Government under the scheme. No doubt, the Federal Government ha issued Notification applying the Act to certain types of companies and institutions but, in my humble opinion, making the Act applicable to them, could not, by itself, make the scheme applicable to them, unless the Govern ment so directs. Even if the scheme is considered to be applicable to the respondent‑Company, it would be liable to contribute to the Workers' Parti cipation Fund for the relevant period only if during the said period, it had earned any profits . However, the balance‑sheets and statements of accounts produced by the respondent‑Company for those years show that throughout the said period the Company was running into losses. As such, the Company was not required in respect of the period in question to contribute to the Workers' Participation Fund. In support of this view, Mr. Mahmood Ghani. the learned Representative of the respondent‑Company invited my attention to a decision of their Lordships of the Supreme Court in the case of Gul Ahmad Textile Mills Ltd. v. Pakistan (1969 S C M R 670). In that case, the Company had shown a loss of about Rs. 2,45,000 in their balance‑sheets as well as in the Profit and Loss Accounts for the calendar year 1975. The Tribunal did not accept this result on the ground that a large sum of Rs. 39 lakhs had been deducted by way of depreciation. The High Court declined to interfere with the decision of the Tribunal and accordingly the matter was taken to the Supreme Court. Their Lordships of the Supreme Court, while setting aside the 2 orders of the Tribunal and the High Court, observed as follows :‑

"The award of the Tribunal on the point of bonus is vitiated by a clear error appearing on the face of the record with regard to the matter of primary importance affecting the grant or otherwise of the bonus, namely, that in fact, out of the net profits when due and reasonable allowances at minimum rates had been made, there was nothing left over out of which a onus could have been awarded, and we accordingly allow this appeal and direct that a writ should issue to quash the award of the Tribunal on the point of bonus."

4. In an earlier decision, reported as Zeal Pak Cement Factory Ltd. v. Cement Labour Association (1960 P L C 50), their Lordships of the Supreme Court rejected the claim of employees to bonus which was founded on alleged big profits arrived at mainly on disallowing deduction on account of deprecia tion, and observed that depreciation fund was an absolute necessity for industrialists.

5. Mr. Mirza Muhammad Kazim, the learned counsel for the appellant Union, however, submitted that as in their statement of accounts and balance- sheets for each of the years during the relevant period, the respondent Company had itself earmarked an amount for the Workers' Participation Fund, it clearly shows that there was a profit in the Company and out of this profit contribution was being made to the said fund. An examination of the balance‑sheets and the profit and loss accounts for the relevant period, however, discloses that the accounts earmarked for the Workers' Participa tion Fund have been shown as liabilities and that overall for each of those years there has been shown a substantial loss. The explanation offered by the respondent‑Company is that these amounts shown in the balance‑sheets for the different years represented the out-standings which were payable by the Company to the Workers Participation Fund for the previous years, when there were profits. This explanation appears to be satisfactory and correct in view of the fact that provision for payment of Workers' Participation Fund is shown in the balance‑sheets even though the balance‑sheets themselves depict overall substantial losses. Furthermore, the earmarking of the amounts for the Workers' Participation Fund is based on no calculation, but is in lump sum amounts.

6. It was argued by Mr. Mirza Muhammad Kazim in the alternative that the accounts submitted by the respondent‑Company before the Labour Court should not be relied upon as they were unaudited accounts. It is true that the said accounts are unaudited but, on the other hand, the appellant- Union neither led any tangible evidence to show that in fact the respondent- Company had been earning profits during the relevant period nor did they take any steps for ensuring the production of the audited accounts before the Labour Court. No application was made to the Labour Court to require the respondent‑Company to produce the audited accounts nor was any application made to the Government under subsection (10) of sec tion 23‑B, I. R. O., to appoint auditors to audit the accounts of the Company. As such, there was no material before the Labour Court to show that the respondent‑Company had in fact made any profits during the relevant period. In the case of Flour Mills Employees' Union v. Karachi Steamroller Flour Mills Ltd. (1964 P L C 594), the Workers' Union made a demand for payment of profit bonus. The Company claimed that no profits had been made by it and, therefore, resisted the claim of the Workers' Union. It produced its accounts and balance‑sheets, but the Union was not satisfied with the same and con tended that it should have produced all the relevant evidence available with the respondent, which would have established that in fact the Company had made profits. Repelling this contention, it was observed by a Division Bench of the Karachi High Court as follows

"Counsel for the Union urged that the evidence, on the basis of which the situation could be established, was in the possession of the Com pany which it did not bring on the record, therefore, a presumption should have been raised against the Company. The Industrial Court has explained that payment of bonus was not warranted on the basis of the previous balance‑sheets and that the affairs could not be clearly understood with respect to the running year because the accounts had not been finalized. If the Union was not satisfied with the evidence that was produced by the Company, then it ought to have taken steps to get such other documents produced as could establish its case and cannot in substitution of that take the stand that a presumption should be raised against the Company. The facts were not of such a nature as could not be brought on the record at the instance of the Union if it desired to prove them. The stand of the Union in this respect cannot be sustained."

7. In the instant case also, the Union is not satisfied with the evidence produced by the respondent‑Company to show that in fact it has suffered losses during the relevant period, but on the other hand, it has failed to lead evidence or to take steps for the production of evidence to establish that to fact the Company had earned profits. The claim in regard to the Worker' Participation Fund cannot, therefore, be allowed.

8. Profit bonus under Standing Order 10‑C is also payable only where the employer makes a profit. I have already pointed out that it has no been established that during the relevant period the respondent‑Company earned profits. On the other hand, the balance‑sheets and profit and loss accounts produced by the Company show that during the relevant period the Company had run into substantial losses. As such, there was neither a right in the workers to receive profit bonus nor was there a liability for the Company to pay the bonus.

9. For the reason discussed by me above I would uphold findings of the learned Labour Court and dismiss the appeals.

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