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Constitutional Petition No. D-203 of 1981, decided on 26th April, 1982.

-- S. 3(4) (as added vide Employees Cost of Living (Relief) (Amend ment) Ordinance (XXXII of 1980)) and Industrial Relations Ordinance (XXIII of 1969), S. 50-Cost of living allowance-Set off against amount payable under settlement-Interpretation of settlement-Settlement allowing increase in basic salary and also in certain allowances expressly providing that increase in basic salary only, was on account of rise in cost of living and would be adjustable against statutory cost of living allowance--Employer, in circumstances, held, not entitled to claim set-off in respect of increase in other allowances, Settlement between the employer and employees' union allowed increase in basic salary of workers and also increase in various allowances.

Specific clause in the settlement was that in case of any announcement by Government for further increase in cost of living allowance and adjustment thereof would be permissible under the law then the employer will be entitled to set-off the increase granted in basic salary only as the same had been allowed due to rise in cost of living. The employer after promulgation of the Employees Cost of Living (Relief) Ordinance, 1980 by which subsection (4) was added to section 3 of the Employees Cost of Living (Relief) Act, 1973 (I of 1974) attempted to set-off some of the increases in allowances also allowed under the settlement besides the increase in basic salary and sought interpretation of the settlement under S. 50 of the Industrial Relations Ordinance, 1969 before the Labour Appellate Tribunal. The Tribunal held that notwithstanding any contrary agreement between the employer and the employees the latter is under the statutory obligation to set-off any amount relatable to rise m the cost of living payable under the agreement executed or becoming effective on or about Ist January, 1980 or which has been announced or becomes effective within a period of one year of the commencement of Employees Cost of Living (Relief) (Amendment) Ordinance, 1980 as the words used in proviso to subsection (4) of section 3 of the Act are "shall be set-off" and that since section 9 of the Act provides a penal action against an employer for contravening any provision the word "shall" cannot be read as "may". Decision of Labour Appellate Tribunal was challenged before High Court in constitutional petition. It was contended that since the settlement itself provided which of the items of increases were adjustable under the set-off the Appellate Tribunal acted illegally in not giving effect to the agreement between the parties and that the interpretation made by the Tribunal runs contrary to the spirit of the Act.

Held: In view of the express settlement between the parties, it was not open to employers to urge that they were entitled to claim set-off in respect of any other amounts than. the amount , covered under the settlement. Such a clause of the settlement is not bit by section 23 of the Contract Act so as to render it void. If an employer adheres to his agreement with his employee, and thereby pays more amount than what he would have been liable to pay, he does not violate section 9 of the Employees Cost of Living (Relief) Act, 1973, which provides that any employer who contravenes any provision of the Act shall be punished with simple imprisonment for a term, which may extend to 6 months or fine which may extend to 2,000 rupees or with both. The above section was enacted in order to force employers to provide benefit contemplated for employees under the Act. But this proviso cannot be pressed into service in order to defeat the object of the Act. The High Court disagreed with Labour Appellate Tribunal that if an employer does not claim set-off in respect of all payments relatable to rise in the cost of living, he renders himself liable to be prosecuted under section 9 for its violation In our view the word hall' employed before the words be set-off'' in proviso to subsection (4) of section 3 of the Act in context with the object of the Act is to be read as may'. It may be mentioned that it is a cardinal principle of interpretation of a statute that where two interpretations to a proviso of an enactment are possible, one which will advance the object for which the enactment was enacted and the other which may not advance the object but counter-runs to it, the former is to be preferred to the latter. It may be observed that from the preamble of the Act, it is evident that the object of the Act was to provide for payment of cost of living allowance to employees and for matters ancillary thereto. The object was not to deprive the employees from the benefits which they might have been receiving prior to the enactment, which intention was manifested by sub-pare. (1) of section 8. It may also be stated that it is a matter of common knowledge the quantum of wages inter alia depend on the capacity of an employer to pay, which in turn is relatable to his earning capacity. If an employer on account of the hard work of the workmen earns more profits and if he wishes to share the same by making additional payments by increasing various allowances, his act will not entail any penal action for violation of section 9 of the Act, but will be commendable and will foster the object of the Act. In the instant case the parties had in contemplation the possibility of further amendment in the Act and, therefore, they had provided for meeting such an eventuality in the settlement. In other words, both the parties have agreed that only payment agreed to be made under specific clause of the settlement was to be treated as payment on account of rise in the cost of living entitling adjustment or set-off under the relevant law if such setoff is permissible. The employer is entitled to claim set-off as per clause of the settlement.

Security Papers Employees Union v. 4th Sind Labour Court and another P L D 1976 Kar. 288: Employees' Welfare Union v. R. B. Industries Ltd., Karachi and another P L D 1976 Kar. 297: Alpha Insurance Co. Ltd. v. Employees' Union and another P L D 1979 Kar. 47; New Jubilee Insurance Co. Ltd. v. District Judge, Karachi and 3 others 1981 P L C 566 and Pakistan Tobacco Co. Ltd. and another v. The Sind Labour' Appellate Tribunal and another 1981 P L C 482 rel.

All Amjad for Petitioner.

Hassan Zafar for Respondents.

Dates of hearing: 29th and 30th March, 1981.

.-This petition is directed against the order dated 27th November, 1980 passed by the learned Sind Labour Appellate Tribunal at Karachi inter alia in application No. KAR-659;1980 (here inafter referred to as learned respondent No. 1) upon an application filed by the present petitioner under section 50 of the I. R. O., 1969 for seeking interpretation of the terms, of the settlement executed between the petitioner and respondent No. 2 on 25th June, 1980. the relevant facts leading to the filing of the above petition are that the petitioner is a registered trade union and is also the collective bargaining agent of the workmen employed by respondent No. 2. It seems that on 1st March, 1980, the petitioner union served on respondent No. 2 a notice under section 26 (1) of the Industrial Relations Ordinance (I. R. O.), which proved futile and, therefore. a notice under section 26 (3) of the I. R. O. for strike was also served on llth March, 1980. It further seems that at or about the same time respondent No. 2 had also served a notice under section 26 (t) of the I. R. O. on the petitioner union, which was followed by a notice of look-out date 11th March, 1480. It also seems that the above exchange of notices was followed by the- initiation of the conciliation proceedings resulting in the conclusion of the aforesaid settlement (hereinafter referred to as the settlement). It may be pertinent to observe that under the settlement respondent No. 2 agreed to increase the basic salary of all the permanent employees by granting an amount of Rs.20 per month to the Peons, Drivers, Chowkidars and Daftaris and Rs.15 p.m. to other workmen. It was also agreed in response to demand No. 10 that the grade of salary would be revised as specified under the settlement. Besides the above benefits there was also an increase in the various allowances, namely; the house rent allowance was increased by 7%, the conveyance allowance was enhanced by Rs.22 per month, the Outdoor allowance for peons was increased from Rs.35 to Rs.50 per month, duplicating allowance given to the peons was increased from Rs.20 to Rs.30 per month and the canteen allowance was increased from Rs.50 to Rs.75 per month; While the settlement was holding the field, the Employees Cost of Living (Relief) (Amendment) Ordinance, 1980 added subsection (4) to section 3 to the Employees Cost of Living (Relief) Act, 1973 (I of 1974) (hereinafter referred to as the Act), whereby it was provided that in addition to the cost of living allowance admissible under subsections 1 and 2 of section 3 or as the case may be under subsection (3), every employee whose wages do not exceed one thousand and five hundred rupees shall, in respect of his employment on or after the first day of July, t980, whether on time work or on piece work basis, be paid by his employer cost of living allowance equal to forty rupees per month. However, it was also provided that the said cost of living allowance shall be set-off against the amount payable under an agreement or settlement reached, or an award given, under the I. R. O., 1969, which has been announced and become effective or after the first January, 1980, or which is announced and becomes effective within a period of .one year of the commencement of the Employees Cost of Living (Relief) (Amendment) Ordinance, 1980, and against the amount payable under an award given under the Newspapers Employees (Conditions of Service) Act, 1973. It seems that after the enactment of the above subsection (4) to section 3 of the Act, respondent No. 2 attempted to set-off some of the items covered by the settlement. There upon, the petitioner filed the aforesaid application under section 50 of the I. R. O. before learned respondent No. 1 for seeking interpretation of certain provisions of the settlement. Thereupon, respondent No. 1 through the impugned order held that respondent No. 2 are entitled to setoff the increase under the settlement in respect of the basic salary, the increase in conveyance allowance, outdoor allowance of peons, the duplicating and the canteen allowances by virtue of the above proviso to the newly enacted subsection (4) to section 3' of the Act. The petitioner being aggrieved by the above order has filed the present petition.

2. In support of the above petition Mr. Ali Amjad, learned counsel for the petitioner had made the following submissions:-

(i) That the settlement itself provided which of the items were adjustable under set-off- by virtue of proviso to section 3 (4) of the Act and, therefore, learned respondent No. 1 acted illegally in not giving effect to the agreement arrived at by the parties;

(ii) That the interpretation found favour with learned respondent No. 1 runs contrary to the spirit of the Act;

(iii) That in any case respondent No. 2 had waived the right to set-off by an express agreement and, therefore, learned respondent No. 1 committed illegality by holding that there was no waiver.

(b) On the other hand Mr. Zafar, learned counsel for respondent No. 2 has candidly submitted that respondent No. 2 will abide by the judgment of this Court as to the interpretation of the settlement and to the newly enacted subsection (4) to section 3 of the Act.

3. (a) In order to appreciate the above contentions advanced by the learned counsel for the petitioner, it may be advantageous to reproduce hereinbelow clauses 1 and 17 of the settlement, which read as follows

"Clause 1. Demand No. l.--The Company has agreed to increase the Basic salary of all permanent employees as on 1st January, 1980, by granting an amount of Rs.20 per month to the Peons, Sweepers, Drivers, Chowkidars and Daftaries and Rs.25 per month to the other members."

"Clause 17.-It is mutually agreed that if the Government announced any further increase in the Cost of Living Allowance or grants any financial benefits otherwise and makes its payment obligatory without the right of set-off and/or adjustment and/or deduction then the same will be allowed to the workmen of the Company. In case any adjustment is permissible under the law then the company will be entitled to set-off the increase granted in terms of Clause No. 1 only as the same has been allowed due to rise in Cost of Living."

It may be noticed that under clause 17 of the settlement, it was agreed between respondent No. 2 and the petitioner union that if the Government would announce any further increase in the cost of living allowance or would grant any financial benefits otherwise and would make its payment obligatory without the right of set-off and/or adjust ment, and/or deduction then the same would be allowed to the workmen of respondent No. 2 company. It was further agreed that in case of any adjustment would be permissible under the law then the respondent company would be entitled to set-off the increase granted in terms of clause No. t only as the same was allowed due to rise in cost of living, It may also be mentioned that under above quote) clause 1 of the settle ment, respondent No. l had agreed to increase the basic salary of all permanent employees as on 1st July, 1980, by granting the amount of Rs.20 per month to the Peons, Sweepers, Drivers, Chowkidars and Daftaries and Rs.25 per month to other workmen as stated hereinabove in para. 1.

(b) It may also be pertinent to quote hereinbelow the newly enacted subsection (4) to section 3 of the Act with its proviso, which reads as follows

"Section 2. Amendment of section 3, Act I of 1974.-In the Employees' Cost of Living (Relief) Act, 1973 (I of 1974), in section 3, after subsection (3), the following new subsection shall be added, namely :-

"(4) In addition to the cost of living allowance admissible under subsections (1) and (2) or, as the case may be subsection (3), it any, every employee whose wages do not exceed one thousand and five hundred rupees shall, in respect of his employment on or after the first day of July, 1980, whether on tithe-work or piece work basis, be paid by his employer a cost of living allowance equal to forty rupees per month:

Provided that the said cost of living allowance shall be set-off :--

(a) against the amount payable under an agreement or settlement reached, or an award, given, under the Industrial Relations Ordinance, 1969 (XXIII of 1969), which has been announced and become effective on or after the first day of January, 1980, or which is announced and becomes effective within a period of one year of the commencement of the Employees' Cost of Living (Relief) Amendment Ordinance, 1980 ; and

(b) against the amount payable under an award given under the Newspapers Employees (Conditions of Service) Act, 1973 (LVIII of 1973), which becomes effective from the fifteenth day of April, 1980."

It may be noticed that under the above newly enacted subsection (4), it has been provided that in addition to the cost of living allowances admissible under subsections II and (2) of the Act or as the case may be under subsection (3) if any, every employee whose wages do not exceed one thousand and five hundred rupees shall, in respect of his employment on or after Ist day of July, 1980, whether on time work or piece work basis be paid by employer a cost of living allowance equal to Rs.40 per month. It also provides that the cost of living allowance shall be set-off against the amount payable against the agreement or settlement reached or on award given under the I. R. O. 1969 (XXIII of 1969) which has been announced and become effective on or after the Ist day of January, 1980, or which is announced and has become effective within a period of one year of the commencement of the Employees Cost of Living (Relief) (Amendment) Ordinance 1980, and against the amount payable under an award given under the News Papers Employees (Condi tions of Service) Act 1973 (XLVII of 1973), which has become effective from 15th day of April, 1980.

(4) (a) The controversy between the parties in the instant case centres around the question, as to whether under the above proviso, to the newly added subsection (4) to section 3 of the Act, an employer is under legal obligation /statutory obligation to setoff the amount payable under an agreement or settlement reached or an award giver under L.R. O, which has been announced and became effective on or about Ist January, 1980, or which has been announced or becomes effective within a period of one year of the commencement of the aforesaid Ordinance notwithstanding an express contrary agreement between the parties. Learned respondent No. 1 has taken the view that notwithstanding any contrary agreement between an employer and an employee, the latter is under the statutory obligation to set-off any amount payable under an agreement executed or became effective within the above target dates provided in the proviso to subsection (4) to section 3 of the Act, as the words used in the proviso are "shall be. set-off". It has been further held by learned respondent No. I that since section 9 of the Act provides a penal action against an employer for contravening any 'provision the word, "shall" cannot be read as "may".

(b) It may be observed that the Employees' Cost of Living (Relief) Ordinance was enacted in 1973, which was repealed and replaced by Act 1973 (Act I of 1974), which contains section 3 without any subsection, providing relief to the extent of Rs.35 per month to employees whose wages did not exceed Rs.750. After that section 3 was renumbered as subsection (P L D 1976 Kar. 288) of section 3 and a new subsection (P L D 1976 Kar. 297) was added to by Act XLVII of 1974 providing further payment of Rs.50 or 10% of wages which ever was more to the employees, whose wages did not exceed Rs.1,000 per month, this was followed by enactment of subsection (3) to section 3 by Act No. CLXI of 1975 providing additional payment of Rs.25 per month. Thereafter subsection (4) to section 3 of the Act in question was added to. The above provisions have been subject matter .of interpretation by the Superior Courts. It may be pertitent to refer to some of the decided cases relating to the aforesaid provisions. In this regard the reference may be made to the case of Security Papers Employees' Union v. 4th. Sind Labour Court and another (1) the case of Employees' Welfare Union v. X. B. Industries Ltd., Karachi and another (2) the case of Alpha Insurance Co. Ltd. v. Employees' Union and another (P L D 1979 Kar. 47) and the case of New Jubilee Insurance Co. Ltd. v. District Judge, Karachi and 3 others (1981 P L C 566) and the case of Pakistan Tobacco Co. Ltd. and another v. The Sind Labour Appellate Tribunal and another (1981 P L C 482).

(i) In the above first case the petitioner union had assailed an award given by the 4th Sind Labour Court dismissing the petitioner's claim for cost of living allowance payable under the Ordinance. The petitioners' claim, was rejected on the ground that under a settlement dated 6th August, 1973, with the employer a benefit of Rs.40 p.m. in the form of an increase in the basic wages was given with effect from 1st April, 1974. It was held that the above benefit was given on account of rise in the cost of living and, therefore, the petitioner union was not entitled to claim the benefit of Rs.35 per month given under the Ordinance. The union being aggrieved by the above order filed a Constitutional writ petition, which was allowed by a learned Single Judge of the Erstwhile High Court of Sind and Baluchistan and it was held that increase in the basic pay under the aforesaid settlement could not be termed as a relief for the rise in the cost of living.

(ii) Referring to the second case reported in P L D 1976 Kar. 297, it may be stated that in the above cave the facts were that the petitioner union entered into a settlement dated 15th May, 1974, with the respondent company, under which the respondent company inter alia agreed to increase the salary to the extent of 38. 6% in the case of lower grade and 21.6% in the higher grade as compared to the increase of 10% in the previous settlement of 1972. After the enforcement of the amending Act, whereby the cost of living allowance was increased, the union demanded payment of additional benefit, which was turned down by the respondent company. Thereupon, an application under section 50 of the I. R. O., 1969 was filed by the union for the interpretation of the aforesaid settlement dated 15th May, 1974. The learned Sind Labour Appellate Tribunal concluded that because the increase as a result of 1974 settle ment was very high as compared to the previous settlement of 1972, the increase was intended to provide relief due to rise in the cost of living and, therefore, the learned Sind Labour Appellate Court dismissed the union's aforesaid application. The above order was assailed by the union in a constitutional petition, which was heard by a D.B. of the Erstwhile High Court of Sind and Baluchistan and it was held that the additional relief given under the amending Act could not be equated with the high increase given in the wages of the workmen under the settlement and therefore, - the petition was allowed, and the respondent Company was directed to pay the benefit under the above amending Act.

(iii) As regard the case reported in P L D 1979 Kar. 47, it may be mentioned that in the above case also the controversy between the parties was, as to whether the employer was entitled to claim set-off under section 8 of the Act in respect of increase in conveyance allowance, medical allowance and payment of house rent payable under a settlement. The Sind Labour Appellate Tribunal while disposing of an application under section 50 of the 1. R. O. filed by the union held that the employer was not entitled to claim the adjustment of the above item. The employer being aggrieved by the above order filed a constitutional petition; which was disposed of by a D. B. of this Court, to which one of us was a party (Ajmal Mian, J). The above D. B. dismissed the petition and held that since the above payments under the settlement were not specifically made on account of rise in the cost of living, the same could not have been adjusted under section 8 of the Act.

(iv) Referring to the case reported in 1981 P L C 566, it may be observed that the present respondent No. 2 in the instant petition had filed the aforesaid constitutional petition challenging the order passed by the District Judge. It may be advantageous to state the relevant facts of the above case namely, on 22nd January, 1970 the union signed a settlement with the petitioner company for 2 years effective from 1st January, 1970. After that from 1st March, 1972, another settlement was concluded for a period of 2 years. which apart from providing the usual annual increment also provided 8% increase in the basic salary of the employees. It also, provided some other allowances. It seems that again on 21st December, 1973, the respondent union made certain demands and after negotiations a settlement was arrived at between the parties and duly signed on 21st December, 1973 under which the petitioner company agreed to pay 8% increase in the basic salary of all permanent employees apart from other allowances and concessions, which inter alia included house rent allowance and increase in conveyance allowance. The dispute arose between the parties as 'to the adjustment under the above proviso to subsection (4) to section 3 of the Act. It seems, that the petitioner company attempted to claim set-off in respect of 8% increase under the aforesaid settlement on ground that the same was intended to be a relief in the cost of living. Thereupon, the respondent union filed application under section. 12 of the Shops and Establishment Ordinance 1969 before the specified authority, which by its order dated 31st January, 1976, dismissed the aforesaid application holding that increase of 8% in the basic salary under the aforesaid agreement of 1st November, 1974 was allowed as a measure of relief towards the cost of living. The union being aggrieved filed an appeal before the District Judge against the aforesaid order under the aforesaid Shops and Establishment Ordinance: 196), which was allowed, and it was held that the petitioner employer was not entitled to claim set-off of the above amount. The petitioner being aggrieved by the above order filed a writ peti tion which was dismissed by a division bench of this Court. It was held that any employer claiming benefit of the proviso to subsection (4) of section 3 of the Act has to establish clearly by documentary or oral evidence as the case may be that increase in salary or the grant of allowance was made with a view to provide relief due to rise in the cost of living. It was further held that the words "not specifically given" do not refer to the form of expression in which increase of allowance should 'have been mentioned in the agreement or in other document but they refer to the intention of the parties and to the factum of grant or payment of allowance to the workmen.

(v) With reference to the case reported in 1981 P L C 482 it may be observed that the controversy in the above case was whether in order to avail of benefit of proviso to subsection (4) employer should prove that a settlement was made or announced on or after 1st January, 1980, and that it has become effective on or after 1st January, 1980, or any one of the above two things. It was contended by learned counsel for the petitioner/employer that the word "and" employed in the phrase "which has been announced and become effective on or after 1st January, 1980)" is to be read disjunctively and not conjunctively. It was further contended that if an employer can show that the agreement or settlement reached or an award given under the 1. R O. was announced on or before Ist day of January, 1980, or the same has become effective on or after the Ist day of January, 1980, he shall be entitled to claim set-off under proviso to subsection (4) of section 3 of the Act. The above contention was repelled by a division bench of this Court and it was held that in order to avail the proviso the employer should prove that the settlement was arrived at on or after 1st January, 1980, and that it has become effective on or after Ist January, 1980. It was also pointed out that the Act being a beneficial legislation should be given liberal construction.

5. (a) From the above cited and discussed cases, it is evident that the Courts are inclined to place construction on the provisions of the Act which advance the object of the Act, namely, to give more benefits to the employees for whose benefit the Act was enacted.

(b) It may be pertinent to point out here that in the original Employees Cost of Living (Relief) Ordinance, 1973 as well as in the unamended Act there was a proviso entitling the employer to claim adjustment of certain payments made or agreed to be paid. In this regard, it may be pertinent to quote hereinbelow section 8 of the .Act, which reads as follows :-

"Section 8. Saving of certain rights and privileges.-Nothing in this Act shall affect any right or privilege to which an employee was entitled immediately before the commencement of the Employees' Cost of Living (Relief) Ordinance, 1973 (XXII of 1973), under any law for the time being in force or under any award, agreement, settlement, contract, custom or usage in force immediately before such commencement:

Provided that, if on or after the first day of August, 1973, but preceding the commencement of the said Ordinance, any employer has paid, or agreed to pay, whether, by way of settlement or otherwise, to any employee, in respect of any period, any sum of money, whether as an allowance not forming part of his wages or as increase in was as or otherwise, which is intended to provide relief due to a rise in the cost of living, such employer shall not be required to pay to such employee any amount in excess of the difference, if any, between the amount so paid by him and the cost of living allowance payable to such employee."

It may be noticed that in the above quoted section it was expressly provided that nothing in the Act shall affect any right or privilege to which an employee was entitled immediately before the commencement of the Employees' Cost of Living (Relief) Ordinance, 1973 under any law for the time being in force or under any award, agreement, settlement, contract, custom or usage in force immediately before such commence ment. It was further provided that if on or after 1st day of August, 1973, but preceding to the commencement of the Ordinance any employer paid or agreed to pay whether by or settlement of otherwise, to any employee, in respect of any period any sum of money whether as an allowance not forming part of the wages or as increase in wages or otherwise which was intended to provide relief due to rise in the cost of living such employer shall not be required to pay suds employees any amount in excess of the difference, if any, between the amount so paid by him and the cost of living allowance payable to such employee. The present proviso to subsection (4) of section 3 of the Act is intended to provide a similar right to an employer which was given under the above quoted section 8 of the Act.

6. (a) Reverting to impugned order, it may be observed that learned respondent No. I in the impugned order has held that under proviso to subsection (4) of section 3 of the Act an employer is not entitled to claim adjustment of every payment but his entitlement is confined to those payments which are relatable to the rise in the cost of living. It has been further held by learned respondent No. I that the question as to whether a particular payment is on account of rise in the cost of living is to be determined. To put it differently, it has been held by learned respondent No. 1 that every payment under a settlement agreed to or given under an award during the target period is not adjustable, and this is a question to be determined on the basis of the evidence. It has further been held that in view of the mandatory nature of proviso to subsection (4) of section 3 of the Act employers are under statutory obligation to claim set-off in respect of all payments relatable to rise in the cost of living under an agreement/settlement concluded and became effective with effect from 1st January, 1980, or which is announced and has become effective within one year from the commencement of the aforesaid amending Ordinance of 1980.

We are inclined to hold that the impugned order is not sustainable inter alia on the following two grounds :-

(i) That learned respondent No. 1 after having held that every payment under the settlement or award given during the target period is not adjustable, has ignored the express agreement between the parties contained in clause 17 of the settlement, which clearly provided as pointed out hereinabove that only payment agreed to be made under clause 1 of the settlement was to be treated as a payment on account of rise in the cost of living and would be adjustable. In view of the express settlement between the parties, it was not open to respondent. No. 2 to urge that they were entitled to claim set-off in respect of any other amounts than the amount covered under clause of the settlement. We are inclined to hold that clause 17 of the settlement is not hit by section 23 of the Contract Act so as to render it void. We are further inclined to hold that if au employer adheres to his agreement with his employee, and thereby pays more amount than what he would have been liable to pay, he does not violate section 9 of the Act, which provides that any employer who contravenes any provision of the Act 4 shall be punished with simple imprisonment for a term, which may extend to 6 months or with fine which may extend to 2,000 rupees or with both. The above section was enacted in order to force employers to provide benefit contemplated for employees under the Act. But this proviso cannot be pressed into service in order to defeat the object of the Act.

(ii) We are unable to agree with learned respondent No. 1 that if an employer does not claim set-off in respect of all paymenisl8 relatable to ris0 in the cost of living, he renders himself liable to be prosecuted under section 9 for its violation. In our view the word 'shall' employed before the words 'be set-off' in proviso to subsection (4) of section 3 of the Act in context with the object of the Act is to be read as 'may.' It may be mentioned that it is a cardinal principle of interpretation of a statute that where two interpretations to a proviso of an enactment are possible, one which will advance the object for which the enactment was enacted and the other which may not advance the object but counter-runs to it, the former is to be preferred to the latter. It may be observed that from the preamble of the Act, it is evident that the object of the Act was to provide for payment of cost of living allowance to employees and for matters ancillary thereto. The object was not to deprive the employees from the benefits which they might have been receiving prior to the' enactment, which intention was manifested by subpara. (1) of section 8 referred to hereinabove. It may also be stated that it is a matter of common knowledge that quantum of wages inter alia depends on the capacity of an employer to pay, which' in turn is relatable to his earning capacity. If an employer on' account of the hard work of the workmen earns more profits and if he wishes to share the same by making additional pay ments by increasing various allowances, to our view his above act will not entail any penal action for violation of section 9 of the Act, but will be commendable and will foster the object of the Act. In the instant case the parties had in contemplation the possibility of further amendment in the Act and, therefore, they had provided for meeting such an eventuality in clause 17 of the settlement. In other words, both the parties have agreed that only payment agreed to be made under clause 1 of the settlement was to be treated as payment on account of rise in the cost of living entitling adjustment or set-off under the relevant law if such set-off is permissible. Respondent No. are entitled to claim set-off as per clause 17 of the settlement.

(7) Reverting to Mr. Ali Amjad's contention that respondent No. 2. by virtue of clause 17 of the settlement had waived their right to claim a set-off in respect of other items, than the item provided for in clause 1 of the settlement, it may be observed that the conclusion arrived at by the learned respondent No. I seems to be in consonance with law as, there cannot be any waiver to a right which does not exist. In order to constitute a waiver in law inter alia the following ingredients must be present.

(i) That the right should exist;

(ii) the person in whose favour the right exists should have the knowledge of such right

(iii) that he consciously waives such right, and

(iv) that waiver does not violate any law.

In the instant case it is an admitted position that at the time of the execution of the settlement, subsection (4) to section 3 of the Act was not even enacted with its proviso entitling respondent No. 2 to claim any set-off.

(8) For the foregoing reasons we, therefore, are of the view that the impugned order is clot sustainable and hence the same is declared as being without lawful authority and of no legal effect. The respondents are restrained from acting upon the aforesaid order.

In the circumstances of the case there will be no order as to costs.

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