Find a Lawyer

Civil Appeal No. K‑122 of 1983, decided on 12th January, 1986.

(On appeal from the judgment, dated 8‑3‑1983 of the High Court of Sind at Karachi in C.P.D. 1584 of 1980).

‑‑Art. 212(3)‑‑Companies Profits (Workers' Participation) Act (XII of 1968), S. 2(e)‑‑Industrial undertaking‑‑Leave to appeal granted to examine whether Rice Export Corporation of Pakistan was an industrial undertaking as defined in Scheme framed under Act (XII of 1968) in pursuance of provisions of S. 2(e) thereof.

‑‑‑S. 2(e)‑‑"Industrial undertaking"‑‑Rice Export Corporation of Pakistan‑‑Appellant Corporation carrying business of export of rice including all operations connected with its procurement, milling, cleaning, storage, packing and sale for export, declared by High Court to be an "industrial undertaking" within meaning of Act‑‑Order impugned‑‑Plea that processes which were undertaken by appellant‑Corporation neither changed original condition of commodity nor added to its value, repelled‑‑Process of cleaning, finishing and polishing rice undertaken by Corporation definitely adds to its value and even changes its original condition‑‑Appellant Corporation satisfying requisites laid down for any establishment to qualify as an industrial undertaking within meaning of Scheme rightly, held, as such‑‑Appeal dismissed with costs.

Fazle Ghani Khan, Advocate Supreme Court with Z. Aziz Dastgir, Advocate‑on‑Record for Appellant.

Respondents Nos. 1 and 2: Ex parte.

F.G. Ibrahim, Senior Advocate Supreme Court and Ahmadullah Farooqi, Advocate‑on‑Record for Respondent No.3.

Date of hearing: 1.2th January, 1986.

‑‑The appellant is a Limited Company incorporated under the Companies Act, 1913, on 22‑8‑1974. According to its Memorandum and Articles of Association the main object for which it was established was to carry on business of export of rice from Pakistan including all operations connected with its procurement, milling, cleaning, storage, packing and sale for export. The Company made considerable profits during the years 1974‑1977. However, it made no provision for Workers' Participation Fund as provided for under the Companies Profits (Workers' Participation) Act, 1968, on the view that it was not an "industrial undertaking" for the purposes of the Act and, therefore, not required to establish or contribute to such fund.

This assumption was challenged by the Employees' Union .of the appellant Corporation (respondent No. 3 herein). But the appellant was not persuaded to alter its view, hence respondent No. 3 through its General Secretary preferred an application under section 34 of the Industrial Relations Ordinance (hereinafter called I.R.O.) before the Sind Labour Court No. V, Karachi seeking an order to direct the managem6nt of the appellant Corporation to establish the workers' participation fund and to make payment to it as per rate prescribed against the profits earned during the financial years 1974‑75, 1975‑76, 1976‑77 and 1977‑78.

2. By order, dated 1‑7‑1980 the Fifth Sind Labour Court, Karachi held that the application filed by the respondent's workers' union (respondent No. 3 herein) was maintainable and that the appellant's establishment came within the purview of the Companies (Workers' Participation Fund) Act, 1968 and was, therefore, liable to establish the workers' participation fund, in accordance with the Scheme. Accordingly, the Management of the appellant Corporation was directed to establish the workers' participation fund and make payment towards it as per rate prescribed against the profit earned during the financial years 1974‑75 to 1977‑78.

3. The appellant feeling aggrieved by this order appealed to the Sind Labour Appellate Tribunal at Karachi (Appeal No. Kar. 556 of 1980) but the appeal was dismissed by it vide order, dated 29‑10‑1980.

4. The appellant, therefore, filed a constitutional petition (Civil Petition No. D‑1584 of 1980) to challenge the order of the Sind Labour Court No V, dated 1‑7‑1980 and that of the Sind Labour Appellate Tribunal, Karachi, dated 29‑10‑1980 but the said petition too failed and was dismissed by a Division Bench of ‑the learned High Court on 8‑3‑1983. Leave was granted by this Court to examine the following question of Law:‑

"Whether the petitioner (appellant herein) is an "industrial undertaking" as defined in the Scheme framed under the Companies Profits Workers' Participation Act, 1968 in pursuance of the provisions of section 2(e) of the said Act "

5. Section 2(e) of the Act defines "Scheme" to mean "the scheme set out in the Schedule". According to the Schedule, wherein the details of the Scheme referred to in section 2 (e) are set out, it is provided, inter alia, as follows:‑

‑The scheme applies to all companies engaged in industrial undertaking which satisfy any one of the following conditions and to such other companies as the Federal Government may, by notification in the official Gazette, specify in this behalf, namely: ‑‑

(i) The number of workers employed by the company at any time during a year is 30 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 cost) as on the last day of the accounting year is Rs.40 lakhs or more.

In this scheme‑‑

(a) "industrial undertaking" means an institution, organisation enterprise or establishment which involves the use of electrical, thermal, nuclear or any other form of energy transmitted mechanically and not generated by human or animal agency and which is engaged in any one or more of the following operations, namely: ‑

(i) the subjection of goods or materials to any manufacturing, assembly, finishing or other artificial or natural process, which changes their original condition or adds to their value."

Both the Sind Labour Court and the Sind Labour Appellate Tribunal found that the appellant Corporation was an industrial undertaking within the meaning of the Scheme and the High Court upheld this finding.

5. Mr. Fazle Ghani Khan, learned counsel for the appellant has attempted to displace this finding before us. He submitted that it was true that the number of workers employed by the appellant Corporation was 50 or more at any one time during the year and that its paid‑up capital as on the last day of its accounting year exceeded Rs.20 lakhs and the value of its fixed assets (at cost) as on the last day of the accounting year also exceeded more than Rs.40 lakhs but submitted that the further essential requirement for the application of the Scheme, namely, that it should be engaged in an "industrial undertaking" as defined in the Scheme was lacking. He submitted that the appellant Corporation is not engaged in any such undertaking as its essential function was merely to market rice which is procured through the Government Agencies and the only operations which it undertook was the refining and purification of rice and that these operations did not make it an "industrial undertaking" for the purposes of the Act. In this connection, he also submitted that the processes which were undertaken neither changed the original condition of the commodity nor added to its value. We regret, we cannot agree.

6. No doubt, the appellant Corporation purchased the rice for export to foreign markets but the processes undertaking by it contributed to a substantial change both in the appearance of the commodity and in the enhacement of its value. It is undisputed that the rice bought by it from the producers is mixed with all sorts of impurities, including stones, it is mostly unpolished and retains in part or whole also its husk. It is besides also mixed with a substantial quantity of broken rice. The true position is that in order to ensure proper quality of rice, fit for export, the Corporation subjects the rice purchased from the producers to various processes and for this purposes it has installed at its own godown sites, a number of machines which are operated by electricity and mechanical power. There includes an aspirator and cleaner machines, stone separator machines, paddy separator machines, husk separators, rotary sieves and other sophisticated machines. By these processes the rice is cleaned, paddy separated, fragmented rice removed and rice of proper standard retained for export. Substantial amount of labour and expenditure is involved in these operations and these are undertaken with a view to adding to the value of the commodity (rice) and for making it acceptable in the international market. In the result its price is enhanced. Thus, by subjection of the goods to these processes its value is increased. An argument was raised by Mr. Fazle Ghani Khan that since the rice purchased by the Corporation ultimately remains "rice", no increase in its value occurs. This is not correct because the value amongst other things means also the "worth" of the article (see Concise Oxford Dictionary) and the worth of the rice definitely increases as a result of subjection of the rice, as purchased, to the processes mentioned above. In so far as the operations do add to the value of the commodity, the appellant Corporation comes within the definition of an "industrial undertaking" as given in the Scheme. The High Court is, therefore, right when it observed that only the best' quality rice is exported from Pakistan for earning valuable foreign exchange for the country. Its view that "any rice which is mixed with dust, husk or paddy fetches far lesser price than rice which has been so graded that full grains are separated from broken ones and the dust, husk or paddy is removed" is doubtless correct. Its further observations that "as the process of cleaning is resorted to by the petitioner‑Corporation for the purpose of granding, purifying and/or refining the rice such process will undoubtedly change its original condition and add to its value" is indeed correct. Its conclusion that "consequently the process of cleaning, finishing and polishing the rice definitely adds to its value and even changes its original condition" is also unexceptionable.

The upshot is that as the appellant Corporation satisfies the requisites laid down for any establishment to qualify as an "industrial undertaking" within the meaning of the Scheme, the appellant Corporation has rightly been held as such.

8. The result is that the impugned judgment of the High Court is unexceptionable and needs no interference. This appeal, accordingly fails and is dismissed hereby with costs.

M.I. Appeal dismissed.

Find a Lawyer Near You

Dealing with a matter like this? Connect with a verified advocate in your city — free on SJP Lawyers Directory.