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(a) West Pakistan Employees' Social Security Ordinance (X of 1965)‑‑

‑‑‑Ss. 2(30), 57 & 59‑‑Contribution‑‑Social security‑‑Bonus‑ Establishment failing to contribute towards social security on amount paid to workers by way of Production Bonus, Special Production Bonus and Inami Bonus on plea that bonus paid as such was not included in 'wages'‑‑Memorandum of Settlement reached between employer and workers showing that payment of bonus was dependent upon quantity of work and method of calculating amount of bonus was contingent on quantum of production‑‑Bonus paid by employer to employee for services rendered held formed part of 'wages'‑‑Appeal filed by Institution against order of Social Security Court, to the effect that bonus was not wages, accepted in circumstances.

Sind Employees' Social Security Institution v. Lipton (Pakistan) Ltd. 1982 P L C (C.S.) 674 and Sind Employees' Social Security Institution v. Amin Fabrics Limited 1983 P L C 182 rel.

Pakistan Cigarette Labour Union v. Pakistan Tobacco Co. Ltd. Karachi and another P L D 1981 S C 495 ref.

(b) West Pakistan Employees' Social Security Ordinance (X of 1965)‑‑-

‑‑‑Preamble‑‑Interpretation of statutes‑‑Social Security Ordinance 1965, being a welfare and beneficial legislation---Its provisions, held, must be liberally construed and such interpretation to be avoided which destroyed the very object of legislature.

Kohinoor Chemical Co. Ltd. and another v. Sind Employees' Social Security Institution and another P L D 1977 S C 197 rel.

(c) West Pakistan Employees' Social Security Ordinance (X of 1965)‑‑-

‑‑‑Ss. 59 & 64‑‑Appeal‑‑Plea not raised before forum below, held, could not be allowed to be raised before High Court.

S. A. Sarwana for Appellant.

Khurshid Anwar Sheikh for Respondent.

Dates of hearing: 2nd and 17th September, 1986.

This judgment would dispose of two appeals as common question of facts are involved in these two appeals.

M. A. No. 21 of 1986:

Consolidated Sugar Mills Ltd., Ranipur District Khairpur (hereinafter referred to as the Mill) entered into a memorandum of Settlement with the registered Union (Collective Bargaining Agent) on 1‑11‑1977 and in that agreement had agreed to pay Bonus to the employees and for the purpose of calculating the amount of Bonus a formula was devised. The Social Security Institution (hereinafter referred to as the Institution) checked the record of the appellant for the period from June, 1977 to September, 1981 and it was revealed that they did not contribute towards Social Security Contribution on the sum of Rs.31,83,047.27 paid to the workers by way of Production Bonus, Special Production Bonus and Inami Production Bonus. A sum of Rs.3,34,219.95 were demanded from the Mill. The Mill filed their objections against the said demand. The Director Khairpur did not accept the contention of the Mill, whereupon Mill submitted an application under section 57 of the Social Security Ordinance before the Institution. This application was rejected by the respondent No. 1. An appeal was filed against the said order which was dismissed by the Social Security No. II, Karachi by means of order, dated 5‑3‑1986.

M. A. No. 93 of 1980:

The dispute arose between the parties over various payments The dispute was decided by the Institution under section 57 of the Social Security Ordinance on 12‑5‑1980 wherein it was held that the Mill was liable to pay contribution on Production Bonus and Special Production Bonus. The Mill filed an appeal under section 59 of the Social Security Ordinance against the said decision. The Social Security Court No.II on 23‑11‑1980 allowed the appeal partly holding that the Production Bonus and Special Production Bonus are not part of wages. The Institution being aggrieved filed the appeal against the said order.

The precise question for decision in these two appeals are whether the Production Bonus and the Special Production Bonus are part of Wages. It is contended by the learned counsel for the Mill that the bonus is payable under an agreement between the employer and employees i.e. contract bonus, would be excluded for the purpose of contribution. The 'wages' have been defined in section 2(30) of the Ordinance as under: ‑

Wages means remuneration for service paid or payable in cash or in kind to a secured person, not being less than remuneration based on the minimum rates of wages declared under the Minimum Wages Ordinance, 1961 (XXXIX of 1961), without taking account of deductions for any purpose, under a contract of service or apprenticeship, expressed or implied, and shall be deemed to include any dearness allowance or other addition in respect of the cost of living and any payment by the employer to a secured person in respect of any period of authorised leave, illegal lockout or legal strike; but does not exclude:

(a)any payment for overtime; or

(b)any sum paid to the person employed to defray special expenses entailed by the nature of his employment; or

(c)any gratuity payable on discharge; or

(d)any sum paid as bonus by the employer;"

The learned counsel has stated that bare reading of sub‑clause (d) makes it clear that bonus paid by the employer does not include in the wages. It is further contended that the bonus has been paid by the Mill under a contract as an incentive bonus and it does not include in the wages This incentive was given to the workers for making more production. In order to appreciate the contention it is necessary to consider the object of Social Security Ordinance under which the Institution claimed contribution. The object of this Ordinance is for providing benefits to certain employees or their dependents in the event of sickness. This is a welfare and beneficial legislation and, therefore, the provision of this Ordinance must be liberally construed. Keeping in view the intention of the legislature, such interpretation should be avoided which destroyed the object of the legislation. In the A case of Kohinoor Chemical Co. Ltd. and another v. Sind Employees' Social Security Institution and another P L D 1977 S C 197 it has been held that "the West Pakistan Employees' Social Security Ordinance, 1965, is a beneficial or remedial legislation conceived as a means of ameliorating the lot of the working class, and as such, it would be in keeping with the accepted principle of interpretation, that it should be so construed as to advance the remedy and suppress the mischief, or else it would frustrate the legislative intent". It is contended by the learned counsel for the Mill that the bonus paid by the Mill was traditional bonus. It was specifically mentioned as 'bonus' in memorandum of Settlement and words could only be given its natural meanings. This contention has no force. The word 'bonus' has not been defined in the Ordinance. But use of word 'bonus' in the Settlement is not material. The determining factor is whether such payment, comes within purview of wages. In B the present case it is not a bonus so to be excluded from the operation of Social Security Ordinance, 1965. The Mill had evolved a formula for calculating the amount which is as under: ‑

(a)Due to closing of the crushing season, the seasonal workers were to be paid off. So with the mutual understanding between the Management and the Union, the Management with the consent of the Union had agreed to pay and has already paid on 30th May, 1977 and on subsequent dates production bonus equivalent to one month's basic wages/salaries plus Rs.110 being ex gratia amount on the completed minimum target of one lac bags of sugar bags each weighing 100 Kgs. for the season 1976‑77 to the permanent and seasonal workers only on the basis of one full bonus for 108 days attendance on 9‑5‑1977 and pro rata for those who had lesser days of attendance.

(b).............................................................

(c)After a gesture of goodwill and with the sole object of maintaining cordial labour/ Management relations and promote harmony, the Management has agreed as a special consideration to pay an exgratia amount to one month basic salary to those permanent and seasonal employees who have performed their duties satisfactorily during the last season 1976‑77 and who will be on our roll and work satisfactorily in the coming season 1977‑78. It is agreed upon between the parties that the payment of the said ex.‑gratin amount will be made after expiry of the month of January 1978. Those workers who have left the services in the intervening period or who have been discharged or dismissed and hence not allowed to work during the coming season because of bad record of service in the last season, will not be entitled to get the said ex‑gratia payment. The Union undertakes that it will not mention this ex‑gratia payment as an instance in future.

It is further agreed by the Union that payment of this ex‑gratia amount is adjustable towards bonus under section 10 (c) of West Pakistan Industrial and Commercial Employment (Standing Orders) Ordinance, 1968, as amended in case the same becomes due under the law.

(d) In view of the fact that this Settlement will be binding on both the parties for a period of two years from 1^st August, 1977, the Union desired and demanded that the Production Bonus for the next two seasons, i.e. 1977‑78 and 1978‑79, be decided and incorporated in this Settlement. It is, therefore, agreed between the parties that the Production Bonus for the crushing season 1977‑79 and 1978‑79 will be ‑paid on the following manner:

(i) First bonus will be paid on completion of one lac bags of sugar each weighing 100 Kgs.

(ii)Second bonus will be paid on completion of one lac seventy‑five thousand bags of sugar each weighing 100 Kgs.

(iii)Third bonus will be paid on completion of two lacs fifty thousand bags of sugar each weighing 100 Kgs.

(iv)Fourth bonus will be paid on completion of three lacs bags of sugar each weighing 100 Kgs.

(v)The fifth bonus will be paid on completion of three lacs fifty thousand bags of sugar each weighing 100 Kgs.

Thereafter each additional fifty thousand bags of sugar will entitle the employees to one bonus. Each bonus will be equivalent to one month basic wages/salary."

It is, therefore, clear that payment was dependent upon the quantity of work and the method of calculating the amount of bonus was contingent on the quantum of production. The bonus paid by the employer to the employees for services rendered form part of the wages.

The learned counsel for the Mill has stated that the employees will get the bonus for seven months which is the crushing season. The period for payment of bonus is not immaterial. It is sum and substance of the controversy, which is to be seen. This controversy has been resolved in two cases decided by this Court. (1) Sind Employees' Social Security Institution v. Lipton (Pakistan) Ltd. 1982 P L C (C.S.) 674 wherein it has been held that an employee under a contract made on the basis of attainment of certain standard of work and which the employee is entitled to claim as a right on its performance cannot be treated as bonus irrespective of the fact that such payment is described by the employer as a bonus. It is an admitted position that production bonus is paid by the respondents in the appeal to their employees on condition of their producing the goods over and above the agreed minimum limit of production and such payment is claimed by the employees as of right on attaining the set‑standard. Similar view was taken in the case of Sind Employees Social Security Institution v. Amin Fabrics Limited 1983 P L C 182. In this case various authorities have been considered. In concluding para. 14 of the judgment, the following observations are made: ‑

There is a recent judgment of Saeeduzzaman Siddiqui, J. a learned Judge of this Court in M. A. No. 94 of 1979 wherein it has been held that production bonus does not fall within the meaning of "bonus" used in section 2(30) of the 1965 Ordinance. The reasoning of the learned Single Judge is primarily based on the dictionary meaning of the word 'bonus' I may not agree with the reasoning of Saeeduzzaman Siddiqui, J. in that case but I am in full agreement with my learned brother that Production Bonus does not fall within the meaning of bonus. I may observe that in my view the word bonus employed in exception (d) of section 2(30) of the 1965 Ordinance refers to the traditional bonus paid or payable ex‑gratis out of the profits of the employer to the employees. It also includes statutory bonus. It further includes bonus payable under an agreement between the employer and the employees i.e. contract bonus provided such contract bonus is in the nature of a bonus invariably described and termed as bonus and is also not known or described as an allowance in the labour management circles. In short it may be stated that the word "bonus" in section 2(30) means only payments which are known and described always as bonus and not by any other term or name.

I may also refer to the case of Pakistan Cigarette Labour Union v. Pakistan Tobaccco Co. Ltd., Karachi and another P L D 1981 S C 495 and the contention that once workman makes his employer agree to pay him bonus, same would be deemed to have become part of his wages was not accepted by the Supreme Court. It was further held that very essence of bonus is that it is a payment which is not intended to be permanent, as distinct from wages, which are intended to be paid permanently. In this case construction of Standing Order 10‑C of West Pakistan (Standing Orders) Ordinance, 1968 was involved. This provision imposed on an employer a statutory liability to pay bonus out of profits and in this context implication of contractual bonus and statutory bonus was considered. This case is not applicable to facts of the present case.

The learned counsel for the Mill has submitted that Special Leave has been granted by the Supreme Court to Messrs Lipton Pakistan Ltd. against the order of the High Court but no final judgment has been pronounced by the Supreme Court. No appeal has been filed against the decision reported in 1983 C L C 182. Therefore, the pronouncement of the High Court had become final.

It is contended that the learned Presiding Officer also ignored the fact that under section 20 of the Social Security Ordinance, contribution was payably only upto wages of Rs.20 per day. i.e. upto Rs.600 wages per month. The law, i.e. section 20 of the Social Security Ordinance, was amended on 14^th May, 1981 but no retrospective effect was either envisaged or could be given to the provisions of this section. In fact, the appellant was not liable to pay contribution in respect of any wages in excess of Rs.20 per day upto May 14, 1981, i.e. en wages in excess of Rs.7,200 per year. In case the amounts of bonus paid to its employees was included, no contribution remained payable in respect of any employee as the wages of each and every employees exceeded Rs.600 p.m. or Rs.7,200 per annum, by the appellant. The appellant has not raised this plea before the Presiding Officer, therefore, this question cannot be agitated at this stage. The learned counsel has referred to C.P.S.L.A. Nos. K‑117 and K-118 1978 wherein leave has been granted to consider where the wages paid to the employees whose wages are more than Rs.20 per day are to be excluded in computing the amount of the contribution. The operating part of the leave order reads as under: ‑

We have heard the learned counsel for the petitioner. In this connection subsection (8) of section 2 of the Ordinance defines an "employee" to mean any person, working normally for at least 24 hours per week, for wages, in or in connection with the work of any industry, business, undertaking or establishment under any, contract of service or apprenticeship, but it does not include inter alla (f) any person employed on wages exceeding Rs.500 per mensem. This figure of Rs.500 was later on raised to 1,000 per mensem by an amendment introduced by Ordinance XXVI of 1975. At the same time subsection (4) of section 20 of the Ordinance also lays down that no contribution shall be payable on wages which are in excess of Rs.20 per day. The manner of calculating daily wages for the purpose is separately prescribed in regulation 4 of the West Pakistan Employee's Social Security (Contribution) Regulation, 1967. Reading these provisions together it appears that an employer is liable to make contribution in respect of all his employees who are employed on wages not exceeding Rs.1,000 per mensem and that too on their wages upto the extent of rupees twenty per day and not on any wages in excess thereof.

The matter has not been finally disposed of by the Supreme Court and only leave has been granted. The petitioner cannot base his arguments on the leave granting order. The learned counsel for the Institution has submitted that the Mill has not raised this plea before lower Tribunal, therefore, he had no chance to meet the objection.

In the result the Miscellaneous Appeal No. 21 of 1986 is dismissed and the Miscellaneous Appeal No.93 of 1980 is accepted, with no order as to costs.

M. Y. H. /5127/Lb Appeal dismissed

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