The petitioner challenges through this petition the warrants of attachment dated 30th September and 3rd December, 1979, issued against it for recovery of a sum of Rs, 22,12,674.41, being the arrears of Social Security contribution, under section 20 of the Social Security Ordinance, for the period August, 1977 to November, 1978, and April, 1979 to May, 1979.
2. Briefly, the facts of the case are that the management of the petitioner concern known as Ittefaq Foundry and Workshop Ltd., was taken over by Respondent No, 5, under Economic Reforms Order (P.
0. I of 1972), on 2nd January, 1972. The establishment was re-named as LEFO. On 1st December, 1973, the Federal Government also acquired the shares of the previous owners under Article 7 (b) of P.
0. I of 1972, as amended by Ordinance XVIII of 1973, and Act LXIV of 1973 Entitlement Certificates were also issued under Article 7 (c) of P. O. I of 1972, to the shareholders. Another concern Federal Light Engineering Corporation was created and the LEFO was put in its charge. The above said demand had in fact arisen during that period.
3. On 16th September, 1978, the President promulgated President Order 12 of 1978. Under its Article
(4) (1) the Federal Government was empowered to transfer the shares of proprietary interest, in such concerns as had been taken over under P.
0. I of 1972, to the persons specified and on the terms set out in the Schedule. Thus a notification was issued on 16th. May, 1979, offering all the 70350 shares to the persons specified in the notice for acceptance who did so. The petitioner concern was returned to its previous owners on 16th June, 1979. The warrants of attachment, as said above, were served on 30th September, and 3rd December, 1979, while two recovery notices on 15th October and 22nd October, 1979. The petitioner filed a petition under section 57 of the Ordinance but that was rejected on 3rd December, 1979.
4. A special audit as provided for under Article 7 of President Order 12 of 1978, was ordered.
According to Article 8, the Federal Government may assume such of the liabilities of the managed establishment as it may decide. This liability, however, is not to exceed the net loss incurred between the specified date and the date, on which the order under Article 6 (1) had been issued, by the Federal Government for the transfer of the concern. The term 'net loss' has been explained thereunder. It means the total amount of losses incurred between the specified date and the transfer date as determined in pursuance of the audit carried out under Article 7, minus (a) increase in reserves, retained earnings, and unappropriated profits, (b) written off losses with regard to operations and assets relating to East Pakistan. It is admitted by both the sides that an audit report under Article 7 was made by Messrs Ferguson Chartered Accountants and sent to the Federal Government on 4th February, 1981 (See Para. 5 of the written statement).
5. According to para.Of the written statement a sum of Rs, 27,43,082.55 was payable to the Punjab Employees' Social Security Institution as on 16th June, 1979, i. e. The date on which the concern was handed back to the present owners. It is further admitted that the institution had been pressing for the payment of the amount even before. The Federal Government very rightly accepted in Para. 8 of its written statement the liability but pleaded that it did not confer on the petitioner any right to withhold payments of outstanding statutory dues. Thus the facts given above do establish that the liability is genuine. The only question involved is, should it have been paid by the Federal Government or must it be recovered from the transferee of the concern, i. e. The petitioner ?
6. The Employees' Social Security Institution was established under section 3 of the West Pakistan Employees' Social Security Ordinance, 1965, as a body corporate having perpetual succession and a common seal. Section 20 of the Ordinance X of 1965, obliged every employer to pay to the Institution a contribution at such times, at such rate and subject to such conditions as may be prescribed. The contribution comprises a share deducted from employees' wages and a part payable by the employer. It is payable within 30 days. The amount can be increased by a percentage as prescribed under section 23. The arrears can be recovered as arrears of Land, Revenue according to section 55.
7. Undoubtedly, the liabilities are to be assumed by the Federal Government under Article 8 of P.
0. 12 of 1978, though a direction to decide which liability it shall assume rests in it. The restriction placed on its discretion is that the assumed liabilities shall not be more than the net loss. The net loss had been carefully defined in the Explanation added to Article 8 as said in Para. 4 above. The offer of transfer made to the petitioner, is contained in ANNEX. 'A', the notification dated 16th May, 1979. The terms and conditions are same as given in the Schedule to P. O. 12 of 1978. In the offer the promisee were asked to refund any compensation received.
8. Para. 3 of the Schedule attached to P.
0. 12 of 1978, lays down that the shares of a managed concern, which incurred no loss, after a Managing Director was appointed under clause (1) of Article 4 of P.O. 1 of 1972, shall be offered at the value equivalent to the compensation, if paid, or surrender of certificates of entitlement to compensation. Seen in the light of Article 9, referred to above, it clearly means that the Federal Government wanted to restore the concern in the same way as it took over. It is for this reason that the Legislature allowed the Federal Government to assume the liabilities making up the net loss.
9. The question whether the word 'may' here means 'shall' does not offer any difficulty. Article 8 provided that the Federal Government may assume such of the liabilities of the managed establishment as the Federal Government may decide...-. The discretion vesting is to choose which of the liabilities and not to deny every liability. Again the discretion is to confine liabilities to be assumed to those forming net loss. However, as said above the principle that equal value is to be restored, shows that the liabilities forming net loss must be met by the Federal Government.
10. The above liability is a statutory liability. There is no doubt about its genuineness either and in fact it is admitted in the written statement. Undoubtedly, it would be recoverable from the petitioner normally. However according to Article 8 of the P.O. 12 of 1978, it has to be assumed by the Federal Government. The Federal Statute has also to prevail on the Provincial Law. Consequently, this liability shall attach to the Federal Government and shall have to be recovered from it.
' In view of the above, the demand notices and the warrants of attachment issued against the petitioner are declared to be without lawful authority and of no legal effect. Respondents 1 to 3, shall pay the costs.