RASAAL HASAN SYED, J......This Order will dispose of W.P. No. 8214/2019 as well as following writ petitions as common questions of fact and law are involved: W.Ps. Nos. 6067/2014, 7284 /2014, 7285/2014, 7286/2014, 11071/2014 and 8040/2018 (group "A") as well as W.Ps. Nos.12471/2014, 17585/2016, 7474/2017, 14123/2017, 17733/2018, 71 11/2020, 71 13/2020, 7363/2020, 8817/2020, 8965/2020 and 9201/2020 ( group "B ").
2. The petitioners were appointed in different years as Area Managers pursuant to Regulation No. 4(ii) of The State Life Insurance (Employees) Regulation s, 1973 (the "Regulations ") in the respondent State Life Insurance Corporation (the "Corporation "). The writ petitions placed in group "A" supra call into question the letter whereby they were downgraded pursuant to clause captioned "Performance Review" of their Appointment Letter wherein the Zonal Head is authorized to carry out a review of performance under Rule 4(ii)(c)(1)&(2) of the Regulations on six monthly basis or such shorter period as may be deemed necessary . In the instant case, on finding their performance below the mark, the petition ers were re-categorized from category "A" to "B" with the rider that if they strove for the best by adopting their professional obligations such as recruitment, training and supervision, etc. to fill personnel and by procuring certain percentage of First Year's Premium ("FYP") quota, they could regain their original category . The writ petitioners now seek declaration to the effect that this letter is illegal, without lawful authority and against the service regulations.
3. Writ petitioners in group "B" supra pose a challenge to certain dedu ctions made by the Corporation from their salary in the form of "Operational Cost" pursuant to provision in Appointment Letters of the petitioners. Pertinent clause of the Appointment Letter stipulates that petitioners had to operate within 10% cost to their FYP of each year and that if their Direct Cost, when added to office cost, is more than 10%, the excess cost shall be recovered from them as per formula of adjusted cost approved by the Board of Directors of the Corporation as amended from time to time. The petitioners through these petitions have requested for a declaration that the deduction/recovery from their monthly salary is illegal and further that such deductions may be refunded.
4. Learned counsel from both sides have been heard and the appended documents scrutinized with their able assistance.
5. It cannot be gainsaid that insurance business is one of the most competitive industries of the day and the employment structure reflects its strong commercial orientation. High performance and perseverance is incentivized and, being so, lethargic performance is discouraged by disincentivizing unenterprising behavior .
Structure corresponding to intensely commercial orientation of the enterprise for which manpower is hired, is reflected in the contractual terms and conditions recorded in Appointment Letter , which the petitioners accepted and signed at the time they were hired. The Appointment Letters inter alia provide as follows: "your performance will be .reviewed by Zonal Head "under Rule 4(ii)(c)(1)&(2)" of the Regulations "on a six monthly basis or for such shorter period as deemed necessary" and "if on such review it is found that your performance falls short of the prescribed standard, as may be generally or specifically prescribed such measure s including but not limited to, reduction, curtailment or withdrawal of emoluments or perquisite or all such measures together or re-categorization as "B" or "C" category Area Manager or as Sales Manager , keeping in view your performance, shall be taken by the Zonal Head ". This contractual stipulation, it appears, stems from Regulation No.4(ii)(c)(1)&(2), relevant part whereof is reproduced below: "(1) An Area Manager shall be required to meet such performance standards regarding new business, persistency and other operational factors as the Board may prescribe from time to time.
(2) The performance of an Area Manager shall be reviewed by the Zonal Head on six monthly basis or for such shorter periods as may be deemed necessary by the Board. If on such review it is found that his performance falls short of the prescribed standards, the Zonal Head may terminate his services after giving him three month notice or three month pay in lieu thereof or may take such measures including but not limited to, reduction, curtailment or withdrawal of his emoluments or perquisites or all such measures together , shall be taken by the Zonal Head as may be generally or specifically prescribed by the Board".
6. Petitioners through petitions in group "A" raise the objection that the step of downgrading or reduction in rank by re-categorization on the basis of Performance Review as envisaged in the Appointment Letter , is without support in the Regulations. Perusal of the Regulation No.4(ii)(c)(2) supra indicates that on review if it is found that the performance of Area Managers falls short of the prescribed standard, Zonal Head may inter alia take such measures that include, but are not limited to, reduction, curtailment or withdrawal of emoluments as may be prescribed by the Board. An examination of the Appointment Letter: that constitutes the contract inter se the employer and employee, reveals that the concept of re-categorization from one category of Area Manager or Sales Manager to another , as a consequence of dissatisfactory performance on review by the Zonal Head, has been incorporated in view of the consequence s listed in the Regulations. The contract signed in due course by the petitioners was presumably after carefully reading the same as persons of sound capacity who, as such, entered into the contractual relationship with free will and consent, possessing all attributes necessary to create a binding contract under The Contract Act, 1872. The inclusive nature of the stipulation in the primary document i.e. the Regulations "may take such measures including but not limited to" appears to leave room for incrementing the catalogue of measures that may be validly incorporated in the secondary docum ent i.e. the Appointment Letter/ Contract signed and accepted by the petitioners and this would be so, as long as such addition does not contradict or negate the provision of the Regulation and is in line with the same. Re-categor ization, as a measure, does not appear to be inconsistent in any manner with the already existing measures of reduction, curtailment or withdrawal of emoluments or perquisites and in any event appears to be far less fateful that the prospect of termination of employment on three month notice or equivalent salary in its lieu present in the Regulations. No prohibition in the Regulation in incorporating re-categorization upon A unfavourable Performance Review could be pointed out specifically from the' petitioners' side. While re-categorization appears to be clearly a measure that the parties agreed at the time of their contract; it does not appear to present any unconscionable treatment, contractually , especially within the clear commercially oriented value-system. In the instant case the reclassification was left open to reversal on improvement of the performance by the petitioners, as such, it is not a fate to which the petitioners have been irreversibly sent.
7. The concept of recategorization, as carried out and impugned in the instant case has, pertinently , been subject- matter of past litigation. In "State Life Insurance Corporation of Pakistan and others v. Syed Hassan Ali Shah and others" (2010 SCMR 1381 ) the honourable Supreme Court while examining the notion of performance standards in the context of insurance industry made the following observations: "7. It would be out of context to note that as far as performance standard is concerned, it is in fact the condition prescribed under the Regulation No.4(ii)(c)(1) and (2) of the Regulations, 1973. As it has been noted in the case of Mazullah Khan (ibid.) that the petitioner organization is commercial one, therefo re, its employees are bound to show performance otherwise, it would be difficult for the organization to continue its existence, therefore, in such- like situation where commercial activity is the basis for running of. the same, the relevant rules/regulations are to be construed/ applied and incorporated strictly".
Reference can be made to another case i.e. W.P. 5596 of 2006, where assessing the plea against placing/reverting the petitioners from "A" category to "B" category or "C" category , a learned Single Judge of this Court by drawing wisdom from the pronouncement of the honourable Supreme Court, concluded in the composite judgment passed in W.P. No.5136/2006 as follows: "15. The judgments of the Supreme Court of Pakistan to which a reference has been made hereinabove is a complete answer to the contentions raised by the learned counsel for the petitioner as regards the act of SLI conveyed vide the impugned letter dated 15.4.2001 by which the category of the petitioner was changed from "A" to "C" with immediate effect. It can be seen that the Supreme Court of Pakistan took note of the context and setting of the Regulations, 1973 and observed that the controversy with regard to the services of an area manager and its termination has to be viewed in the peculiar circumstances in which SLI functions and operates. The nub of the holding of the Supreme Court of Pakistan was that the leeway and discretion was given to SLI by the provisions of Regulation 4 of the Regulations, 1973 and superior courts should not intervene any such decision unless patent lack of jurisdiction or illegality has been pointed out. No such illegality has been referred to in this case as well. It is clear that the case of the petitioner by lowering of his category from "A" to "C" was clearly dealt with under Regulation 4(ii)(c)(1)(2) of the Regulations, 1973 and such a decision was a commercial decision within the contemplation of the said Regulations and was based on the objective criterion laid down by the Board in this behalf and matters which were taken into consid eration and which were within the expertise and jurisdiction of the of ficers of SLI who exercise the said powers in issuing the impugned decision".
(emphasis supplied)
8. In another litigation on the question of recategorization on poor performance in W.P. No.230298/2018, a learned Single Judge of this Court while dismissing the writ petition vide judgment dated 11.2.2019, observed in para 9 of the judgment that "the order passed by the corporation for down gradation of petitioners from Category B to Category C due to poor performance" was rightly passed. The judgment dated 11.2.2019 was later assailed through I.C.As. Nos.29469/2019 and 23515/2019 which were also dismissed vide judgment dated 12.10.2020 wherein it was observed as follows by the learned Division Bench: "3. We have heard the counsel for the parties and do not find any reasonable cause to interfere in the judgment of the learned Single Judge which proceeds on a proper application of the State Life Employees Service Regulations, 1973 and in particular Regulation No.4(2)(1) (i)&(ii). The said Regulation by its mandate shows that the performance of an Area Manager shall be reviewed by the Zonal Head on a month ly basis for such periods, as the Board may prescribe. In case, the performance falls short of the prescribed standards, the Zonal Head may terminate his service after giving him three months notice or take other measures prescribed in that Regulation.
Further , the reliance of the learned Single Judge on a judgment passed by the Supreme Court of Pakistan in Civil Appeals whose reference has been given in paragraph 7 of the judgment, is prope r and apt. Suffice to say that in that judgment the Supreme Court of Pakistan left evaluation of employees of Corporation to be determined by the Zonal Head and other superior officers and which was held to be a subjective satisfaction of the Corporation and its officers who were tasked with evaluation of performance. It was not for the Court to upset the evaluation so undertaken by the Corporation and to substitute its own opinion for that of the Corporation.
4. ............
5. Moreover , the impugned order dated 16.5.2018 merely reclassified the category of the appellants from 'B' to 'C'.
This was, however , subject to a caveat that as and when of 'B' Category annual FYP quota during the year 2018 is completed by the appellants, the impugne d letter shall be treated as withdrawn and the category will be revived as 'B' category area manager ..."
In view of the rule consistently observed and reasons noted supra , no case is made by the petitioners in group "A" for interference.
9. In the petitions of group "B" the objection pertains to deduction of Operational Cost from the salary . For consideration of objection the pertinent stipulation in the Appointment Letter needs to be examined, which is reproduced as follows: "PERFORMANCE ST ANDARDS
(i) ..............
(ii) .................
(iii) OPERA TIONAL COST
(a) You have to operate within 10% cost of your FYP each year. Direct Cost (Excluding Incentive Bonus and Additional Incentive Bonus) by not exceeding 5%.
(b) Office Cost, (including, 1/3rd of the expenses on SAF/reimbursement of office expenses to your EOAs, or a maximum of 2% of your FYP , whichever is less) by not exceeding 5%.
(c) If your total cost i.e. (a) + (b) is more than 10%, then the excess cost shall be recovered from you as per formula of adjusted cost approved by the Board of Directors and amended from time to time".
10. Objection raised is that though the petitioners accept the concept of recovery of excess cost of the total cost which is the sum of Direct Cost and Office Cost supra , when the same is more than 10% cost of the FYP each year, yet the term "Operational Cost" shall exclude the salary of the petitioners. Petitioners' stance is that salary is not actually part of Operational Cost and their precise argument is that "Operational Cost" as mentioned in the Appointment Letter is part of the "Performance Standards" and is divided into "Direct Cost" and "Indirect Cost" and the words "salary" or "pay" are not mentioned in Direct or Indirect Cost and that salary/pay is categorized separately under the category of "Emoluments", as such it is not included. The entry captioned "Emoluments" as it exists in the Appointment Letter , is reproduced as under: a) EMOLUMENTS PARTICULARS PAY AND ALLOW ANCES BASIC P AY ...
HOUSE RENT ...
UTILITY ...
TOTAL ...
B) INCENTIVE BONUS
(i) At the commencement of the calendar year , the basic rate will be 1.5% of FYP .
(ii) A further 0.75% of FYP will be paid for any quarter in which at least 20% of the FYP quota for the year is completed. This is payable quarter by quarter . The shortfall of any quarter cannot be made good in any other quarter . If the FYP in any quarter is less than 20% of your quota for the year, then this 0.75% is lost forever for that quarter .
(iii) On completion of yearly FYP quota for the year and meeting the 2nd Year Persistency requirements, then at the end of the year you will be paid a further 0.75% of the FYP for the full year .
11. Perusal of the term "Operational Cost" as provided in the Appointment Letter supra shows that it is the sum total of Direct Cost ("a") and Office Cost ("b"). Both terms have been fairly well laid out. It has been inter alia stipulated that Direct Cost will exclude "Incentive Bonus" and "Additional Incentive Bonus" which forms part of the head of "Emoluments". By exclusion of these two kind of emoluments from the category of "Emoluments" by stipulation given in the Appointment Letter , the inference gains considerable fortification that those items that are not explicitly excluded from the head of emoluments will not be protected from being considered as part of the Operational Cost envisaged under the contract. The argument, as such, that since salary is mentioned under the separate category of "Emoluments"] not form part and parcel of the Operational Cost, does not appear to hold water particularly when certain incentives that are mentioned in the head of "Emoluments" are specifically excluded by express stipulation and if salary was not intended to be included this could also just as well have been inserted and mentioned in the exclusions. Learned counsel, at this point, has attempted to make an abstract argument about salary forming part of fundamental right! and, as such, being an irreducible part of the remuneration liable to be paid to an employee, deductions permissible under the head of Operational Cost, would not extend to salary . This abstract argument about the notion of salary in general does not appear to hold water in the contractual context at hand. Insurance business has its own pecuniary structure within the relationship inter se the corporation and its employees based on highly commercial nature of the business. As observer by the honorable Supreme Court in judgment supra, its commercial orientation is linked to the survival of the business and to operative effectively it needs to be intensely performance oriented. L earned counsel for the Corporation has taken the Court through the detailed itemization of Direct Cost that include salary which has been approved by the Board. Under the circumstances the plea that salary by mere virtue of being called "sala ry" shall be excluded from the stipulation that allows deductions based on Operational Cost in excess of 10% cost of FYP , does not appear to be very convincing.
12. The treatment of salary in the context of recovery of Operational Cost has been adumbrated by the honourable Supreme Court in the Order dated 04.1.2018 passed in C.P. No.340 of 2017 titled "State Life Insurance Corporation of Pakistan through its Chairperson and others v . Asmat Ullah and another" as under: "Learned counsel for the Respondents states that if any amount exceeding 10% of the first year's premium (FYP) as operational cost has ever been given by the petitioners to the respondents, the petitioners are entitled to recover the excess amount even from their salary . This is acceptable to the learned counsel for the petitioners. Therefore, this petition by consent is converted into appeal and disposed of in terms that hi case any amount in excess of 10% of the FYP as operatic coal cost was given to the respondents, the recover the amount in excess of 10% from the respondents, petitioners shall be entitled to notwithstanding the impugned judgment of the learned High Court".
13. The stance of the Corporation in the matter of adjustment from salary is suppo rted by the Order supra wherein the principle to recover the amount in excess of 10% of the FYP from the salary was not disapproved. In result, the instant petitions being without substance, are accordingly dismissed.