ABID HUSSAIN CHATTHA, J. This Intra Court Appeal assailed the Judgment dated 03.11.2020 passed by learned Single. Judge in Chambers in Writ Petition No. 17733/2018, whereby, the prayer against deduction of Incentive Bonus and Additional Incentive Bonus from Operational Cost was declined.
2. The brief facts necessary for decision of the titled Appeal are that the Appellants were appointed as Area Managers by the Respondents / State Life Insurance Corporation of Pakistan (the "Respondent") vide Appointment Letters dated 21.09.2010 and 10.12.2012 and are performing their duties since their appointment. Admittedly, services of the Appellants are governed by the State Life Employees (Service) Regulations, 1973 (the "Regulations, 1973"). Lately, the Respondent started deduction of 'Incentive Bonus' and 'Additional Incentive Bonus' from the 'Operational Cost' of the Appellants. It is the case of the Appellants that although the Respondent is entitled to recover any amount in excess of 10% of their Operational Cost yet the Respondent cannot deduct any amount from Incentive Bonus or Additional Incentive Bonus since the terms and conditions of their Appointment Letter / service contract expressly and specifically bars the deduction of Incentive Bonus and Additional Incentive Bonus from Operational Cost. Hence, such deductions are unlawful.
Conversely, the Respondent asserted an unfettered and unconditional right to recover Operational Cost in excess of 10% from the Appellants including the impugned deductions from Incentive Bonus or Additional Incentive Bonus.
3. Learned Counsel for the Appellants contended that the impugned Judgment is self- contradictory in the manner that after observing in Paragraph No. 11 thereof that 'Incentive Bonus' and 'Additional Incentive Bonus' are specifically excluded from the expression 'Operational Cost', the prayer made in this behalf was declined. Regulation 8 of the Regulations, 1973 specifically deals with "Incentive and Awards" but the impugned Judgment did not deliberate upon the same. Clause 4(b) of the Appointment Letter confers the right to receive Incentive Bonus and Additional Incentive Bonus without making any deductions from Operational Cost in terms of Clause 5(iii) thereof. The right so bestowed cannot be taken away especially when it is not inconsistent with the Regulations, 1973. Any action taken beyond the express scope and mandate of the Regulations, 1973 which are statutory in nature, is in excess of jurisdiction and without lawful authority.
4. Learned Counsel for the Respondent submitted that the impugned Judgment decides the issue based on the premise that the Respondent is entitled to recover Operational Cost in excess of 10% from all emoluments paid to the Area Managers. He stressed that the Apex Court has repeatedly observed that although the Respondent is a statutory organization yet it is a commercial corporation competing with the private sector in insurance business. Its employees are bound by performance standards and business targets set by the management. The Appointment Letter and the Regulations, 1973 provide that they are liable to pay back Operational Cost in excess of 10% since the maximum permissible ceiling for Operational Cost has been fixed at 10%. In this context, the Superior Courts of the country have consistently held that the Respondent can deduct Operational Cost in excess of 10% from the 'emoluments' paid to the Area Managers including their 'salary'. Incentive Bonus and Additional Incentive Bonus are part and parcel of overall permissible emoluments, therefore, deductions therefrom to recover Operational Cost in excess of 10% has been lawfully undertaken by the Respondent. As such, the issue raised in this Appeal has already been settled. He placed reliance on the following case law:-
(i) "State Life Insurance Corporation of Pakistan and others v. Syed Hassan Ali Shah and others"
(ii) "Mazullah Khan v. Zonal Head, State Life Insurance Corporation, Peshawar and others" (2008 SCMR 617);
(iii) "Chairman State Life Insurance Corporation of Pakistan v. Mian Khalid Ahmad Tahir (Ex- Area Manager)" and connected Petitions decided by the Hon'ble Supreme Court of Pakistan vide Judgement dated 09.12.2015 in C.Ps. Nos. 247-L, 249-L, 250-L, 428, 429 and 431 to 437 of 2011;
(iv) "State Life Insurance Corporation of Pakistan through its Chairperson and others v. Asmat Ullah and another." decided by the Hon'ble Supreme Court of Pakistan vide Order dated 04.01.2018 in C.P. No. 340 / 2017;
(v) "Muhammad Khan v. State Life Insurance Corporation of Pakistan and others" decided by the learned Division Bench of this Court vide Order dated 02.02.2021 in I.C.A. No. 21 / 2021;
(vi) "Naeem Akhtar Anser and another v. State Life Insurance Corporation of Pakistan and others." decided by the learned Division Bench of this Court vide Order dated 12.10.2020 in I.C.A. No. 29469 / 2019;
(vii) "Shabbir Hussain Shahid and 2 others v. State Life Insurance Corporation of Pakistan and 3 others." decided by the learned Division Bench of this Court vide Judgment dated 23.06.2021 in I.C.A. No. 15422 / 2021;
(viii) "Muhammad Khan v. State Life Insurance Corporation of Pakistan and others" decided by the learned Division Bench of this Court vide Judgment dated 08.03.2022 in I.C.A. No. 39 / 2021;
(ix) "Bilal Ahmed v. Chairman, State Life Insurance Corporation of Pakistan and others" decided by the learned Division Bench of this Court vide Judgment dated 08.03.2022 in I.C.A. No. 393 / 2020;
(x) "Naeem Akhtar Ansar and others v. State Life Insurance Corporation of Pakistan through its Chairman and others" decided by the learned Single Bench of this Court vide Judgment dated 11.02.2019 in W.P. No. 230298 / 2018;
(xi) "Muhammad Ilyas Bhatti v. State Life Insurance Corporation of Pakistan and others." decided by the learned Single Bench of this Court vide Judgment dated 04.02.2021 in W.P. No. 69609 / 2019; and
(xii) "Ashfaq Hussain v. State Life Insurance Corporation and others" decided by the learned Single Bench of this Court vide Order dated 09.10.2019 in W.P. No. 58816 / 2019.
5. The precise question posed for determination before us is as under:- Whether the act of the Respondent regarding deduction of Incentive Bonus and / or Additional Incentive Bonus from Operational Cost is unlawful being against the express terms and conditions of the Appointment Letters of the Appellants and the Regulations, 1973?
6. At the very outset, we propose to examine the objection qua maintainability of this Appeal on the ground that the query raised herein has already been settled in the Judgments referred by learned counsel for the Respondent. We have minutely read and perused the Judgments quoted above.
We are constrained to observe that none of them addresses the precise query under consideration in this Appeal. Rather, the cases so referred emphasize the statutory and commercial character of the Respondent and relate to issues such as, termination of employees, down-gradation of employees from one category to another and deductions from the monthly salary of the employees in order to recover excess Operational Cost. The last category of issues is the closest to the query in hand. In this context, it has been held that the terms and conditions of appointment read with the Regulations, 1973 do not create a distinction between 'salary' and 'emoluments' and as such, the Respondent could lawfully recover Operational Cost in excess of 10% from the salary and all other emoluments admissible to the employees including Area Managers. Even in the impugned Judgment, learned Single Judge in Chambers framed the following question for consideration encapsulated in Paragraph No. 9 of the impugned Judgment:- "In the petitions of group "B" the objection pertains to deduction of Operational Cost from the salary........"
7. The learned Single Judge while interpreting the Clauses of Appointment Letter of the Appellants concluded in Paragraph No. 11 as under:- "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" it will 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 rights 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 observed 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. Learned 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 "salary" 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."
[Emphasis supplied]
8. It is noted that W.P. No. 17733 of 2018 was decided through detailed Judgment passed in W.P. No. 8214 of 2019. It appears that primary question for determination therein was as to whether the Operational Cost in excess of 10% can be recovered from the salary and the conclusion was made accordingly. However, the precise issue raised by the Appellants regarding deduction of Incentive Bonus and Additional Incentive Bonus from Operational Cost remained unattended, although passing remarks underlined by us in the quoted content expressly hold that deductions of Incentive Bonus and Additional Incentive Bonus from Operational Cost are excluded under the express provisions of the Appointment Letter.
9. The Respondent is a statutory Corporation engaged in the business of insurance. The Regulations, 1973 are statutory in nature as already declared by the Apex Court in case titled, "Chairman State Life Insurance Corporation and others v. Hamayun Irfan and 2 others" (2010 SCMR 1495). Regulation 2(c) of the Regulations, 1973 defines "employee" to mean a full time employee on monthly salary, but does not include salaried field officials whose emoluments are dependent on procurement of business except those who are classed as Area Managers by the competent authority. This Court has already declared that Area Managers are full time employees who are appointed against monthly salary. For reference see, case titled, "Nazar Muhammad Waraich and 7 others v. Zonal Head, State Life insurance Corporation of Pakistan, Sialkot and another" (2017 PLC (C.S.) 685). As such, an area Manager is classed as a full-time employee in terms of Regulation 4(ii)(c) of the Regulations, 1973. The said Regulation stipulates that an Area Manager is appointed on ordinary basis on fixed pay plus a special incentive bonus of such amount on exceeding such performance standards as may be prescribed by the Board of the Respondent from time to time. Importantly, Regulation 4(ii)(c) 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 a 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 months notice or three months 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."
[Emphasis supplied]
10. Regulation 8 of the Regulations, 1973 deals with incentives and rewards and stipulates that an employee who qualifies in any of the examinations approved by the Board may be sanctioned cash awards or other incentives on such terms and conditions and on such scale as may be approved by the Board from time to time and is recognized as such in Clause 8 of the Appointment Letter.
11. The Appointment Letters of the Appellants are almost identical with minor variations which are immaterial for decision of the instant Appeal. It would be beneficial to reproduce the relevant Clauses of the Appointment Letter dated 10.12.2012 as under:- "1. Probation:
2. After completing your probation period satisfactorily and on the confirmation of your services, you shall be governed by the Regulations Nos.4(ii)(c)(1) and (2) of the State Life Employees (Service) Regulations, 1973 which has been stated below under the title "Performance Review" of this letter which is in addition to Regulations Nos. 30 to 32 of State Life Employees (Service)
Regulations, 1973 governing other employees.
3. Territory:
4. Emoluments: As an Area Manager, you will be offered initial pay scale of Deputy Manager (DM) and no annual grade increment will be payable to you as an Area Manager. Your monthly emoluments will be as under:- Particular Pay and Allowance Basic Salary (Initial of DM)..........
House Rent ..........
Conveyance ..........
Utilities ..........
Adhoc 50% ..........
Total ..........
(b) Incentive Bonus:
(i) At the commencement of each calendar year, the basic rate of Incentive Bonus will be 1.5 % of the First Year Premium (FYP).
(ii) An Additional 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 quarterly. The shortfall of any quarterly payment cannot be paid in the subsequent quarter(s). Thus, if the FYP in any quarter is less than 20% of your quota of FYP for the year, then the 0.75% of the said quarter will be lost for the year.
(iii) On the completion of yearly FYP quota for the year and meeting the 2nd Year Persistency requirements i.e. 75%, then at the end of the year you will be paid an additional 0.75% of the FYP of the whole year.
5. Performance Standards:
(i) FYP Quota
(a) The current minimum annual FYP quota for the "A" Category Area Manager is Rs. 8,789,063/- Rupees Eighty Seven Lac Eighty Nine Thousand Sixty Three Only and shall be increased by 25% in the year 01.01.2014 and by 25% after every three (3) years, thereafter.
(b) You are required to complete 100% of your FYP quota in a calendar year. However, minimum 20% of annual FYP quota be completed during each quarter of the year.
(ii) Persistency Ratio
(a) The 2nd year Persistency Ratio (i.e. 2nd Policy Year Premium collection in a calendar year / first year premium in previous calendar year X 100) should not be less than 75% in any case.
(b) No relaxation whatsoever shall be given to any one of the above mentioned quota of FYP and persistency and if on two (2) consecutive reviews in terms of Clause - 06 below, if your performance found as unsatisfactory, you may be downgraded to lower category' as an Area Manager OR reverted back to as Sales Manager keeping in view of your performance.
(iii) Operational 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 2% of your FYP, whichever is less) by nor 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.
6. Performance Review: ..........
7. Duties and obligations: .........
8. Service: You are an "EMPLOYEE" subject to the Regulation 4(ii)(c)(1) and (2) of the Corporation for all purposes under the State Life Employees (Service) Regulations, 1973 and your service is governed under the said regulations and as amended from time to time.
9. Antecedents: ..........
10. The State Life Insurance Corporation of Pakistan reserves the right to amend this letter as and when considered necessary by the Board of Directors..."
[Emphasis supplied]
12. The examination of the relevant provisions of the Regulations, 1973 and consideration of terms and conditions of the Appointment Letter make it obvious and unequivocally clear that although Incentive Bonus and Additional Incentive Bonus are included in 'emoluments' admissible to an employee like salary yet they are expressly excluded from the definition of 'Operational Cost'. This is in sharp contrast to salary or any other emoluments payable to an employee. The exclusion is limited to Incentive Bonus and Additional Incentive Bonus in terms of Clause 5(iii)(a) of the Appointment Letter. The Appellants are required to operate within 10% cost of their FYP each year.
The Operational Cost is divided into two components. The first part consists of direct costs which after excluding Incentive Bonus and Additional Incentive Bonus must not exceed 5%. The second component consists of office costs and the maximum threshold of the same must not exceed 5%.
The aggregate of direct cost and office cost constitutes the total Operational Cost which must not exceed 10%. In case, the Operational Cost exceeds 10%, the excess cost is recoverable from the Appellants as per formula of adjusted cost approved by the Board of the Respondent and amended from time to time. In the report and para-wise comments submitted by the Respondent in response to the Writ Petition instituted by the Appellants, the Respondent has in fact conceded that the performance standards prescribed by the Board of the Respondent require the Appellants to maintain costs both direct (excluding Incentive Bonus and Additional Incentive Bonus) and office costs, respectively, within 5% each. The Appellants are required to fulfill their annual FYP quota to ensure that their Persistency Ratio is not lower than ratio as prescribed and failure to achieve all or any of these requirements will necessitate curtailment of the Appellants' emoluments or taking any or all such measures as mentioned above. It is not the case of the Respondent that the exclusion of Incentive Bonus and Additional Incentive Bonus was not granted to the Appellants in terms of Clause 5(iii)(a) of the Appointment Letter or that the same was curtailed or withdrawn in terms of Regulations Nos.4(ii)(c)(1) and (2) of the Regulations, 1973 by the Board of the Respondent. None of the Regulations, 1973 has been pointed out to be inconsistent with the exclusion of Incentive Bonus or Additional Incentive Bonus from the Operational Cost as contained in the terms and conditions of the Appointment Letter. Hence, as long as the terms and conditions of the Appointment Letter remain in the field, the same are liable to be given effect in letter and spirit. The universally accepted principles of interpretation of documents ordained that plain and general words are given their literal meaning, express mention or inclusion of one thing excludes the other and that redundancy cannot be attributed to express words of the contract. Any other interpretation would lead to absurd result.
13. In view of the above discussion, the act of the Respondent regarding deduction of Incentive Bonus and Additional Incentive Bonus from the Operational Cost of the Appellants is declared to be illegal and without lawful authority. Consequently, this Appeal is allowed and the impugned Judgment dated 03.11.2020 is set aside. The Respondent is directed to refund the amount deducted out of Incentive Bonus and Additional Incentive Bonus from the Operational Cost of the Appellants within a period of 30 days from the date of this Judgment.