This is a miscellaneous appeal filed by the appellant, Sind Employees' Social Security Institution.
Respondent in this Appeal is Amin Fabrics Limited, a company inter alia engaged in the manufacture of jute bags in its factory situated at Kotri. The provisions of the Provincial Employees Social Security Ordinance No. X of 1965 became applicable to the respondent company with effect from July, IS68.
2. By his letter dated 3-10-1974 addressed to the respondent-company, the director of the appellant institution at Hyderabad informed the respondent that the Audit team of his office, after checking respondent's record of pay--ments, detected an evasion of social security contribution to the tune of Rs. 4,194 and "increase" of Rs. 2,097 made a total of Rs. 6,291 and required the respondent to pay this amount immediately. Then by his letter dated 28-10-1974, the Social Security 6fficer, Kotri confirmed that the record checked by the Audit team bad revealed an evasion of Rs. 6,291 and this related to the period since the Ordinance of 1965 became applicable to the mills of the respondent till June, 1974. This payment was made by the respondent in March, 1975. Then, on record, there is the letter dated 13-10-1980 of the director of the appellant institution addressed to the respon--dent to the effect that the Vigilance team of the Head Office of the appellant institution had visited the establishment of the respondent on various dates and had checked their record since July, 1968 up to June, 1980 and found that the respondent had paid less amount of social security contribution to the extent of Rs. 1,11,609.22 as per details attached with the said letter. Respondent was required to pay this amount within 15 days. After this some letters were exchanged between the parties but the demand of R s. 1,11,609.22 was not withdrawn by the appellant institution and in the circumstances, the respondent company filed an application under section 57 of the 1965 Ordinance which was disposed of by the Commissioner of the appellant institution by his order dated 30-3-1981. It may be observed here that the demand raised by the appellant institution related to the contribution to be paid by the respondent-company on the following payments and by the respondent-company to its employees :-
(i) Production bonus ;
(ii) Washing/kit allowance ; and (i.e) Conveyance reimbursement.
It was the case of the respondent/Company that none of such payments were included in the definition of the word "wages" in section 2(30) of the 1965 Ordinance and as such no contribution was payable by the respondent/, Company on these amounts paid to their employees. The demand on account of "increase" at the rate of 50% of the amount of contribution was also challenged as unjustified and not payable in the circumstances of the case. The Commissioner of the appellant institution by his order dated 30-3-1981 decided that production bonus and amount paid to the employees as convey--ance reimbursement was not exempt from payment of contribution but in so far as the washing/kit allowance was concerned, he came to the conclusion that such allowance did not form part of "wages" and accordingly contribu--tion was not payable by the respondent/Company thereon. As regards the increase the Commissioner was of the view that the employees were legally obliged to pay the increase under section 23(l) of the 1965, Ordinance on account of late payment of contribution.
A review petition was filed by the respondent/Company against the decision dated 30-3-1981 of the Commissioner of the appellant institution which came to be dismissed by the Commissioner by his order dated 13-6-1981.
Being aggrieved with the aforesaid orders dated 30-3-1981 and 13-6-1981 of the Commissioner of the appellant institution, the respondent/Company filed an appeal No. 2/1981 under section 59 pf the 1965 Ordinance before the Sind Employees' Social Security Court, Karachi. This appeal was dismissed by Sind Social Security Court No. 1, Karachi by judgment dated 19-12-1981 subject, however, to ,the reduction of the rate of "increase" from 50.% to 30 %. Para. 17 of the judgment of the Sind Social Security Court relates to the question of increase and it reads as follows :- "17. As regards increase at the rate of 50 %, I think that the same appears to be unreasonable.
Accordingly the rate of increase is hereby decreased to 30 % and the respondents (appellant institution) are hereby directed to make adjustment in the demand accordingly."
The appellant institution has filed the present Miscellaneous Appeal No. 7/1982 challenging the reduction of the rate of increase from 50% to 30% by the Sind Social Security Court . Cross-objections have been filed in this appeal on behalf of the respondent-company under Order XLI, rule 22, C. P. C. Praying that-
(i) This appeal be dismissed ; and
(ii) The decisions of the Social Security Institution and the Social Security Court be set aside.
3. I have heard at length the arguments of Mr. S. A. Sarwana, learned counsel for the appellant and Mr. Mamoon Kazi, learned counsel for the respondent. Before, however, referring to the various contentions raised on behalf of the parties, by their learned counsel, reference may be made to certain relevant provisions of they Provincial Employees' Social Security Ordinance, 1965 and the Provincial Employees' Social Security (Contributions) Rules, 1966 framed under section 79 of the 1965 Ordinance. Relevant pro--visions are reproduced here:-- "Section 2(S):= "Contribution" means the sum of money payable to the Institution by an employer in respect of an employee, to accordance with the provisions of this Ordinance ; Section 2(30).-"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 were declared under the Minimum Wages Ordinance, 1961 (XXXIX of 1961), without taking account of deductions for any purpose, under a contract of service or apprentice--ship, 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 lock-out or legal strike ; but does not include-
(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 ; Section 20. Amount and payment of contribution.-(1) Subject to the other provisions of this Chapter, the employer, shall in respect pf every employee, whether employed by him directly or through any other person pay to the Institution a contribution at such times, at such rate and subject to such conditions as may be prescribed.
(2)
(3) The employer shall not be entitled to deduct from the employee's wages or otherwise to recover from him any portion of the contribu--tion, notwithstanding any agreement to the contrary.
(4) Subject to the provisions of subsection (2) of section 71-
(a) no contribution shall be payable on wages which are in excess of rupees twenty per day ; and
(5) For the purpose of determining the amount of the contribution payable, daily wages shall be calculated in such manner as may be provided by regulations.
(6) Where the mode of payment of remuneration, whether in cash or in kind, makes difficult to determine the amount of wages for compu--ting the contribution, the Commissioner may, subject to regulations and in consultation with the representatives of employees, determine such wages.
(8) In the case of construction . Work the owner of the building shall guarantee the payment of contributions by the contractor.
(9) In the case of works executed or undertakings carried on behalf of the State by a contractor or licensee, the competent public authority shall before final settlement of the claims of the contractor or licensee arising out of the contract, require the production of a certificate from the Institution showing that the necessary contributions have been paid and in default of such certificate it shall deduct from the amount otherwise payable in settlement of such claim, the appro--priate amount of the contributions payable, and pay such amount direct to the Institution. '
Section 21. Records and returns by employers.-Every employer shall 'keep such records and shall submit to the Institution such returns, at such times, in such form and containing such particulars relating to persons employed by him, as may be provided in the regulations.
Section 22. Officials of Institution to check employer's books.-(1) Any official of the Institution, duly authorised by a certificate in a form specified in the regulations, may, for the purpose of inquiring into the correctness of any of the particulars stated in the records or returns referred to in section 21 for the purpose of ascertaining whether any of the provisions of this Ordinance have been complied with-
(a) require an employer to furnish to him such information as he may consider necessary ; or
(b) at any reasonable time enter any establishment or other premises occupied by such employer and require any person found in charge thereof to produce and allow him to examine such accounts books and other documents relating to the employment of persons and payment of wages, or to furnish to him such information, as he may consider necessary, or
(c) examine, with respect to any matter relevant to the purposes afore. Said, the employer, his agent or any person found in such establishment or other premises, or any other person whom the said official ha; reasonable cause to believe to be or to have been a secured person.
(2) The official referred to in subsection (I) shall be bound so secrecy a. Regards all matters with which he becomes acquainted in the perform once of his duties and which do not relate to matters provided for in this Ordinance.
(3) If an employer fails to maintain records or to submit returns as required by regulations, or otherwise fails to comply with the provisions of subsection (1) and thereby makes it difficult to ascertain the identity of persons required to be secured or the amount of contribution payable, the contribution shall be assessed on the basis of such evidence as the Institution may find satisfactory for this purpose.
Section 23. Increase of unpaid contribution and recovery of contribu--tion, etc., as arrears of land revenue.-(1) If any employer fails to pay on the due date the contribution payable by him under subsection (1) of section 20, the amount so payable by him shall be increased by such percentage or amount as may be prescribed: Provided that in no case shall such increase exceed fifty per centum of the amount due Provided further that no part of such increase shall be payable by, or the liability to pay the same be passed on by the employer to his employees.
(2) Without prejudice to any other remedy, the amount of the contribu--tion due, together with the increase provided for under subsection (1), may be recovered as arrears of land revenue.
Rule 5.-The employer shall submit to the Local Office of the Institution at which he is registered, the copies of pay rolls or contribution schedules referred to in rule 4(I), within fifteen days of the end of each month, or such extended period, not exceeding forty-five days, as the Institution may allow on good cause being shown for the extension, and at the same time shall pay, at the said Local Once, the total amount of the contribution shown thereon as due.
Rule 6.--If any employer fails to pay the total amount of contribution within the ,period prescribed in rule 5, the amount payable shall be increased by one-half per centum per day for each day after expiry of the prescribed date, subject to the maximum increase provided in sub-section (1) of section 23."
4. In support of the present appeal, Mr. S. A. Sarwana, learned counsel for the appellant, contended that the liability of "increase" under section 23 of the 1965 Ordinance was a statutory liability and the employer was liable to pay such increase in accordance with the Rules. It was further contended that neither the Institution nor the Social Security Court had any power or jurisdiction under the 1965 Ordinance or the Rules framed thereunder to reduce the statutory liability under section 23 of the 1965 Ordinance. It. Was argued that section 23(1) provided that if any employer fails to pay on the due date the contribution payable under section 20(t), the amount so payable by the employer shall be increased by such percentage or amount as may be prescribed and under rule 6 of the Provincial Employees' Social Security (Contribution)
Rules, 1966, it was prescribed that the amount payable shall be increased by --% per day for each day after the expiry of the prescribed date, subject however to the maximum increase provided in section 23(1) of the Ordinance, which was 50 % of the amount due. Counsel referred to rule 5 of the said Rules of 1966 and argued that on good cause being shown the Institution could extend the time for 45 days to pay the amount of con--tribution and this was the maximum time that could be granted by the Institution and no other exemption or relief in so far as the increase was concerned could be granted under the law by the Institution. Learned counsel referred to the following reported judgments of the Supreme Court of Pakistan and of this High Court for the proposition that "increase" was a statutory liability of an, employer who was liable to ,pay the increase in accordance with the Rules :-
(i) Kohinoor Chemical Co. Ltd. v. Sind Employees' Social Security Institu--tion PLD 1977 SC 197.
(ii) Sind Employees' Social Security Institution v. Silva Industries Ltd. 1982 PLC 1062.
(i.e) Rashid Textile Mills Ltd. v. Sind Social Security Institution 1984 PLC 800.
(iv) Sind Employees' Social Security Institution v. Rashid Textile Mills Ltd. 1980 `PLC 1245.
The aforesaid decisions no doubt lay down that the liability for payment of "increase" is a statutory liability of the employer but in none of these decisions there is any discussion on the question whether the Social Security Institution or the Court has any power to reduce the amount of "increase" or in a given case, where facts and circumstances require, even exempt the employer front payment of increase.
On the other hand it was argued by Mr. Mamoon Kazi, learned counsel for the respondent, that the first proviso to section 23(1) of. The 1965 Ordinance places a maximum ceiling on the rate of increase which was 50 % of the; amount due and as a maximum ceiling was placed it has to be implied that the increase could be less.
5. In my view the liability for the payment of increase is no doubt a statutory liability but the employer is only to pay the increase under section 23 (l) of the 1965 Ordinance if he "fails to pay on the due date the contribution payable by him" as provided by section 23 (1). In the case of Sind Employees' Social Security Institution v. Silva Industries Limited, Ajmal Mian, J. Considered this provision of section 23 from the angle whether an employer is liable to pay the amount of increase if he fails to pay con--tribution in respect of any payment for any reason whatsoever or there should be some negligence or default on his part in order to attract the above penal provisions. In this context, Ajmal Mian, J. Was of the view that the words "fail" and "default" are not synonymous and the word "fail" has wider connotation as compared to the word "default". In that case the employer had written a letter to the direction of the appellant institution informing that they had entered into an agreement with their employees to pay canteen allowance and as that payment was an ex gratia payment to the workers the employer believed that provisions of Social Security Ordinance were not applicable in respect of that payment and the institution was asked to confirm.
The director of the appellant institution in reply informed the employer that social security contribution was not payable on canteen allowance. Later on it was held that social security contribution was under the law payable; on canteen allowance also and the institution sought to recover "increase" on the amount of contribution payable in respect of the canteen allowance. It was held by Ajmal Mian, J. In that case that the employer did not pay the con--tribution on the amount of the canteen allowance because of the express statement made by the director of the appellant institution that no contribution in respect thereof was liable. It was observed that "it will be unjust and improper to levy a penalty in the form of an increase in the instant case as in my view there has not been any failure on the pact of the respondents within the meaning of section 23 of the Ordinance.
6. The question, therefore, that arises in this case is whether there has been any "failure" on the part of the respondent Company to pay the con--tribution. Reference has already been made to certain correspondence which included the letter dated 3-10-1974 of the director of the appellant institution addressed to the respondent Company that after checking the records of the respondent company an evasion of Rs. 4,194 was detected on which increase amounted to Rs.
21,097 making the total Rs. 6,291 due from the respondent up to June, 1974. This was again confirmed by the institution by the letter dated 28-10-1974 of the Social Security Officer, addressed to the respondent Company. In the said letter, it is stated as follows :- "It is confirmed that the record checked by the Audit Team and evasion of Rs. 6,291 detected related to the period since the Social Security Ordinance applied to or bills up to June, 1974."
On the basis of the aforesaid documents, therefore, it is apparent that the records of the respondent Company were checked in 1974 by the Audit Team of the appellant institution and on the records being checked, an evasion of Rs. Y5,291 was detected. It is an admitted position that "production bonus" as well as "conveyance reimbursement" was being paid by respondent Company to their employees even prior to June, 1974. After 1974 the first intimation that the respondent receives in relation to the default in the payment of contribution is the letter dated 13- 10-1980 of the director of the appellant institution in which reference; is made to a checking of the record of. The respondent Company by the Vigilance team of the Head Office and for the a first time a demand is raised relating to production bonus, conveyance reimbursement and washing/kit allowance. In the statement attached to the letter dated 13-10-1980, details of the amount payable according to the institu--tion since 1969 are given and it is shown that such bonus/allowances were being paid by the respondent Company to their employees since a date much prior to October, 1974. As observed earlier, in 1974 the records of the respondent Company were checked by the Audit Team of the appellant institution. In spite of the checking of the records, no demand was raised by the institution in respect of production bonus, washing/kit allowance and conveyance reimbursement. On the contrary it was confirmed by letter dated 213-10-1974 by the Social Security Officer, Kotri that the checking of records bar the Audit Team had shown a n evasion of Rs. 6,291. From this it follows that although payments were being made on account of production bonus and conveyance reimbursement from a date much prior to October, 1974 by the respondent Company to its workers and this information was available in the records of the respondent Company, the appellant institution was of the view that social security contribution under section 20 of the 1965 Ordinance was not payable by the respondent Company in respect of those payments. In the circumstances I am of the view that till 13-10-1980 there was no "failure" on the part of the respondent Company in making payment of the contribution on "production bonus" and "conveyance reimbursement---. It has not been the case of the appellant institution that in spite of inspection of appellant's records, the demand in this regard was not raised earlier to 1980 on account of any collusion between the respondent Company and the concerned officials of the appellant institution. In the circumstances the respondent Company became liable to pay the increase only after the demand was raised about the contribution payable in respect of production bonus and conveyance reimbursement by the respondent to their employees. As there has been no failure on the part of the respondent Company prior to 13-10-1980 in the payment of contribution on production,, bonus and conveyance reimburse--ment, I hold that the respondent Company is not liable for any increase in the amount of contribution payable under these two heads for the period prior to 13-10-1980. I further hold that from 13-10-1980 the respondent Company will be entitled to an exemption of 45 days during which they are liable for any increase.
From the date of expiry of 45 days from 1310-1980, the respondent Company is liable to pay the increase on the contribution payable under section 20(1) on payments towards production bonus and conveyance reimbur--sement, if such payments come within the meaning of "wages".
The Social Security Court has given no reasons for reduction of rate of increase from 50 % to 30 %. The only reason that has been given in this regard is that rate of 50 % appears to be unreasonable. This vague reason given by the Social Security Court is not sufficient for reducing the rate of increase. I have already decided that no increase will be payable in respect of the contribution due on production bonus and conveyance reimbursement for the period prior to October, 1980. After the expiry of 45 days from 13-10.1980, increase is liable to be paid at the rates prescribed by the Rules as laid down in section 23(1) of the 1965 Ordinance.
Payment of contribution is a statutory liability which has to be made at the rates prescribed and increase is also to be paid on the rates prescribed and from the language used in section 23 of the 1965 Ordinance and rules 5 and 6 of the Provincial , Employees' Social Security (Contribution) Rules, 1966, I am of the view that the institution cannot charge less than what is prescribed provided there, is failure on the part of the employer to pay the contribution. The rate of increase, therefore, could no be reduced as has been illegally done by the Social Security Court . It is, therefore, held that the respondent Company is liable to pay the statutory increase at the prescribed rate from the date specified earlier.
7. The point for determination in this appeal, apart from the question' of "increase", is whether the amounts paid or payable by respondent Company as "production bonus" and "conveyance reimbursement" to their employees come within the meaning of the word "wages", which has been defined in section 2(30) of the Provincial Employees' Social Security Ordinance, 1965. Definition of the word "wages" has already been reproduced above.
8. In support of his cross-objections, learned counsel for the respondent argued that payments under the aforesaid two heads are not "Wages" under the Ordinance of 1965. In so far as the production bonus" is concerned, the contention of the learned counsel for the respondent was that under sub. Clause (d) of section 2(30), wages do not i0clude any sum paid as "bonus" by the employer and as "production bonus", amounts paid in this regard to the employees are not included in "wages l' under .The 1965 Ordinance. As regards "conveyance reimbursement", the contention of the learned counsel for the respondent that this payment is not "wages", was two- fold. Firstly, it was argued that conveyance reimbursement was not a remuneration for service, and secondly, it was contended, that conveyance reimbursement was a payment made by the respondent Company to its employees to defray special expenses entailed by the nature of their workers' employment. It was, therefore, urged that no contribution was payable by the respondent on these two categories of payments.
9. I will take up the question regarding "conveyance reimbursement" first. There is no evidence on record to show whether this payment on account of "conveyance reimbursement" was being paid to employees on account of the conveyance expenses for any special assignments or this was a payment made by the respondent Company to its employees as a conveyance allowance but using the terminology of "conveyance reimbursement". Before the Social Security Court , learned counsel appearing for both the parties mad statements that neither of them wished to lead any evidence. In the absence of any evidence adduced, it is presumed that the payment under the head "conveyance reimbursement" was/is being made by the respondent Company to its employees as a conveyance allowance and not as payment to cover or defray conveyance expenses for any special or extraordinary assignment. In Bawani Violin Textile Mills Limited v. Social Security Institution (PLD 1978 Kar. 890), a Division Bench inter alia held that conveyance allowance paid by the employer to his employees is included in the word "wages" under the 1965 Ordinance.
This judgment was followed by Ajmal Mian, J. In the case of Dawood Cotton Mills Limited v. Social Security Institution (PLD 1978 Kar. 744). Learned counsel for the respondent, however, argued that the decision of the Division Bench in PLD 1978 Kar. 890 is not binding inasmuch as that was a case where a writ petition was dismissed in limine by the Division Bench and that further Ajmal Mian, J. In PLD 1978 Kar. 744 only followed the decision of the Division Bench in PLD 1978 Kar. 890 and there is no discussion in the judgment of Ajmal Mian, J. Regarding this question. :.Further according to learned counsel for the respondent, even if the payment made by tile respondent Company to its employees as "conveyance reimbursement" was treated as conveyance allowance, it could not fall within the definition of "wages" in section 2(30) of the 1965 Ordinance. According to learned counsel, conveyance allowance is paid to the employee so that he could be present at the place of the work but it is not a remuneration for service rendered by the employee to his employer. Learned counsel in support of his proposition relied upon a recent judgment of a learned Single Judge of the Lahore High Court reported in Punjab Employees Social Security Institution v. Kohinoor Textile Mills Ltd (1982 PLC 325), wherein it has been held that house rent allowance paid by an employer to his employee is not included in the term "wages" used in the 1965 Ordinance.
10. I am not impressed with the argument of the learned counsel for the respondent that conveyance allowance paid or payable by an employer to an em--ployee is not a payment on account of remuneration for service. First I respect--fully agree with the views expressed in PLD 1978 Kar. 890 and PLD 1978 Kar. 744. . Further, there can be no two opinions that conveyance allowance is paid to an employee by the employer in connection with his service. It is, therefore, remuneration in connection with his service or employment. If he were not employed with the employer, the employee will not get the con--veyance allowance. It is to be treated as a part of remuneration payable by the employer to the employee for his service as this payment enables the employee to be available at the factory, establishment or office of the employer for work. The contention of the learned counsel for the appellant that to hold otherwise would lead to absurd results and would give a lever to the employer to avoid his liability under the Ordinance for payment of contribution relating to social security, is not without substance. For instance an employer may be inclined to give a package of - emoluments totalling rupees one thousand per month to an employee and he may at his own discretion give this amount of rupees one thousand in the form of monthly basic were plus allowances of different sorts. If conveyance allowance is not to be treated as a part of wages, he may even give for instance thirty per cent. Of the total were or remuneration in the garb of conveyance allowance. It is the total amount, including allowances, which is paid or payable by the employer to the employee as remuneration for his service with the employer which would fall under the term "wages" in section 2(30) of the 1965 Ordinance. No doubt if any payment falls within any of the. Four exceptions mentioned in section 2(30), such payment will not be treated as wages for purposes of the Social Security Ordinance, as also any ex gratia payment made by the employer to the employee and also any payment made not on account of remuneration. Judgment in 1982 PLC 325 is firstly distinguish--able as it relates to house rent allowance. In any case according to the view that I have taken, even house rent allowance will all within the meaning of " wages" as the same is paid to the employee as a part of the remuneration for the employee's service. With respect I may observe that I do not find myself able to agree with the view taken by the learned Single Judge in 1982 PLC325.
11. The other point raised in the cross-objections filed on behalf of the respondent and which requires consideration is whether "production bonus" is included in the term "wages" as defined in section 2(30) of the 1965 Ordnance. According to the learned counsel for the respondent, the word used in exception (d) in section 2(30) is "bonus" and this word "bonus" is not qualified or restricted to any special or particular kind of bonus or bonuses. According to the learned counsel for the respondent, the word "bonus" as employed by the Legislature in section 2(30) would include all kinds of bonuses including "production bonus" paid by the respondent to its employees. In this connection it was argued that not only at present but much prior to 1965, when the Ordinance in question was enacted, the word "bonus" ceased to be confined to ex gratia bonuses paid by the employer to its employees and that "bonus" has now for several decades acquired a much wider meaning and the term includes other types of bonuses including production bonus. Learned counsel in this connection relied on the following reported Judgments of the High Courts of Pakistan:-
(i) Khyer Tobacco Co. Ltd. v. Labour Union PLD 1976 Penh. 10 ;
(ii) Attock Oil Co. Ltd. v. Supreme Body of Oilfields League and Refinery Union P 1. D 1970 Lab. 122 ; (i.e) Pakistan Tobacco Co. Ltd. v. Pakistan Cigarette Labour Union PLD 1977 Kar. 586 ;
(iv) Quadri Brothers Foundry and Workshop v. Sind Employees' Security Institute PLD 1977 Kar: 112 ; and
(i) In PLD 1976 Pesh. 10, a Division Bench of the Peshawar High Court had observed as follows:- "The learned counsel, however, argued that since the workers had, under the said agreement, received bonuses in lieu of bonus under Standing Order 10-C(1) in all fairness, the Labour Court should have rejected their application in which again they had claimed the same relief. The learned counsel for the Union, however, countered this argument saying that long before the coming into force of Standing Order 10-C of the Ordinance, by which an employer is required to pay to workers profit bonus, the workers of the Union had been receiving from the company annual bonuses. He, therefore, argued that the payment of these bonuses by the company had nothing to do with its statutory liability under the Standing Order, nor indeed would the workers be estopped to insist upon the realization of their statutory right thereunder. Elaborating his contention, he pointed out that the bonuses paid to the workers, prior to the coming into force of Standing Order 10-C, were not linked with the profits of the company ;- the obligation to pay these bonuses had become a part of the wages of workers and therefore the company was bound to pay them over and above the statutory profit bonus under the Ordinance. In support of his contention, the learned counsel referred to the following dictum from a judgment of Calcutta High Court in the case of Messrs M. Tdak & Co. v. Third Industrial Tribunal and others (AIR 1959 Cal. 797):- "Bonus is a concept of many connotations. It may be the term of the contract of employment in which event the question if such bonus is payable out of profit only when the wages fall below living standards will depend on the terms of such contract of employment. It is within the range of economic and legal possibility that in a particular contract of employment it is stipulated that bonus will be paid irrespective of profits or living standards. It may be a cash incentive to a greater efficiency and production even when there is no question of absence of living age. Akin to this conception of bonus is the case of a bonus annexed to the employment by custom or social practice such as customary and traditional bonus, the question of profit may or may not arise at all and such customary and traditional bonus will depend on the content and terms of that custom or the tradition on which the claim for bonus is made. Each claim for bonus must depend on the facts of such claim. No doctrinaire view about bonus is possible or desirable. This much, however, is judicially settled that bonus is not deferred wages. It is a narrow and static view that- considers bonus as always ex gratia payment or a glorified tip or Bakhshish or a mere cash patronage payable at the pleasure of the employer. Ire the industrial jurisprudence of modern economic society, it is a legal claim and a legal category whose potentialities are not as yet full conceived, but struggling to formulate. It is a vital instrument of industrial peace and progress dynamic in its implication and operation."
(ii) In PLD 1970 Lah. 122, a Division Bench of Lahore High Court observed as follows:- "So far as the nature of bonus is concerned, we would like to observe that the employees always regard bonus as an item of remuneration to which they are entitled out of the profits of the company after they have put in a year's labour and they consider it as an essential condition for the continuance of work by them in the future in a particular industrial concern and by convention of industries it has now come to be regarded as a part of their terms and conditions of employment and has been enforced as such by the Courts of law."---.."Taking into consideration the various decisions cited above and the changed conditions of our society in which the rapid industrialization is taking place in the country we are of the view that bonus has to be regarded as deferred wages payable to employees which may be claimed by them as of right and it should be recognized as one of their rights which they can claim from their employers under certain circumstances."
(i.e) PLD 1977 Kar. 586 is a decision of a learned Single Judge of this court. In paragraph 16 of his judgment the learned Judge observed as follows:- I "It is now well-recognized that there can be various kinds of bonuses like attendance bonus, dependent upon the regular attendance of the workers, production bonus as an . Incentive to increase in production, customary bonus, based on usage or festival bonus which is also based on' usage connected with some festival and lastly profit bonus which is entirely based upon the earning of profits by the employer. The nature and incidents of the various types of bonuses show that not all bonuses are related to profit earning. For instance, production bonus or incentive bonus or festival bonus is paid irrespective of whether the employer earns profit or not."
We may mention here that the aforesaid decision of the learned Single Judge was reversed in High Court Appeal by judgment of a Division Bench of this Court reported in PLD 1.977 Kar. 879 but not.
On the question of the word "bonus".
(iv) PLD 1977 Kar. 112 was cited by the learned counsel for the respondent, for the observations in respect of section 2(30) of a learned Single Judge of this Court made in paras: 16 and 17 of the judgment, which read as follows:- "16. Now, the above definition uses the words "means", "includes" as also "does not include". In Craise on Statute Law, Seventh Edition, it is stated that there are two forms of interpretation clause-- in one, where the word defined is declared to mean so and so, the definition is explanation and prima facie restrictive, while in the other, where the word defined is declared to "include" so and so, .The declaration is exhaustive. However, where the definition contains the words "means and includes" there will inevitably be a doubt as to interpretation. It is apparently, in an effort to avoid this doubt, that the words "but does not include" have been used -in the instant case. Now, if I were to accept the submission of Mr. Sarwana the: extended definition be given to the words "remuneration for service paid or payable" appearing in the definition of "wages", so as to include all payments made by the employer to the employees on account of relationship of service, irrespective of the fact whether service was actually rendered or not, excluding only the payments which are covered by the words "does not include" then there was no purpose in specifically including in the definition of "wages" dearness allowance addition to cost of living allowance, and more important, payments for any period of authorised leave, illegal lock-out or legal strike. The ;words "shall be deemed to include" in the definition of "wages" clearly indicate a legal fiction, whereby payments which are not wages are to be deemed to be wages. The payment mad: by the petitioners 'to his workers for the period from 13-6-197-; c,` 15-6-1972, was neither in respect of any service- nor for any period of illegal strike or lock-out. It was simply an ex gratia payment in compliance with the Government directive contained in the press release of 30th June, 1972. Had such payment been made under the provisions of a statute, the case may have been different, for then it would have been remuneration payable and the decisions of the Lordships of the Supreme Court in cases of Muhammad Sharif and Bashir Ahmed may have been appropriately relied upon, but the above payment was a mere ex gratia payment, in deference to the wishes of Government and not founded upon any statutory liability. Reference on this point may also be made to a Division Bench decision of the defunct High Court of West Pakistan reported in Law Notes 1969 Kar. 1,62 where it was held that the word "payable" in the definition of "wages" under the Ordinance appears to refer to that remuneration which, as a matter of legal obligation, an employer must pay, to his worker.".
17. The payment made by the petitioners to their workers for the period from 8-6-1972 to 1 5-6-72, being a mere ex gratia payment, and not for service nor a statutory liability, such payment cannot be considered to be "wages" for the purposes of the Ordinance. I am fortified in my view by a decision of this Court in the case of Adamjee Cotton Mills v. Sind Employees' Social Security Institution 1974 PLC 213 where it hays been held that though the word remuneration" is a word of were import, it cannot include any ex gratia payment; that wages are the remuneration for contract of service and that failure of workmen to work during disturbed period amounts to suspension of their contract of employment, relieving the Management of obliga--tion to pay wages to such workmen during the period that they failed to work."
The first three judgments mentioned hereinabove are to the effect that the word "bonus" is no longer confined to ex gratia payments and in view of the changed conditions of our society, in which rapid industrialization has been taking place, bonus is now treated as a right of the employees and further, apart from customary bonuses paid out of profits, there are other kinds of bonuses including production bonus, which is given to the employees as an incentive to a greater efficiency and production irrespective of the fact whether any profit has been made by the employer or not. Relying upon these judgments, it was argued by the learned counsel :or the respondent that Legislature was aware in 1965, when the Social Security Ordinance was enacted, that the term "bonus" was no longer restricted or confined to the ex gratia traditional bonus given at the direct discretion of the employer to the employees but that it also meant and included statutory bonus as well as other bonuses, which could be claimed as a matter of right by the employees and as no restriction was placed on the word "bonus" used in section 2(30) of the 1965 Ordinance, the intent of the Legislature was that all kinds of bonuses vrere to be treated as payments not included in "wages" for the purposes of the said Ordinance.
12. It is not clear from the record in what context this "production bonus" was paid or payable by the respondent to its employees. In any case, it could either be a payment made by the respondent to its employees on account of higher efficiency or for extra production. Now this kind of payment can also be termed as an efficiency or production allowance. If in one establishment such payment is termed by the employer as efficiency or production allowance and in another establishment like that of the respondent it is termed as "production bonus", and the word "bonus" as employed in section, 2(30) of the 1965 Ordinance is interpreted to include "production bonus" also, the result would be that no contribution will be payable towards social security under the Ordinance by those companies, who term such payments as "production bonus", but those companies, who term such payments as incentive or production allowance, will be subject to payment of contribution. What principle of interpretation is to be adopted for construing the provisions of the Social Security Ordinance of 1965? If I may borrow the language used by our Supreme Court in Kohinoor Chemical Co. Ltd. v. Sind Employees' Social Security Institution (PLD 1977 SC 197) this Ordinance 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, as observed in Divisional Superintendent, P. W. R., Karachi v. Bashir Ahmed (P L: D 1973 SC 589), that it should be construed as to advance the remedy and suppress the mischief, or else it would frustrate the legislative intent"., It was then observed by the Supreme Court in that Judgment that in keeping with the object of the legislation, as were an interpretation should be placed on, the terms "employee" and "establishment" as permissible Within the language employed in the 1965 Ordinance. In view of the aforesaid principle of interpretation to be employed in construing the provisions of the 1965 Ordinance, the four exceptions in section 2(30) of the 1965 Ordinance are to be construed strictly and a narrow interpretation and not a were interpretation, is to be adopted in that context. As, therefore, "production bonus" can be equated with payments which are also known or termed as production on efficiency allowances, I would interpret the word "bonus" in exception (d) in section 2(30) of the 1965 Ordinance as not to include payments made by an employer to the employees as "production bonus". I may add that it cannot be denied that such payments are not ex gratia payments but are payments which will be included in the remunera-- tion paid to the employees for their service. The purpose of making the employers liable for - payment of contribution under section 20 of the 1965 Ordinance -is to generate funds for providing various kinds of benefits to the workers as detailed under Chapter V of the Ordinance and these include sickness benefit, maternity benefit, death grant, medical care, injury benefit, disablement pension and gratuity etc. By placing a restricted meaning on the term "bonus" as used in section 2(30) of the 1965 Ordinance, purposes of Chapter V of the Ordinance stand advanced.
13. Mr. Mamoon Kazi, learned counsel for the respondent, had also relied on a judgment of Supreme Court in the case of Sind Employees' Sociai Security Institution v. Dawood Cotton Mills (PLD1977SC177). Great reliance was placed on the following observation at pages 181-182 of the report:-- "Coming now to the main question. In the case, namely, whether the payments made for the days when there was stoppage of work fell within the definition of the term `wages' as contained in clause (30) of section 2 of the Ordinance, we are inclined to agree with the view taken by the High Court that they do not. "
According to this clause, the term `were' 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 lock-out or legal strike." The definition then excludes certain items of payment, with which we are not directly concerned in the present case. This definition accords with the dictionary meaning of the term `wages' which is construed as the amount paid periodically, specially by the day or week or month, for time during which workman or servant is at employer's disposal. The word `remuneration' as used in the definition means, according to the Oxford dictionary, a reward payable for service rendered. It would be seen that the rendering of service, or at least the availability of the employee at the disposal of the employer for service, is an essential requirement or prerequisite for the payment of wages. The definition by including payments made by the employer in respect of any period of illegal lock-out or legal strike has indeed given effect to the principle that during these periods the employee must be deemed to be available for service with employer. By specifically including the payment made for any period of authorised leave, the definition has accorded a statutory status to this payment as if it were included in every contract of service.
We cannot, however, agree with the learned counsel for the appellant that the definition should be so extended as to include therein every payment made by the employer to an employee. The definition being clear and unambiguous, its extension in the manner suggested by Mr. Sarwana would be unwarranted. Even otherwise, such an extension can produce absurd results. There may be a case, for instance where an employer agrees to make an ex gratia or a charitable grant for the marriage of the employee's children, or scholarship for their education. Such payments could not be regarded as wages merely because they are made by an employer to his employee. The statutory definition being, payments not covered by it cannot be included.
As to the payment made for the days in July, 1972, when the stoppage of work was caused by civil commotion, it seems to us that the learned Judge in the High Court has rightly taken assistance from the provisions contained in Standing Order No. 11. As there does not seem to be any provision for such an eventuality in the definition of wages contained in clause (30) of section 2 of the Ordinance. The relevant clause of the Standing Order makes it clear that such a payment is to bean amount equal to one-half of the daily wages during the fourteen days of lay-of as compensation. The Standing Order itself, therefore, makes it clear that the amount is merely being paid as compensation and not as wages although its amount is being fixed with reference to the daily wages.
For the foregoing reasons, we are in agreement with the view taken by the High Court that the ex gratia payments made during the days of the stoppage of work in June and July, 1972, did not fall within the definition of the term `wages' as contained in the Ordinance. Accordingly, the employers were under no obligation to pay social security contributions in respect of these payments."
Supreme Court of Pakistan has, therefore, laid down that every payment made to an employee is not necessarily included in "wages" as defined by section 2(30) of the Ordinance .And made reference to ex gratia payments made by the employer to the employees. Then the Supreme Court in the aforesaid case agreed with the High Court that the ex gratia payments made during the days of stoppage were not "wages" but were paid as compensation. The above dictum of the Supreme Court does not come to the aid of the respondent as firstly the facts are distinguishable and secondly the payments in that case were treated by the Supreme Court as ex gratin and as compensa--tion whereas in the instant case the payments made as "production bonus" are clearly included in the remuneration paid by the respondent to its employees.
14. 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 gratin 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.
15. As a result Miscellaneous Appeal No. 7 of 1982, is partly allowed to the extent mentioned in para. 6 of this Judgment. Cross-objections filed by the respondent are dismissed. There will be no order as to costs.