1. ' Z.C. VALIANI, J.-Petitioner above-named has challenged the order/ directions, dated 20th August, 1977 of Government of Pakistan. Respondent No, 1, communicated to the petitioner by respondent No, 2, under Companies Profits (Workers' Participation) Act, 1968, on the following facts and grounds : ' That the petitioner is a private limited company registered under the Companies Act, 1913 and is engaged in the business of manufacturing textile goods at Karachi. The petitioner makes up its annual accounts on 30th June, every year.
2. ' That for the purposes of projecting the true profits from its manufacturing and trading operations the petitioner had not been debiting depreciation in the books of account. In fact in the years prior to Account year 1975-76 the petitioners have been mistakenly paying to the Workers' Participation Fund constituted under the Companies Profits (Workers' Participation) Act, 1968, on the basis of profits worked out by the auditors, without charging depreciation on its capital assets.
3. ' That on receiving the audited balance-sheet for the Account year 1975-76 the petitioner for the first time realised the mistake of having paid to the Workers' Participation Fund, on the basis of profits worked out without charging depreciation. The petitioner, therefore, requested the auditors to prepare revised profit and loss statement and balance-sheet after charging depreciation. The auditors duly revised the profit and loss statement and the balance-sheet accordingly.
4. ' That according to the first audited profit and loss statement and balance-sheet prepared without charging depreciation, the profit came to Rs, 6,31,470.32 and the amount allocable to Workers' Profit Participation Fund came to Rs, 31,572.52.
5. ' According to revise profit and loss statement and balance-sheet prepared after charging depreciation the profit came to Rs, 3,04,083.03 and the amount allocable to Workers' Profit Participation Fund came to. Rs, 15,205.15.
6. ' The petitioners have credited the said sum of Rs, 15,204.15 to the Workers' Profits Participation Fund and have offered to pay this sum to the Trustees of the Fund.
7. ' That the Trustees of the Fund representing the respondent No, 3 however raised a dispute claiming to be entitled to payment in accordance with the first balance-sheet to which the petitioners did not agree. These Trustees, therefore, referred their demand to respondent No, 2 by writing a letter, dated 6th July, 1977.
8. ' That respondent No, 2 by'a letter No, I.M.B. (III) (371)/77, dated nil informed the petitioners, that Mr. Imtiaz Ahmed Chaudhry, Joint Secretary of the Labour Division will hear both the parties on 10th August, 1977 at Karachi and requiring the petitioners to appear before The petitioner duly attended the hearing and explained the entire position to the Joint Secretary. The Joint Secretary advised to petitioner to bring their auditors on 12th August, 1977 to explain the position.
9. ' The petitioner's auditors were however out of station. The petitioners, therefore, by their letter No, M.M.-1 2/2007, dated 11th August, 1977 informed the Joint Secretary, that due to the auditor being out of station they were unable to produce him on 12th August, and requested him to grant one week's time and fix another date at his convenience, when the petitioners will bring the auditor.
10. ' That the Joint Secretary named above did not communicate any other date to the petitioners. But the petitioners received a letter No, I.M.P. (HI)-1 (371)/77, dated 20th August, 1977 from respondent No, 2 which stated as follows
(a) that petitioner company is a private limited company to which section 87C of the Companies Act, 1913, does not apply. Hence respondent No, 2 has to go by the figures of the net profit as "worked out in the balance sheet of the company",
(b) depreciation has not been charged to the profit and loss account and no special remarks given to his effect are valid,
(c) this has been the persistent practice with the company that they have not been charging depreciation even in previous years,
(d) on the above-mentioned grounds respondent No, 2 directed the petitioner under section 7 (1) of the Companies Profits (Workers' Participation) Act, 1968 to allocate to the Workers' Participation Fund on the net profit, as declared by the Chartered Accountant in the first balance-sheet and profit and loss account, wherein depreciation was not charged,
(e) Respondent No, 2 further informed the petitioner, that why further hearing is not considered necessary,
(1) Respondent No, 2 directed the petitioners to submit a compliance report within 15 days of the receipt of the letter and threatened that in the event of failure to furnish the information within the time specified the petitioners will render themselves liable to prosecution under section 176 of the Pakistan Penal Code and the proceedings shall be initiated ex parte.
11. ' That the petitioners legal advisers have sent a reply to the respondent No, 2.
12. ' The learned Advocate for the petitioner in support of above petition submitted, that the order of respondent No, 2 as contained in Annexure B-2 directing the petitioners to pay to the Workers'
13. Participation Fund on the basis of the profit and loss and balance-sheet prepared without charging depreciation and the threat to initiate prosecution of the petitioner on failure to do so is completely illegal and without jurisdiction, on the following amongst other grounds :
(I) that for the purposes of determining the amount payable to Workers' Participation Fund, the profit of the petitioner and of all other employers are required by law to be worked out after charging depreciation.
(ii) that for the purposes of Companies Profits (Workers' Participation) Act, 1968, the expression "Profits" means "Profit" as contemplated by section 87-C of the Companies Act, 1913 as per section 2
(d) of the Companies Profits (Workers' Participation) Act, 1968 and section 87-C requires profits to be calculated after allowing inter alia "depreciation".
(iii) that the view expressed by respondent No, 2, that the petitioner's company being a private company, section 87-C of the Companies Act, 1913 does not apply is not warranted by law, for the purposes of determining the profit under the Companies Profits (Workers' Participation Fund) Act, 1968.
(iv) that the mere fact that the petitioner has not been charging depreciation in its books of accounts or in the past has paid to the Workers' Participation Fund on the basis of the Profit worked out without charging depreciation, cannot justify continuing to disregard the relevant provision of law, and cannot override specific provision of law.
14. ' The learned Advocate appearing for respondents on the other hand submitted, that section 87-C
(3) is not applicable to private limited companies and since petitioner is private limited company, the definition of Net profits given in the said section cannot be taken into consideration for deducting depreciation for arriving at Net Profits under section 7(1) of Companies Profits (Workers'
15. Participation) Act, 1968. In support of this, the learned counsel relied upon the wordings of section 87-C of Companies Act, 1913, which clearly states, that this section shall apply only to public limited companies.
16. ' We have carefully considered the above submission made by the learned Advocates before us.
17. The only question which requires consideration in the above petition is interpretation. Net Profits, as mentioned in section 7(1) of Companies Profits (Workers' Participation) Act, 1968, which act defines "Profits" under section 2 (d), as under : "Profits" in relation to a company means such of the "net profits" as defined in section 87-C of the Companies Act, 1913 (VII of 1913), as are attributable to its business, trade, undertakings or other operations in Pakistan."
18. It is clear from above definition of profits, that the same are to be calculated in accordance with section 87-C of the Companies Act, 1913, irrespective of the fact whether such company to which provisions of Companies Profits (Workers' Participation) Act, 1968 applies, is private' limited or public limited company.
19. Discrimination cannot easily attributed to Legislature. If the of the learned Advocate for respondents are accepted, it would amcontentionount to discrimination for purposes of calculating "profits" under section 7 (1) of Companies Profits (Workers' Participation) Act, 1968, between public limited companies and private limited companies. There is no separate definition for "Profits" given in Companies Profit (Workers' Participation) Act, 1968, for private limited company and as such irrespective of the fact whether section 87-C of Companies Act, 1913 does not apply to private companies, still the definition of "Net Profits" given in this section, by virtue of definition of "Profits" given in section 2 (d) of Companies Profits (Workers' Participation) Act, 1968, would apply to private companies as well, in our opinion : ' Therefore, we declare as under :
(1) It is hereby declared that the order of respondent No, 2, dated 20th August, 1977 directing the petitioner to pay to the workers participation fund, on the basis of profit and loss and balance- sheet prepared without charging depreciation is invalid in law.
(2) That the petitioner is entitled to charge depreciation in the profit and loss statement, so that the profits will get reduced to the extent as provided by section 87-C (3) of the Companies Act of 1913.
(3) It shall, however, be open to the concerned authority, under the Companies Profits (Workers'
20. Participation) Act, 1968 or to respondent No, 2 to scrutinize the balance-sheet and the profit and loss statement to determine whether depreciation should be allowed.