1. I ZAFFAR HUSAIN MIRZA, J.---Leave was granted in this case to consider the question whether an aggrieved party who withholds the payment of disputed amount of contribution claimed to be payable to the Sindh Employees' Social Security Institution, Karachi, after obtaining a proper stay order from the appellate Court exercising jurisdiction under the Social Security Ordinance, 1965, can be held to have failed to pay the amount so as to be liable to the payment of increase as provided by section 23 of the said Ordinance, in case the appeal is subsequently dismissed.
2. ' This appeal arises out of the judgment and order of a learned Single Judge of the High Court of Sindh, Karachi, dated 4th April, 1982, by which the appeal filed by the appellant under section 64 of the Social Security Ordinance, 1965 (hereinafter referred to as the Ordinance) was dismissed.
3. ' The appellant which is a public limited company and employs skilled as well as unskilled labour in their factory, had raised a dispute over the demand of contribution in respect of certain payments being made by it to its workers, with the Sindh Employees' Social Security Institution, respondent herein, which matter was agitated by the appellant through a complaint under section 57 of the Ordinance. The Commissioner having dismissed the complaint of the appellant, an appeal was filed by it before the Social Security Court which also failed vide order dated 13th March, 1976, except in regard to one item of dispute. Consequently the appellant filed an appeal before the High Court under section 64 of the Ordinance. Simultaneously the appellant sought stay of the recovery of the disputed items of contribution. By order dated 16th June, 1976, the High Court granted interim stay subject to furnishing of security, which order was subsequently confirmed on 20th September, 1976. Eventually, however, the appellant did not succeed in its appeal which was dismissed on 29th May, 1980. The appellant therefore tendered the payment due on account of the disputed items of contribution amounting to Rs, 56,323.18. This amount was accepted provisionally by the respondent, but a demand for a sum of Rs, 28,161.59 was made from the appellant being the increased amount payable on account of failure on the part of the appellant to pay the contribution on the due date.
4. ' This resulted in a fresh round of litigation between the parties. The assertion of the appellant was that the non-payment of the amount of contribution not being deliberate or wilful and the stay order being in operation granted by the High Court, there can be no question of failure on the part of the appellant to pay the amount of due date, in terms of section 23 and therefore the levy and demand of the amount was illegal. The Commissioner did not accept the contention of the appellant and dismissed its complaint. In appeal, however, the Sindh Social Security Court No, 1, Karachi, partly accepted the appeal and modified the order of the Commissioner vide order dated 16th December, 1980.
5. ' It was held that increase was not payable during the currency of the stay order granted by the High Court but was payable for the rest of the period prior and subsequent to the aforesaid period.
6. Aggrieved by the said decision the respondent went up in appeal before the High Court and by the impugned judgment learned Single Judge has taken the view, that the increased amount demanded by the respondent was payable by the appellant, on the ground that the words "fails to pay" occurring in section 23(1) of the Ordinance are not qualified by any adjectives like wilful or deliberate failure.
7. ' In support of the appeal Mr. Abrar Hasan, learned counsel appearing on behalf of the appellant, urged that in the facts and circumstances of the present case, since the High Court had stayed the recovery of the contribution, it cannot justifiably be held that there was failure on the part of the appellant to pay the amount on the due date during the operation of the stay granted by the Court, so as to be burdened by the penalty provided by section 23 of the Social Security Ordinance of 1965, (hereinafter referred to as the Ordinance). In support of the contention learned counsel referred us to the case of Sindh Employees' Social Security Institution v. Silva Industries Limited, Karachi (1982 PLC 1062) (to which one of us was a party).
8. ' On the other hand Mr. S.A. Sarwana, learned counsel appearing on behalf of the respondent, submitted that the question raised in this case already stands settled indirectly by the decision of this Court in Kohinoor Chemical Co.Ltd. And another vs. Sindh Employees' Social Security Institution and another (PLD 1977 SC 197). According to the learned counsel for the respondent the liability for the payment of increase accrues automatically on the failure to make the payment on the due date and no authority under the Ordinance has any power or jurisdiction to condone the failure on any ground whatsoever or to extend the time except for the limited period under rule 5 of the Social Security (Contribution) Rules, 1966 (which is not the case here). Accordingly the submission of the learned counsel was that the view taken by the learned Single Judge of the High Court that on the conclusion of the proceedings of appeal and the termination of the stay order, the effect of the restraint placed by it on the recovery of the amount, totally disappeared and was wiped off, with the result the liability for the payment of the increase stood revived.
9. ' Now the view taken by the Presiding Officer Sindh Labour Court No,1, Karachi, in his order dated 16th December, 1980, may be reproduced in his own words: "No doubt PLD 1977 SC 197 is the final authority on the point of increase.This judgment was announced on 23-12-1976 and is the latest pronouncement on this point and it has been followed in Misc. Appeal No,75 of 1978 decided on 4-6-1980. It has been held in both these judgments that it is the absolute responsibility of an establishment (covered by the Ordinance) to pay contribution and if it fails to pay it, whatever may be the reason, it is liable to pay increase under section 23 and good faith is no defence for escaping this liability. But what shall be the position when the Hon'ble High Court itself grants a stay order during the pendency of an appeal? The above two judgments, even though they are the latest on the point of increase do not reflect upon this aspect.
10. ' Exh.1-C/1 is the copy of order dated 16-6-1976 whereby Civil Misc. Appeal No,34 of 1976 was admitted and stay against the recovery was granted. This appeal was, however, dismissed on 29- 3-1980, vide judgment Exh.1-C. The factual position is thus not in doubt and it is clear that from 16- 6-1976 to 29-3-1980 the stay order of the Hon'ble High Court prevailed.
11. ' Now, can it be said that the appellants failed to pay the contribution between 16-6-1976 and 29-3- 1980? Question of failure arises when there is an obligation to pay. In my view, the appellants were under the obligation to pay the increase (for their failure to pay the contribution) from the date the contribution was due upto 15-6-1976 and from 30-3-1980 till the date of payment of the contribution. The increase can not be claimed for the period from 16-6-1976 to 29-3-1980 because, in view of the stay order granted by the Honourable High Court, the appellants were not under an obligation to pay the contribution during this period and consequently there is no question of their failure, when there is no question of their failure, there is no justification of demanding increase. I do not agree with the reasons given in para 8 (page 3) of the decision dated 1-10-1980 passed by the learned Commissioner. I have not been able to understand the significance of the words "The security furnished to the Court as per directions of the Court was, in fact, not a payment to the Institution". It certainly was not but does the learned Commissioner imply that because/it was not, it was trash and of no significance and therefore must be ignored? What for, after all, the appellant had obtained stay order. Not for the fun of it, certainly. Para 8 of the decision in my humble opinion,
(sic) of contempt of Hon'ble High Court."
12. ' As already stated the learned Single Judge did not agree with this view for two reasons, the first reason after referring to the wording of section 23 was as reproduced hereunder: "The above wording does not qualify words 'fails to pay' by any adjectives like wilful and/or deliberate failure."
13. ' The second reason that prevailed with the learned Judge is contained in the following passage from his judgment: "It is an admitted position that respondents' appeal in question was dismissed after final hearing on merits and consequently the liability of the respondents, as it existed on the day of the grant of the stay order stood revived, for which respondents had furnished security. In this connection I may mention, that even in the appeals arising out of money decrees, stay is granted for recovery, in suitable cases on furnishing of security. However, such stays, if and when granted, do not halt calculation of the normal interest as awarded on such decretal amounts if ultimately such appeals are dismissed and the only relief which a party gains by such interim stay orders is from prompt payment, pending disposal of the appeals. Once such appeals are disposed of against the party, who secured stay orders, the liability of such party to pay interest on the decretal amounts automatically revives. In the present case the increase in contribution, as envisaged by section 23 of the West Pakistan Employees' Social Security Ordinance, 1975, is more or less on the same footing as interest payable on the amount due by party, who has obtained stay orders and as such in my opinion once the appeal of the respondents was dismissed by this Court, the effect of the stay orders in question completely vanished and the liability of the respondents to pay increase on their contribution as envisaged by section 23 of the Ordinance in question stood revived."
14. ' After alrefully considering the reasoning adopted by the two Courts below and the contentions advanced by the learned counsel, we feel that the decision of the learned Sindh Labour Court No,1 is in consonance with the true interpretation of section 23 and the intendment of the law, so that we regret our inability to subscribe to the view taken by the learned Single Judge.
15. ' In order to appreciate the submissions of the counsel it will be of advantage to set out the provisions of section 23 of the Ordinance which read as under: "23. Increase of unpaid contribution and recovery of contribution. 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, 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 contribution due, together with the increase provided for under sub-section (1), may be recovered as arrears of land revenue."
16. True import and the effect of sections 20 and 21 of the Ordinance was considered and authoritatively laid down by this Court in the case of Kohinoor Chemical Co.Ltd. (supra). It was held that once a notification has been issued under subsection (3) of section 1 of the Ordinance, then the obligation of the employers affected by that notification comes into play, and it is incumbent upon them to make the necessary contribution. It was categorically laid down that obligations so arising under the aforesaid provisions are statutory obligations which are not dependent upon any action to be taken or initiated on the part of the Institution. It was further elucidated that as the penal provisions of the Ordinance do not speak of the failure to comply with any notice of, demand, it would follow that the liability to pay or make the contribution arises under the statute and the rules and regulations made thereunder. We would, therefore, agree with the submission that the accrual of the liability to pay the contribution is automatic and the charge is created by law unconnected with any proceedings for determination of the same. But that proposition is not conclusive of the question for determination before us. In the case of Sindh Employees Social Security Institution v. Silva Industries Limited, Karachi (1982 PLC m5,4 in spite of having acknowledged the above proposition, one of us (Ajmal Minn, J.) was required to decide somewhat similar question in the case in which the contribution was not paid by the establishment in view of the letter of Director of the Institution which clarified that no contribution was payable on the particular allowance in question and which letter was acted upon for a period of 4 years. It was held that the word "used in section 23 is fail and not default'. Consequently the penal provisions of section 23 would be attracted even if there is no wilful default in the payment of contribution on due date, because the words "fair and "default" are not synonymous. However, in the context of the facts of that case the following significant observation was made: "In my view from the above reply as logical corollary it must follow, that if an employer can point out that there was no failure on his part to make the contribution and in fact non-payment was on account of act/omission on the part of the staff of the Institution he will not be liable to pay the amount of increase. In my view the reasonable interpretation of world "fail" used in the aforesaid section 23 of the Ordinance will be that in order to attract the penal provision of the levy of increase, contained in the above section, there should be inexcusable neglect or omission on the part of employer to pay contribution on an item of wages/salary on which contribution is payable and there should not be any contributory act/omission on the part of the Institution resulting in the non-payment of the contribution."
17. ' In the concluding part of the judgment the fording was summarised in the following terms: "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 part of the respondents within the meaning of section 23 of the Ordinance."
18. The ratio of this decision supports the reasoning adopted by the learned Labour Court reproduced herein above. The present case is of a category of cases in which on the principles as mentioned in the foregoing citation, it can legitimately be said that there was no failure on the part of the appellant to make payment, as the High Court had by granting stay suspended the obligation of the appellant to make payment during the operation of the stay. It may be pointed out that the scheme of the Ordinance itself envisages the hierarchy of authorities and Courts for correction of errors and redress of grievances made by the employer and other affected parties by any action taken under the Ordinance. Section 57 (f) refers to any dispute in respect of "any contribution or other dues payable or recoverable under this Ordinance." Such matters can be agitated before the forums set iup by the Ordinance and before the established Courts. An appeal is provided under section 64 of the Ordinance to the High Court. Section 65 of the Ordinance provides for the stay of payment pending appeals. Reading the provisions of section 23 of the Ordinance with sections 64 and 65, it becomes abundantly clear that the scheme of the Ordinance itself provides that in case of a stay, until the final adjudication of the dispute, the obligation to pay the dues does not arise.
19. Therefore, we agree with the view that in absence of the obligation to pay there cannot be failure to pay within the meaning of section 23 of the Ordinance.
20. The analogy adopted by the learned Single Judge of the High Court in respect of the interest payable on a money decree, is in our, view inapt and irrelevant for the present purposes. The increase payable under section 23 as held in the case of Kohinoor Chemical Company is plainly a penalty which cannot be compared with interest. A penalty generally refers to contumacious conduct in disregard of lawful duty or obligation. The principle underlying the payment of interest is totally different.
21. ' Before concluding we would like to refer to an argument advanced by Mr. Sarwana that the stay order passed by the High Court related to the amount then due and payable on the date of the order with regard to the past dues, that is why the security in the sum of Rs, 6,000 was obtained. In the submission of the learned counsel, therefore, the amount of contribution on the disputed items falling due subsequently in the future was not covered by the stay and therefore increase was payable on the failure to pay the same. We are unable to accept this contention for the simple reason that the dispute was not with regard to the quantum of contribution but the leviability of the contribution in respect of certain items. Therefore, the grant of stay in terms of the prayer made in the application for the same covered the recovery of the contribution in respect of the item, namely, special expenses which was the subject-matter of the appeals, even in the future until the decision of the appeal. The extent and scope of the stay is not, therefore, subject to any doubt. It was for the respondent to have asked the Court for further security to cover the future dues during the pendency of the appeal to protect their interest. This argument is also devoid of substance.
22. ' To sum up our conclusion we hold that the appellant was not liable to pay increase in terms of section 23 of the Ordinance during the period in which the stay order granted by the High Court was in force and therefore the same cannot be recovered from the appellant.
23. ' For the foregoing reasons we accept this appeal, set aside the judgment of the High Court with the result that the order dated 16th December, 1980, passed by the Sindh Labour Court No,1, Karachi, shall stand restored. In the circumstances of this case we make no order as to costs.