Constitutional Petition No. 25/1975, filed by the I. C. P. Employees' Front, a registered Trade Union and the Collective Bargaining Agent of the Investment Corporation of Pakistan, calls in question the order of the Presiding Officer of Sind Labour Court No. 5, Karachi, by which the demand of the petitioners for the grant of bonus under Standing Order 10-C of the West Pakistan Industrial and Commercial Employment (Standing Orders) Ordinance, 1968 (hereinafter called the Ordinance) for the years 197:-72 and 1972-73 was disallowed on the finding that there were hardly any substantial profits earned, and Constitutional Petition No. 1263/1975 calls in question the order of another Presiding Officer, granting bonus to the respondents equivalent to one month's aggregate wages for the year ending June, 1974. Both the petitions will be disposed of by this common judgment.
2. Briefly stated, the facts are k that in June 1974, an application under section 34 of the Industrial Relations Ordinance was filed by the respondents in Petition No. 25/1975 on the allegation that, though the petitioners had made a profit of Rs. 41,49,659 in the financial year ending 30th of June 1972 and Rs. 59,69,579. In the financial year ending 30th June 1973, they had declined to delare any bonus under Standing Order 10-C of the Ordinance, despite to the fact that they had been called upon in writing. In the written statement, it was contended that the pro. Visions of the Ordinance were not applicable to the Corporation, as it was a statutory Corporation with rules and regulations of its own. It was further maintained that the Corporation's net assets blocked in East Pakistan amounted to Rs. 8.97 crones, and the profit shown was only technical, as more than that amount bad to be paid by the Corporation to the Federal Government of Pakistan towards the debt servicing for the years in question, which had been deferred only for the time being. The other application, forming the subject-matter of Constitutional Petition No. 1263 of 1975, contained almost identical allegations, the profit earned being Rs. 50,17,109.
3. In both the applications, the contention, that the provisions of the Ordinance were not applicable to the Corporation, was repelled. However, in the latter application, the learned Presiding Officer held that, once the balance-sheet of the Corporation showed profits, and that there being nothing to show that the Corporation had been called upon to clear the yearly interest to the Federal Government, there was sufficient profit available for the disbursement of bonus, as enjoined under Standing Order 10-C of the Ordinance. As the question of the applicability of Standing Order 10-C is under challenge on the ground that the Corporation was governed by its own rules and regulations, it will be in the fitness of things to examine the salient features of the Ordinance No. IV of 1966, that is, the Investment Cor--poration of Pakistan Ordinance, which was promulgated on the 19th of February, 1966.
4. The preamble shows that it was promulgated, as it was expedient to establish an Investment Corporation to encourage and broaden the base of Investments and develop the capital market in Pakistan and to provide for all matters connected therewith. According to subsection (2) of section 3, the Corporation was to be a body corporate by the name of the Investment Corporation of Pakistan, having perpetual succession and a common seal, with power, subject to the provisions of the Ordinance, to acquire, hold and dispose of any property "and shall, by the said name, sue and be sued". According to section 4, the authorised share capital of the Corporation was to be twenty crores of rupees divided into twenty lakh ordinary shares of one hundred rupees each, and the shares of the Corporation were to be offered for subscription to the constituent institutions and general public as may be decided by the Central Government. Further the shares of the Corporation were to be listed on each Stock Exchange in Pakistan as the Board of Directors determined. Section 11, dealing with the direction and superinten--dence, reads as under : "11. Direction and superintendence.- (a) The general direction and superintendence of the affairs and business of the Corporation shall vest in a Board of Directors constituted in accordance with section 12 which may exercise all such powers and do all such acts and things as may be exercised or done by the Corporation and are not, by this Ordinance, expressly directed or required to be done by the Cor--poration in general meeting.
(2) The Board in discharging its functions shall act on commercial considerations with due regard to the investment climate and to the interests of the capital market and of its depositors and the public generally.
(3) Where the Central Government is satisfied that-
(a) in the public interest ; or
(b) to prevent the affairs of the Corporation being conducted in a manner detrimental to the interests of the Corporation ; or
(c) to secure the proper management of the Corporation generally ; it is necessary to issue directions to the Corporation generally or in any particular case, it may, from time to time issue such directions as it deems fit, and the Corporation shall be bound to comply with such directions."
Sections 12, 13 and 14 are also relevant to the point at issue., and they read as under t "12. Board,-(I1) The Board shall consist of the following Directors namely
(a) the Chairman to be appointed by the Central Government ;
(b) for persons to be appointed by the Central Government of whom two shall be from amongst persons serving under the Central Government and two from amongst the shareholders;
(c) five persons to he elected by the shareholders in such manner as may be laid down in the regulations ; and
(d) the Managing Director to be appointed by the Central Government Provided that the Central Government may, if it so considers expedient, increase by two the number of the Directors to be appointed by it.
Provided further that in constituting the Board for the first time, the Central Government shall appoint five Directors in place of the Directors required to be elected under clause (c).
(2) Save as provided in subsection (2) of section 13 in respect of the Chairman, and in subsection
(2) of section 14 in respect of the Manag--ing Director a Director appointed by the Central Government shall hold office during its pleasure.
(3) A Director elected under clause (c) of subsection (1) shall hold office for a term of three years and shall continue in office thereafter until his successor is elected and shall also be eligible for re- election : Provided that such Director may be removed before the expiration of his term by a special resolution passed by the vote of such shareholders as hold more than half of the shares of the Corporation.
(4) A casual vacancy in the office of an elected Director shall be filled by election and the person elected to fill such vacancy shall hold office for the unexpired period of the term of his predecessors : Provided that it shall not be necessary to fill a vacancy for a period not exceeding three months.
13. Chairman.-(1) The appointment of the Chairman shall be honorary.
(2) Unless the Central Government otherwise directs, the Chairman shall holy office for a term of three years and continue in office thereafter until his successor is appointed and shall be eligible for re-appointment.
(3) A casual vacancy in the office of the Chairman shall be filled by the Central Government .And the person appointed to fill such vacancy shall, unless the Central Government otherwise directs, hold office for the unexpired period of the term of his predecessor.
14. Managing Director.-(1) The Managing Director shall be appointed on such salary and terms and conditions as the Central Government may determine.
(2) The Managing Director shall, unless the Central Government otherwise directs, hold office for a term of five years which the Central Government may, from time to time, extend.
(3) The Managing Director shall be the Chief Executive of the Cor--poration and shall subject to the provisions of this Ordinance, the rules and regulations be responsible for the management of the affairs of the Corporation. He shall be a whole time officer and shall in addition to his functions as the Chief Executive exercise such powers and perform such functions as may be assigned to him by the Board Provided that the Central Government may utilise the services of the Managing Director for any other work.
There was also to be an executive committee, and, according to section 18, no business of the Board or of the Executive Committee could be transacted except at a meeting at which a quorum of three Directors in the case of the Board, and two members in the case of the Executive Committee was present. The material section, dealing with the business, which the Corporation was authorised to transact, was 23, which reads as under : "23. Business which the Corporation is authorised to transact.-The Corporation may carry on, transact or do the several kinds of business and acts hereinafter specified, namely
(1) Underwriting, managing and distributing the issue of stocks, shares, bonds, debentures and other securities either directly or through or jointly with one or more of its constituent institutions or other investment or financial institutions ;
(2) opening and maintaining of Investors' Deposit Accounts ;
(3) making advances for purchase of shares and investment in such other securities as may be approved in each case ;
(4) purchasing and selling shares to the Investors' Deposit Account holders over the counter ;
(5) engaging in the business of investing and reinvesting in and the owning and holding of securities ;
(6) merchandising of shares ;
(7) facilitating investments by selling new floatations of existing or new companies without underwriting obligations ;
(8) helping generally in broadening the base of investments and encourag--ing investments in sound projects ;
(9) managing investment portfolios on behalf of individuals or institutions ;
(10) providing professional counsel regarding investments ;
(11) promoting industrial development in Pakistan ;
(12) being a member of a Stock Exchange in Pakistan ;
(13) acting in any manner as a principal or agent in matters relating to, investment in securities ;
(14) for purposes of, and in matters relating to its business or objects-
(a) to purchase or otherwise acquire, own, sell, transfer and exchange any tangible or intangible movable or immovable property and any rights, title or interest in such property absolutely, temporarily or ors hire or by hire-purchase or on instalment or on such other terms and conditions, as may be approved by the Board ;
(b) to accept and furnish' any undertaking or commercial guarantee for the performance of any obligation or the fulfilment of any contract or the repayment of any money ;
(c) to accept and furnish any lien, charge, hypothecation or mortgage on any movable or immovable property or any promissory note or bill of exchange ;
(d) to enter into agreements and contracts and execute such documents as may be considered necessary or expedient ;
(15) to appoint attorneys and agents ;
(16) to receive and pay commission, fees and brokerage in connection with its business ;
(17) to sell and realise all property whether movable or immovable which may in any way come into possession of the Corporation in satisfaction or part satisfaction of its claims ; and
(18) generally to do all such acts and things as may be necessary or inci--dental or subsidiary to the transacting of any of the aforesaid business or acts including proceedings in Courts of law."
Section 27 dealt with the disposal of profit ; section 28 with the auditors, and section 29 with the return. Section 34 made it clear that no provision of law relating to the winding-up of companies or banks shall apply to the Corporation and the Corporation shall not be wound up save by order of the Central Government and in such manner as it may direct. The other two sections, which might be relevant, are 35 and 36, the former dealing with the power of the Central Government to make rules, and the latter dealing with the power of the Board to make regulations.
5. The scheme and the framework of this Ordinance are in pari material with the scheme of another statutory corporation, namely, the National Shiping Corporation established under the National Shipping Corporation Ordinance, 1963. The orders of the Labour Courts, re-instating a dismissed employee of the latter Corporation, where, inter alia, the question of the jurisdiction of the labour Courts came to be raised, was the subject-matter of decision by a Division Bench of this Court in National Shipping Corporation v.-- Sind Labour Appellate Tribunal and 2 others (1975 PLC 1). The definition of the expression "commercial establishment", and, in the alternative, the proviso to section 1 of the West Pakistan Industrial and Commercial Employment (Standing Orders)
Ordinance, 1968, which excluded from its operation industrial and commercial establishments carried on by or under the authority of the Central Government, or, any Provincial Government, where statutory rules of service, conduct, or, discipline were applicable to the workmen employed therein, came to be considered. For the reasons, which need not be recapitulated here, it was held that, notwithstanding the fact that the authorised capital of the Corporation was fixed by the statute, and that the Central Government had reserved for itself certain powers, like increase in the capital, nominating majority directors or restricting the Corporation's borrowing power, the National Shipping Corporation would, all the same, be a Joint Stock Company. In regard to the alternate argument, it was held that, in the light of the provisions in the Ordinance, the management of the petitioner-Corporation was vested in its Board, which was to carry on its business as a body, and the Board was only to be guided by instructions from the Central Government and that too only on questions of policy involving national interest. It, therefore, followed that the establishment of the Corporation was not being carried on under the authority of the Central Government, but on its own authority, notwithstanding the restrictions on its borrowing powers or the power vested in the Central Government under section 30 of the Ordinance for winding-up. It was further observed that, though the Central Government had reserved for itself certain powers in the functioning of the Corporation, nonetheless the petitioner-Corporation continued to function under its own authority without the exercise of any authority by the Central Government. It, therefore, was not an establishment carried on under the authority of the Central Government. Sitting as a Single Judge, this authority will be binding on me.
6. Mr. M. L. Shahani, who was specially permitted to appear in this case, as he is still awaiting enrolment on our record also referred to the case of Tamlin v. Hannaford ((1950) 1 K B 19). The plaintiff therein was the lessee of a house, which used to belong to the Great Western Railway Company. The defendant was the sub-tenant of some rooms in the house, and was protected, in those days, by the Rent Restriction Acts. On the nationaliza--tion of the Railways, the house became vested in the British Transport Commission, by virtue of the Transport Act, 1947, and the County Court Judge held that, on that account, the defendant had lost the protection of the Rent Restriction Acts, as the house was to be regarded as owned by the Crown and administered by the British Transport Commission as Crown agents, and the house, being now Crown property, was no longer within the scope of the Rent Restriction Acts. He, accordingly, made an order for possession.
This Corporation, as would appear, had no shareholders to subscribe the capital, or, to have any voice in its affairs. The money needed by the Corporation was raised, not by the issue of shares, but by borrowing, which was guaranteed by the Treasury. In case the debts could not be repaid, the loss fell on the Consolidated Fund of the United Kingdom. There were no profits to be made, or, distributed. Even if it was unable to pay the debts. Its properties were liable to execution, but it was not liable to be wound up at the suit of any creditor. The appellate judgment was given by Denning L. J., who observed on page 24 of the Report : 'These are great powers but still we cannot regard the corporation as being his agent, any more than a company is the agent of the shareholders, or even of a sole shareholder. In the eye of the law, the Corporation is its own master and is answerable as fully as any other person or Corporation It is riot the Crown and has none of the immunities or privileges of the Crown. Its servants are not civil servants, and its property is not Crown ;property. It is as much bound by Acts of Parliament as any other subject of the King. It is, of course, a public authority and its purposes, no doubt, are. Public purposes, but it is not a government department nor do its powers fall within the province of Government". It was further observed as to be found on page 25 of the Report, that "when Parliament intends that a new corporation should act on behalf of the Crown, it as a rule says so expressly, as it did in the case of the Central Land Board by the Town and Country Planning Act, 1947, which was passed on the very same day as the Transport Act, 1947. In the absence of any such express provision, the proper inference, in the case, at any rate, of a commercial corporation, is that it acts on its own behalf, even though it is controlled by a Government department." The appeal, as a result, was allowed.
7. Reference might also be made to the case of Abdul Rehman-Abdul Gafur and another v. Mrs. E.
Paul and others (AIR 1963 Bom. 267). There, the question for consideration was, whether Mazangaon Dock Limited, a commercial Cor--poration incorporated under the Companies Act, whose share capital was owned by the Central Government of India, would be an `industry' carried on directly under the authority of the Central Government. It was found that the phrase "under the authority of the Central Government" must mean and was intended to apply to industries carried on directly under the authority of the Central Government. Further, industries, which were carried on for their own purposes by incorporated commercial corporations, which were governed by their own constitutions, would not be so, as these corpora--tions were independent legal entities, and they ran the industries for their own purposes. Evens when the Central Government controlled these corpora--tions, the industries still worked under the authority of their own constitutions, or, charters.
8. Mr. Mansoor Ahmad Khan, learned counsel for the respondent, referred to the cases of Salahuddin and others v. Frontier Sugar Mills & Distillery Limited and others (PLD 1975 SC 244) and Sind Employees' Social Security Institution v. Dr. Mumtaz Ali Taj and another (PLD 1975 SC 450). The question for consideration in the former case was, whether the directors and the chief executive of the respondent therein, a Joint Stock Company incorporated under the Companies Act for the purpose of carrying on commercial, or industrial activity for the benefit of its shareholders, could be regarded as persons performing State functions, just for the reason that its functioning was regulated by law, or, that the distribution of its manufactured products was subject to governmental control in the public interest, so as to enable the High Court to issue a writ in the nature of quo warranto, requiring a person within its territorial jurisdiction holding, or, purporting to hold a public office to show under what authority of law he claimed to hold that office. The other citation, to my mind, would also not be of any assistance either.
9. It is common ground that no rules have been framed by the Central Government under section 35 of the Ordinance, while the regulations made by the Corporation under section 36 do not contain any provisions in regard to payment of bonus. The applications to the Labour Courts, under -the circumstances, were competent.
10. Jurisdiction given, the question is, whether the Labour Courts were justified in refusing bonus for the years 1971-72 and 1972-73, and ordering the payment of bonus for the year 1973-74.
11. According to Standing Order 10-C of the Ordinance, every employer making profit in any year has to pay to his workman a bonus, in addition to the wages payable to him, "if the amount of the profit is not less than the aggregate of one month's wages of the workmen employed, be than the amount of such aggregate, subject to the maximum of thirty per cent. Of such profit". This is in addition to any other bonus to which he might have been entitled in accordance with the terms of employment, or, any usage, or, any settlement, or any award of a Labour Court. "Profit" has been defined in the explanation appended to Standing Order 10-C to mean the "net profits" as defined in section 87-C of the Companies Act, 1913 which reads as under "87-C.-(1) ------------------------------------------------------------------------...
(2)---------------------------------------------------------------------------------..
(3) For the purposes of this section `net profits' means the. Profits of the company calculated after allowing for all the usual working charges, interest on loans and advances, repairs and outgoings, depreciation, bounties or subsidies received from (any Government) or from a public body, profits by way of premium on shares sold, profits on sale proceeds of forfeited shares, or profits from the sale of the whole or part of the undertaking of the company but without any deduction in respect of income-tax or super-tax or any other tax or duty on income or revenue or for expenditure by way of interest on debentures or otherwise on capital account or on account of any sum which may be set aside in each year out of the profits for reserve or any other special fund."
The balance-sheet shows that the Corporation had borrowed from the Government of Pakistan a sum of Rs. 31,84,73,152. The annual interest thereon was Rs. 1,01,21,643. It also appears from the Auditor's report, in regard to the financial position of the Corporation, that its net assets blocked in East Pakistan amounted to Rs. 8.97 crores, and the Government had agreed to defer the interest liability of the Corporation until a final decision had been taken on the settlement of claims. It is true that, for the years in question, the balance-sheet had shown profits, but all the obligations of the Company have been specially mentioned in clear terms. The amount was with the Corporation, and it had to be accounted for somehow, but the fact is that the yearly profits indicated will not be sufficient for the debt servicing of the respective years even. The realisation of the interest had been deferred, because the assets and the resources of the Corporation have to be replenished, otherwise the very object, for which the Corporation was created, would be defeated. The amounts blocked in East Pakistan, looking to the nature of the Corporation, are mostly investments in scrips, loans and the like. The capital investment is only nominal. It is also not denied, that, in spite of the vicissitudes suffered by the Corporation, in view of the traumatic :happenings in 1971, it has been paying a bonus equivalent to two months pay to all its workmen for all these years. The attitude of the Corporation cannot, therefore, be said to be niggardly. All the same, it will be the bounden duty of the Corporation to pay the bonus, as envisaged under clause (1) of Standing Order 10-C of the Ordinance, if there are any profits earned by it. There are, in fact, no profits, though technically some profits are indicated in the balance-sheets. If there are no profits available with the Corporation-its debt-servicing liabilities yearly only temporarily deferred, being greater-in the words of the Supreme Court, the Labour Courts cannot be permitted to assume the role of benevolent despots. I am, therefore, of the opinion that the approach of the Labour Court in Constitu--tional Petition No. 25/1975 is its the exercise of lawful authority, but the same cannot be said about the decision, which is the subject-matter of Constitutional Petition No. 1263/1975. It, therefore, is hereby quashed.
12. In the result, the Constitutional Petition No. 25/1975 is dismissed, while the Constitutional Petition No. 1263/1975 is allowed. There will, however, be no order as to costs.