' The common question that arises in these two appeals under section 64 of the West Pakistan Employees' Social Security Ordinance, 1965, is whether the persons employed by the independent contractor to run the canteens situate at the factory premises of the respondents, are covered by the said Ordinance so as to make the respondents liable for contribution in respect of these persons to the Social Security Institution within the meaning of section 20 of the said Ordinance.
The additional question that arises in Misc. Appeal No, 18 of 1976 is whether or not the respondent is so liable under the said section 20 in respect of persons employed at its Head Office at I. I.
Chandigarh Road, Karachi.
2. By Notification dated 28-1-1967, the then Governor of West Pakistan in the exercise of the powers conferred by subsection (3) of section 1 of the Ordinance was pleased to apply with effect from 1st March, 1967, the said Ordinance to Karachi District and to the employer and employees of establishments mentioned in column 3 thereof and to direct that employees of such establishments shall be entitled to the benefits as provided in sections 35 to 45 of the said Ordinance. In column 3 appeared at S. No, 197 the name "Adamjee Cotton Mills Ltd., Landhi," the respondent in Misc. Appeal No, 18 of 1976. On 15-3-1973, this respondent received a letter from the Director of the Institution in which it was stated that the cespondent was not paying social security contribution in respect of canteen workers and employees of their Fair Price Ship and their Head Office Staff since March, 1967, and the total amount of contribution in respect of these workers comes to Rs, 77,258.40 which together with the increased .Amount of Rs, 37,642.32, this respondent was called upon to pay within a week failing which the same will be recovered as arrears of land revenue. The respondent by its letter dated 19-3.1973 disputed the claim and asked for its detal. By letter dated 28th March, 1973, the Assistant Collector gave a notice to the respondent as a defaulter under section 81 of the Land Revenue Code, 1871 calling upon them to pay a total sum of Rs, 1,32,400.68 within 10 days failing which compulsory proceedings would be taken for its recovery as arrears of land revenue together with an additional penalty not exceeding 1/4th of the amount in arrears under section 148 of the Land Revenue Act. The Institution by their letter dated 7-4-1973 gave the details of the amount due and payable by the respondent which was Rs, 88,258.34 towards the contribution in arrears and Rs, 44,142.34 towards the increase and called upon the respondent to pay the same within seven days failing which the same will be recovered 'through the Assistant Collector, Karachi as arrears of land revenue. The respondent then filed an appeal under section 59 of the said Ordinance which was allowed by the Social Security Court by its order dated 12-3-1976.
3. In Misc. Appeal No, 96 of 1974 by letter dated 26th May, 1973, the respondent was called upon to pay contribution of Rs, 160 per month in respect of their canteen workers for two years amounting to Rs, 3,840.00 together with the increase, which claim was disputed by the respondent on the ground that the persons working in the canteen were not directly or indirectly employed by the respondent and though they were subsidising the canteen, it was run by an independent contractor. Then followed long correspondence between the parties and series of meetings and as the demand made was not withdrawn, the respondent filed an appeal under section 59 of the West Pakistan Social Security Ordinance, 1967, which was allowed by the Social Security Court by order dated 23rd August, 1974.
4. The first question that arises for consideration in these two appeals Is whether persons working in the canteen and/or the Fair Price Shop were the employees of the respondents within the meaning of the expression contained in subsection (8) of section 2 of the said Ordinance which reads as follows:- `2.-(8)' Employee' means any person working, normally for at least twenty-four hours per week, for wages, in or in connection with the work of any industry, business, undertaking or establishment, under any contract of service or apprenticeship, whether written or oral,. Express or implied but does not include-
(a) persons in the service of the State including members of the Armed. Forces, Police Force and Railway servants;
(b) persons employed in any undertaking under the control of any Defense Organization or Railway administration; (c)persons in the service of a local council, a municipal committee, a cantonment board or any other local authority;
(d) any person in the service of his father, mother, wife, son or daughter, or of her husband; (e)
(f) any person employed on wages exceeding five hundred rupees per mensem;"
'The above expression to be properly understood has to be read in the context of two other definitions "employer" and "wages" which read as follows:- "2.-(9) 'Employer' means in the case of works executed or undertakings carried on by any contractor or licensee on behalf of the State, the contractor or licensee working for the State, and in every other case the owner of the industry, business, undertaking or establishment in which an employee works and includes any agent, manager or respresentative of the owner.
(30) 'Wages' means remuneration for service paid or payable in cash or in kind to a secured person, not 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 legaistrike; 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;
(d) any sum paid as bonus by the employer."
5. To be an employee the persons must be working for wages which would include not only his monthly remuneration but also any dearness allowance or any other payment made by the employer to such a person in respect of his authorised leave, illegal lock-out or legal strike.
Secondly, such a person must be working in or in connection with the work of any industry, business, undertaking or establishment and lastly, he must be so working under a contract of service or apprenticeship which may either be written or oral or express or Implied. To be an employer he must be owner of an industry, business, undertaking or establishment in which the defined employees work and will include any agent, manager or representative of the owner.
6. Mr. S. A. Sarwana, the learned counsel for the Institution contended that once it is established that there is an employee who is working for wages in or in connection with an industry, under a contract of service, such a person becomes an employee and since admittedly, the workmen working in the Canteen and/or at the Fair Price Shop were working for wages in or in connection with the work of the industry and under a contract of service, they were employees within the meaning of the expression defined in the Ordinance and nothing more need be looked into. The learned counsel went on to argue that in this context it is immaterial that the wages were paid for by the contractor or that the workers in the canteen and the Pair Price Shop were under contract of service with the contractor. In other words the learned counsel wanted to read the expression "employee" independent of the expressions "employer" and "wages" defined in the Ordinance. The argument is obviously fallacious for three c dlective ingredients of the concept of employment are, an employer, his employee, and a contract of employment between the two. It is not sufficient to say that X' is an employee but the question that immediately follows is, whose employee is he?
Therefore, unless there is contract of service between "X" and "Y" there would be no relationship of employee and employer between the two. It is significant to note that whenever the Legislature intended to depart from this commonly understood concept of employment, like when an employer was sought to be made liable not for his own employees but for the employees of his contractor, it was expressly so provided such as in section 12 of the Workmen's Compensation Act, 1923 and section 40 of the Employees Old Age Benefits Ordinance, 1975 (Ordinance XXVII of 1975). In the Ordinance the employer is that person who owns the industry and the agent, manager or representative of such owner and payment of wages by such a person either in cash or in kind as remuneration for service. In the present case, therefore, though persons employed in the Canteen and the Fair Price Shop were working in or in connection with the work of the respondents they were not their employees for they neither paid them wage nor were they under any contract of service with them. Mr. S. A. Sarwana, the learned counsel for the Institution invited my attention to a decision of a learned Single Judge of this Court, in Misc. Appeal No, 59 of 1974, in which the following observation appears: - "So far as payment to the two contractors are concerned, namely, items 3 and 4 of the respondent's letter of 8th June, 1973, no doubt the plaintiffs would be deemed to be the employer of any workmen engaged by these contractors, to whom they had assigned work in connection with their establishment by reason of the definition of 'employer' contained in the Ordinance, as the contractors would be deemed to be the representatives of the employer, but in order that 'contribution' should be levied upon such payment, it has to be established by the respondents that the workmen employed by the contractors fall within the definition of 'employee' as contained in the Ordinance, for 'contributions' are payable only in respect of employees. Now only such persons are deemed to be 'employees' for the purposes of the Ordinance as have been working normally for at least twenty-four hours per week for "wages" in or in connection with an industry, business, undertaking or establishment. Mr. Sarwana conceded that there was no evidence on record to show that workmen employed by the plaintiff's contractors bad been engaged in connection with the work of the plaintiffs or their establishment for a period of not less than twenty-four hours per week. In fact, there is no evidence on this point whatsoever. As such, these workmen would not come within the definition of 'employees' for the purposes of the Ordinance, and no 'contribution' would be payable by the employer on remuneration paid to them."
7. I have given anxious thought to the above observations of my learned brother and cannot say if I have really understood them. An independent contractor is not an agent or representative of the person for whom he has agreed to do the assigned work. He does not while engaged in his assigned work, represent the person who had employed him to do that work. He is an independent contractor and his obligation is to complete the assigned work without any interference from the employer. The acts of a contractor are not acts of his employer as acts of an agent are that of his principal. By holding that owners "would be deemed to B be the employer of any workmen engaged by these contractors to whom they had assigned work in connection with their establishment by reason of the definition of 'employer', as the contractors would be deemed to be representative of the employer", the learned Judge appears to have overlooked the requirement of law that a person to be an "employee" under the Ordinance has to be under contract of service with his employer and the work is done in consideration of wages payable by such an employer.
8. Mr. Sarwana next invited my attention to subsection (1) of section 20 of the Ordinance which reads as follows- "20. Amount and paymeats of contribution.-(1) Subject to the other provisions of this Chapter, the employer shall in respect of 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."
' The learned counsel contended that under the aforesaid section the employee may be employed by the employer either directly or through any other person, to make the employer liable to make the contribution. The argument ignores the words "employed by him", occurring in the section. To be made liable for contribution the person must be employed by the employer which may either be directly or indirectly. The persons working in the Canteen and the Fair Price Shop were not employed by the respondents.
9. Mr. Khurshid Anwar Shaikh, and Mr. Kama Mansoor Alam, the learned counsel for the respondents referred me to several decisions from Indian jurisdiction including Chintaman Rao and another v.
State of Madhya Pradesh (1) in which the words "person employed directly or through an agency" occurring in the definition of the expression "worker" In Factories Act, 1934 were interpreted as indicating that the employment is by the Management directly or through some kind of employment agency and in either case there is contract of employment between the Management and the persons employed and there should be a private of contract between them and the Management. Furthermore, I cannot ignore the definition of the expression "employee" in section 2 of the Ordinance, and give it an extended meaning as there is nothing in the context of section 20 to pursuade me to depart from the defined expression. It may here be recalled that under the original subsection (2) of section 20 the employer was entitled to deduct from the employees' wages prescribed percentage towards latter's contribution and there would be no occasion to make any such deduction by an employer from wages payable not by him but by his independent contractor. There is also considerable force in the argument that if subsection (1) of section 20 was intended to include contractor's labor it was
(1) AIR 1958 SC 388 ' not necessary to provide in subsection (8) that in the case of construction work the owner of the building shall guarantee the payment of contribution t by the contractor. There would be no occasion to say that there would be any contribution payable by a contractor or that such a contribution should be guaranteed by the owner of the building if subsection (1) of section 20 had already made the owner himself liable for the employees of the contractor.
10. The upshot of the above discussion is that the respondents are not liable to any contribution for persons employed by the contractor for running their Canteen and the Fair Price Shop.
11. Coming to the additional ground in C. M. A. No, 18 of 1976 the contention of Mr. Sarwana was that the establishment, Adamjee Cotton Mills Ltd., Landhi was among others, a concern owned by Adamjee Industries Ltd., which has its Head Office at I. I. Chandigarh Road, Karachi and that in the Textile Division of Adamjee Industries Ltd., were employed persons who were working in connection with the work of the Cotton Mills at Landhi for whom the respondent was bound to make contribution under -section 20 of the said Ordinance. Mr. Sarwara, conceded that it was not possible for him to state on behalf of the Institution that every person working in the Textile Division of Adamjee Industries Ltd., was working in connection with the work of Adamjee Cotton Mills but since according to him the respondent refused to allow inspection of the records the institution had no other alternative but to include every one of them as secured person. Mr. Khurshid Anwar Shaikh, the learned counsel for the respondent contended that the notification expressly applied to the establishment of "Adamjee Cotton Mills Ltd., at Landhi" which is an industrial establishment registered under the Factories Act, 1934, and there would, therefore, be no occasion to apply the Ordinance to the Textile Division of Adamjee Industries Ltd., which is a commercial establishment registered under Shops and Establishments Act. Now it is correct that in so far as the parties are concerred though the Ordinance was extended to Adamjee Cotton Mills Ltd., Landhi as far back as 1967 the persons employed at the Head Office in the Textile Division were not regarded as -secured persons. In fact, Adamjee Cotton Mills is not a limited company and has been wrongly described as such. Probably it was for this reason that the persons employed in Textile Division of Adamjee Industries Ltd., were excluded as having no connection with what was understood to be independently incorporated person, the Adamjee Cotton Mills Ltd. The Ordinance was extended to the cotton mills at Landhi and will, in view of the definition of "employee" extend to all persons working in connection with the work of the said mills irrespective of their place of work. Mr. Khurshid Anwar Shaikh contended that the Government was aware or should have been aware of the fact that Adamjee Industries Ltd., was the owner of the cotton mills and if the intention was to extend the application of the Ordinance not only to the employees working at the mills but also the employees working at the Head Office in its Textile Division the Ordinance would have been extended to Adamjee Industries Ltd., Textile Division and in its absence the application must be confined to Adamjee Cotton Mills Ltd., Landhi. This indeed would have been more appropriate manner of extending the application of the Ordinance to all the employees of the Adamjee Industries Ltd., Textile Division. But the question here is whether in law the notification dated 15th October, 1968 will cover the employees in the Textile Division of Adamjee Industries Ltd. And for its answer our attention should not be limited to subsection (1) of section 3 of the Ordinance and the notification issued thereunder which in the present case was extended to Adamjee Cotton Mills Ltd., Landhi but also to the definition of the expression "employees" which will extend the benefit to all persons working in connection with the industry or establishment to which the Ordinance is made applicable. To my mind once we are clear as to the meaning of the words "in connection with the work of any industry or establishment" it will extend to all the employees working in connection with the work of the industrial establishment to which the Ordinance has been made applicable wherever such work may be carried on provided it is confined to the specified area of the Karachi district. Mr. Khurshid Anwar Shaikh relied on a decision reported in Messrs Kashmir Corner v. Sind Employees' Social Security Institution, Karachi 1) in which the Ordinance was extended to Kashmir Handicrafts, Korangi Industrial Area, Karachi and the demand was made in respect of persons working at the establishment known as Kashmir Corner at Zaibunnissa Street on the ground that both the establishments were owned by the same persons but the contention was repelled in these terms: "The notification does not refer and the Ordinance does not, therefore apply to a single natural person or a legal entity all the employees of which are to be given the benefits of the Ordinance.
On the contrary in its own terms it talks of the 'employees of establishments mentioned against each of such areas' and the word 'establishment' is itself defined in the Ordinance thus 'establishment means organization, whether industrial, commercial, agricultural or otherwise'. By reason of this definition and section 1(3) of the Ordinance which I have already quoted it seems plain that the Ordinance was not to apply to all concerns owned by a particular person or a legal entity as such but to industries or establishments specifically stated (I ignore as being irrelevant for my present purposes, the words 'classes of personal. It seems to me, therefore, that the intention of the legislation was to provide specifically for the employees of such industries or establishments.
The demand in respect of Zebunnissa Street Establishment is made on the basis that in that Establishment are sold some of the goods manufactured in the Korangi Establishment and that the two establishments have a common ownership. In my opinion that mere fact doe; not connect the two sufficiently for the purpose of making the Ordinance applicable to the Zebunnissa Street Establishment. It is in fact the case of the appellants which is not denied, that a great deal of the products manufactured at the Korangi Establishment are exported while the Zebunnissa Street Establishment sells goods which are not manufactured at the Korangi Establishment only."
12. Mr. Sarwana on the other hand relied on an unreported decision in M. A. No, 105 of 1973 in which another learned Single Judge of this Court was pleased to hold that extension of the Ordinance to a particular industrial establishment will extend to the employees at Head Office of the company which owns that industrial Establishment on the ground that "it
(1) PLD 1975 Kar. 36 'cannot be denied that the staff at the Head office of the respondents is in connection with the work of the industry". It will, therefore, have to be determined as to who are the employees at the Head office who are working In connection with the work of the Adamjee Cotton Mills and this would depend upon the nature of their duties and its relation to the work at the mills. Admittedly, the work of Adamjee Cotton Mills is that of manufacture of cloth. It follows, therefore that only persons who are in some manner or other connected with the said work viz. Production of cloth will come within the expression "employee". It is no part of the work of the Mills at Landhi to sell or export the manufactured goods for their work would end with the production of the finished articles.
13. Unfortunately the Institution in the present case proceeded on the assumption that all the employees of the Head Office in the Textile Division would ipso facto become secured persons. No evidence was led by either party as to the persons at the Head Office who will be deemed to be covered by the extension of the Ordinance to Adamjee Cotton Mills, Landhi. I will, therefore, in so far as this aspect of the case is concerned remand the case back to the Social Security Court who will give the parties liberty to lead such evidence as they may desire as to the persons working in the Textile Division of Adamjee Industrial Ltd., to whom the benefit of the Ordinance should be available as persons working in connection with the work of the Adamjee Cotton Mills, Landhi.
14. Lastly, the question that arises for consideration is whether or not the respondent in Misc. Appeal No, 18 of 1976 will be liable to the increase by reason of their failure to extend the benefit of the Ordinance to such employees at the Head Office as are found to be working in connection with the work of Adamjee Cotton Mills under section 23 of the Ordinance. Mr. Sarwana contended that if as is found that some or all the employees of the Textile Division were covered by the Ordinance since the year 1967, it must automatically follow that the respondent must pay the increase provided in said section 23. On the other hand, Mr. Khurshid Anwar Shaikh contended that this is a penal clause and unless the finding is that it was an intentional violation on the part of the respondent or any omission arising out of their default or neglect there would be no occasion to impose penalty under the said section. I have noticed that failure to pay the contribution under the law not only entails a heavy penalty but also amounts to a criminal offence. The words used in section 23 "if any employer fails to pay on the due date the contribution payable by him.. ..." would import in the context of section 66 which makes such failure an offence punishable with imprisonment which may extend to three months or with fine extending to 1.000 rupees or with both, an element of default or neglect and not a mere omission to perform an obligation. In the present case to begin with the Ordinance was extended to a non-existent incorporated person, namely, Adamjee Cotton Mills Ltd., Landhi which may have reasonably led the respondent to believe that the intention was to confine it to their mills establishment at Landhi. In another notification under subsection (3) of section 1 of the Ordinance, dated 15th October, 1968 two items at S. Nos. 53 and 61 are worth- noticing. The former of this reads "Sind Steel Mills Ltd., Corporation Ltd., 9/20, S. I. T. E., Karachi" while the latter is "Sind Steel Corporation Ltd., Steel House, West Wharf, Karachi 2" which would show that the Government when intending to extend the benefits of the Ordinance to more than one establishment of the same owner did so specifically. This fact may also have increased the possibility of the same belief being reasonably held by the respondent. It is also significant to note that it is equally the duty of the Institution to see that benefits due to the employees are not denied to them but the Institution remained totally oblivious for a long period of five years. It will, therefore, be unjust and unfair to impose the increase on the respondent for there has been no default, neglect or failure on their part. The result, therefore, will be that while the respondent will be liable to pay contribution in respect of employees found to be so on remand by the Social Security Court with effect from 28-1-1967 but there will be no occasion for them to pay any increase under section 23 of the said Ordinance.
15. The result, therefore, is that Misc. Appeal No, 96 of 1974 it dismissed with cost and Misc. Appeal No, 18 of 1976 is partly allowed and the case remanded to the Social Security Court as aforesaid with no order as to cost.