' NAZIM HUSSAIN SIDDIQUI, J.---This judgment will dispose of Civil Appeals Nos.207 and 208 of 1995.
2. In Civil Appeal No,207 of 1995, the impugned judgment is dated 15-6-1994 of a learned Judge in Chamber, Peshawar High Court passed on C.M.A. No,1 of 1992 in Company Claim No,3 of 1990, while in Civil Appeal No,208/1995 judgment is of the same date passed in C.M. No,5/1992 in Company Claim No,2 of 1990.
3. The facts relevant for decision of these appeals are that in Civil Appeal No,207 of 1995 the appellant is the N.-W.F.P. Employees' Social Security Institution, hereinafter referred to as "the Institution", constituted under the provisions of Social Security Ordinance, 1965 as amended by N.- W.F.P. Employees' Social Security Ordinance, 1970, hereinafter referred to as "the Ordinance of 1965".
The Institution has been established for providing benefits to certain employees or their dependents in the event of sickness, maternity, employment injury or death and for matters ancillary thereto.
4. The employees of respondent No,2, M/s. Chemicals Ltd., District Charsadda, were the beneficiaries of social security cover provided by the institution for the last so many years, which continued up to August, 1990.
5. It appears that the order of winding up of respondent No,2 was passed on 8-9-1990 and, therefore, Official Liquidators were appointed. The Institution submitted its claim to the Official Liquidators to the tune of Rs,1,94,414.45 towards contribution, which the company was liable to pay as original amount. The Institution also claimed that, besides above amount, the company was also liable to pay an amount of Rs,1,95,960.31 under section 23 of the Ordinance of 1965 being an increase on unpaid contribution. Thus, the total claim of the Institution against the company was of Rs,3,00,374.76.
6. The Official Liquidators informed the Institution, through their letter dated 6-7-1992, that though they had accepted claim of the Institution to the tune of Rs,1,83,105.00 but out of said amount, Rs,70,875.00 were treated as preferential claim under section 405 of the Companies Ordinance of 1984, hereinafter referred to as "the Ordinance of 1984" and the balance of Rs,112,230.00 was treated as unsecured debt. The Institution challenged the report of Official Liquidators, which was in above terms and learned Company Judge passed" the following order:--- "This is an application of Employees' Social Security Institution praying that the balance amount be also treated as preferential claim instead of treating an ordinary unsecured debt. The Official Liquidators have dealt with the claim under section 405(1)(a) of the Companies Ordinance and have ranked the claim accordingly. I do not find any exception to this. The application is dismissed."
7. In the matter relating to Appeal No,208 of 1995 the Institution had claimed an amount of Rs, 12,94,169.84 as original amount, Rs, 10,84,247.39 as an amount under section 23 of the Ordinance of 1965, total Rs,23,78,417.23. The Official Liquidators accepted the total liability of company namely, Pakistan Paper Corporation Limited, Charsadda to the tune of Rs,561,616.00 and treated it as preferential claim, under section 405 of the Ordinance of 1984. The Institution impugned above order before High Court, which affirmed the report of the Official Liquidators and directed them to release amount of Rs,561,616.00 to the Institution.
8. Above orders of High Court have been impugned in these appeals. Leave to appeal was granted in these matters to consider the followings:
(i) Whether the petitioner's claim against the liquidated Company in its entirety shall be deemed to be included amount debts. To be paid priority to all other debts?
(ii) Whether on Company's failure to pay on due date, the contributions payable by it under subsection (1) of section 23 of the West Pakistan Employees' Social Security Ordinance (X of 1965), the amount so payable by it is liable to be increased by 10 per centum as envisaged by section 23 thereof?
9. Learned counsel for the appellants, while arguing these appeals referred to the provisions of section 405(1)(a) of the Ordinance of 1984 and section 68 of the Ordinance of 1965, which are as follows:- (Section 405(1)(a) of the Companies Ordinance, 1984)
405. Preferential payments.---(1) In a winding-up, there shall be paid in priority to all other debts--
(a) all revenue, taxes, cesses and rates due from the company to the Federal Government or a Provincial Government or to a local authority at the relevant date and having become due and payable within the twelve months next before that date;"
(Section 68 of the Social Security Ordinance, 1965)
68. Contributions, etc. To have priority over other debts.---In any proceedings of insolvency against a person or proceedings for the winding up of a company, any contribution or other amount payable under this Ordinance by such person or company shall be deemed to be included among debts to be paid in priority to all other debts.
10. It is contended on behalf of the appellants that the Institution is entitled to the entire amount, including the amount claimed under section 23 of the Ordinance of 1965 on preferential basis. To enforce above contention reliance is placed upon the unreported judgment dated 15-3-1992 of this Court passed in Civil Appeal No,90-P of 1990 (Appeal against the judgment dated 3-3-1990 of Peshawar High Court in Appeal No,82 of 1981). In above judgment, a learned Division Bench of this Court, having taken into consideration the provisions of section 405(1)(a) of the Ordinance of 1984, the provisions of section 68 of the Ordinance of 1965, clause 28 of the General Clauses Act, 1897 and Article 143 of the Constitution of Islamic Republic of Pakistan, reached the conclusion that the provisions of section 405(1)(a) and provisions of section 68 are not inconsistent but are supplementary or complimentary to clause 'a' of said subsection (1) of section 405 of the Ordinance of 1984. Further, it was observed that these are the provisions of section 68 of the Ordinance of 1965 and not of section 405(1)(a), which bring the claim of the Institution on preferential basis.
11. We respectfully follow the dictum laid down in the aforesaid case and hold that in Civil Appeal No,207 of 1995 the amount of Rs,1,83,105 shall be treated on priority basis in terms of section 405(1)
(a) of the Ordinance of 1984. The claim of Rs,1,95,960 of the Institution under section 23 of the Ordinance of 1965 was not justified. The company had suffered loss and had gone in liquidation.
This was the reason for non-payment of contribution. Therefore, additional liability of increase on unpaid contribution could not be imposed and it was to be restricted to the original amount as determined by the Official Liquidators.
12. As regards Civil Appeal No,208 of 1995, total claim of the Institution was Rs,23,78,417.23 but the Institution proved its claim only to the extent of Rs,561,616.00, which has already been allowed to be treated as preferential claim.
13. In consequence, Civil Appeal No,207 of 1995 is allowed to the above extent and Civil Appeal No,208 of 1995 is dismissed.