SANA INDUSTRIES LIMITED VS GOVERNMENT OF PAKISTAN, 2012 PTD-SUPREME-COURT 420 (2011)

(Against the judgment dated 14-12-2004 passed the High Court of Sindh, Karachi in Constitutional Petition No. 920 of 1995).

Companies Profits (Workers' Participation) Act (XII of 1968)---

----S.3 & Sched.---Workers' Participation Fund---5% profits of company for financial year 1-10-1991 to 30-9-1992 paid into such fund on 16-1-1993---Interest on such profit from 1-10-1991 till its payment on 16-1-1993 claimed by such Fund---Company's plea that no interest was payable on such profit paid during grace period of nine months after end of a financial year---Validity---According to provisions of S.3(2) of Companies Profits (Workers' Participation) Act, 1968, such profit payable by company stood allocated to and vested in such Fund on first day of the following financial year i.e. 1-10-1992---No legal nexus existed between such grace period and liability of a company to pay interest on delayed payment of such profit---According to scheme given in Schedule of the Act, interest to such Fund would accrue on and from first day of year next succeeding the year in which scheme became applicable to the company---Such scheme became applicable to company on 1-10-1992, thus, company was liable to pay claimed interest.

Dilshad Hussain and another v. Islamic Republic of Pakistan through Secretary, Ministry of Labour, Manpower and Overseas Pakistanis, Islamabad and another 2005 SCMR 530 distinguished.

M. Humayoon, Advocate Supreme Court for Appellant.

Respondents Ex parte.

Date of hearing: 18th October, 2011.

JUDGMENT

JAWWAD S. KHAWAJA, J.---The appellant which is a limited liabilityCompanyoperatinginthetextilesector,impugnsthejudgmentofthelearnedDivisionBenchofthe SindhHighCourt dated 14-12-2004. The facts of the case and the issues arising in it are straightforward and can be briefly stated to provide context to the discussion which follows.

2.The appellant acknowledges that it was required by law to establishaWorkers'ParticipationFund(the'Fund')intermsofsection 3 of the Companies Profits (Workers Participation) Act, 1968 (the 'Act').SuchFundwas,infact,establishedbytheappellant.TheActprovidesinteralia, that 5% oftheprofitsofaCompanyduringany financial year shall be paid into the Fund. The liability to create the Fund and to make payment of profit into it is set out in section 3 of the Act. The said provision, to the extent relevant, is reproduced as under:--

"Section 3. Establishment of Fund - (1) Every Company to which the scheme applies shall---

(a)............................................

(b)subject to adjustments, if any, pay every year to the Fund not later than nine months after the close of that year five per cent of its profits during such year, which shall, where the accounts have been audited by an auditor appointed under section 23-B of the Industrial Relations Ordinance, 1969 (XXIII of 1969), be assessed on the basis of such audit; and

(c)............................................

(2)The amount paid to the Fund under clause (b) of subsection (1) inrelationtoayearshallbe deemedtohavebeenallocatedtotheFundonthefirstdayoftheyearnext succeeding that year.

(underlining is ours)

3.Theappellantacceptsthatforthefinancialyear1-10-1991 to 30-9-1992, it was required to pay 5% of its profits into the Fund and accordingly a sum of Rs.37,50,203, being the amount of the appellant's liability, was paid into the Fund on 16-1-1993. The point in contention between the appellant and the respondents is quite simple. According to therespondentstheappellantwasrequiredto payinterestonthe said amount from 1-10-1992 until the date of payment of the amount i.e. 16-1-1993. The appellant disputes this and denies its liability to pay interest for this period. The High Court has held that the appellant is liable to pay interest for the aforesaid period. The appellant is aggrieved of this finding. Hence this appeal.

4.The fact that the Fund and the scheme envisaged under section 3 of the Act were applicable to the appellant for the year 1991-92 is agreed by the appellant. Furthermore, the calculation of the amount of Rs.37,50,203 is not in question in this case. The relevant provisions of the Act, therefore, need to be considered for the purpose of deciding if the impugned judgment is open to question. For this purpose, reference to subsection (2) of section 3 of the Act is necessary. Through express statutory wording, it has been stipulated that the amount paid into the Fund "in relation to a year shall be deemed to have been allocated to the Fund on the first day of the year next succeeding that year". This means that by operation of law the amount so payable becomes the asset of the Trustees of the Fund on the first day of the following financial year. With this legal position established, it becomes evident that on 1-10-1992 the amount stood allocated to and vested in the Fund as per section 3(2) of the Act.

5.Itwasarguedonbehalfoftheappellantthatasper section 3(1)(b) of the Act, the appellant was entitled to a grace period of nine months after the end of a financial year within which it could pay the amount in question. On this basis, it was submitted that no interest would bepayableiftheamountispaidwithin thesaid periodofnine months.Thisisanon-sequitor.Thereisnolegal nexusbetween thegraceperiodofninemonthsandtheappellant'sliabilityto payinterestontheamount.Thisviewis fortifiedbyreferenceto the scheme given in the schedule to the Act. The relevant part of the scheme which is directly to the point clearly stipulates that "the interest to the Fund shall accrue on and from the first day of the year next succeeding the year in which the scheme becomes applicable to the Company". The admitted position is that the scheme in respect of the appellant became applicable to it on 1-10-1992. There is no difference of opinion between the parties or room for dispute on this fact. Therefore, by virtue of the scheme, interest had to accrue on the amount in question from the said date regardless of the date on which the requisite amount was credited to the Fund.

6.Learned counsel for the appellant then referred to the case titled Dilshad Hussain and another v. Islamic Republic of Pakistan through Secretary, Ministry of Labour Manpower and Overseas Pakistanis, Islamabad and another (2005 SCMR 530) in support of his contention that no interest was payable to the Fund by the appellant if the amount due was paid within the period of nine months stipulated in section 3 of the Act. We have gone through the cited precedent and note that it is clearly distinguishable on facts. The dispute in the said case was between the workers and the Government. As is evident from para 3 of the cited judgment the appellants in the said case namely, Dilshad Hussain and another, had taken the plea that the workers were entitled to the entire accrued interest and that any share therein given to the Federal Government was illegal and ultra vires. The plea taken by the Deputy Attorney General on behalf of the Government further highlights the nature of the dispute in the precedent case. It was his stance that after making payment to workers as per paragraph 4(d) of the scheme, the balance amount was to be credited to the Fund created under the Workers Welfare Fund Ordinance, 1971.

7.The matter before us does not relate to any dispute between the workers and the Government or as to their respective entitlement to the amount credited to the Fund. It is for this obvious reason that the ratio of the cited precedent has no application in the present case. The issuewhich arises before us was neither examined nor adjudicated upon in the case of Dilshad Hussain supra.

8.In view of the foregoing discussion, we find no merit in this appeal. The same is, therefore, dismissed.

S.A.K./S-57/SCAppeal dismissed.