Constitutional Petition No.S-62 of 2006

                                                                                                                                                                                                                Date                                                         Order with Signature of the Judge                                                         



Heard on 13th January, 2016.


Mr. Muhammad Ali Khan, Advocate for petitioner.

Mr. Muhammad Atiq Qureshi, Advocate for respondent No.1.

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SYED MUHAMMAD FAROOQ SHAH, J.:- Impugned is the decision dated 04.12.2005 given in Appeal No.02/2005 under section 17 of the Payment of Wages Act, 1936, whereby the order dated 27.04.2004 passed by the authority has been set aside and the respondent company was directed to make payment of deducted amount of Rs.3,64,638/- to the applicant within thirty days. Record shows that on earlier appeal, the matter was remanded to the authority vide order dated 30.11.2004 and against said order respondent filed Constitutional Petition No.55 of 2005 before this Court, whereby the order passed by Labour Appellate Court was set aside and Labour Court was directed to decide the appeal on merits taking into the consideration issues already framed and evidence led by the parties and to pass appropriate decision after affording opportunity to the parties. 


2.         The real point, which requires determination, is that the Appellate Authority/learned Labour Court has jurisdiction to direct the company/petitioner to pay the payment/ gratuity on gross wages or basic wages.


3.         Succinct facts of the petitioner’s case as averred in the memo of petition are that petitioner-company is engaged in manufacturing the tyres and tubes and respondent No.1 was last employed as Senior Production Superintendent, drawing gross salary of Rs.17,973/-. As Senior Production Superintendent, respondent No.1 was performing work purely of supervisory nature as his main and primary functions and he was also not a member of any union registered in petitioner’s establishment. He was drawing facility as management staff, hence he was not covered under any memorandum of settlement executed between management and the CBA. The petitioner-company was collective bargaining agent and introduced Provident Fund Scheme for the benefit of workmen, which scheme came into force but after approval by the Government another memorandum of settlement was also concluded between the management and CBA on 17.01.1975, wherein the union had demanded that the rate of gratuity to be paid should be one month last salary drawn for each completed year of service together with provident fund and for the payment of gratuity, it should be same as laid down in the Industrial & Commercial Employment (Standing Orders) Ordinance, 1968. In relation to this demand for the payment of gratuity on the same condition as laid down in law, the petitioner company has expressed its inability to accept this demand. Further in relation to provident fund, the petitioner’s management had agreed to 8% of salary as condition and equivalent amount was to be provided by the company in relation to all workers. Once again, on 08.2.1977, another memorandum of settlement concluded between management and CBA, whereby it was agreed by the management that in addition to provident fund petitioner-company will also introduce gratuity scheme and this gratuity scheme was also restricted to workers and was on “slab system” and in this agreed scheme a worker, who completed six years continuous service was entitled to fifteen days wages for each completed year of service and a worker, who completes ten years of continuous service was entitled to 20 days wages for each completed year of service as gratuity. It was further agreed between the parties that gratuity will be payable on discharge of service of a workman but no gratuity will be paid on dismissal for misconduct. Yet on 19.3.1981 another memorandum of settlement was concluded between management and CBA, in which time for payment of gratuity and length of service was also stipulated and it was agreed upon for the first time by the management that gratuity will also be payable to the workman on retirement. This settlement is, however, no more in operation and expired.


4.         It is averred by the petitioner that no gratuity is payable in law if there is a Provident Fund Scheme, however, the management voluntarily had earlier agreed for payment of gratuity as a second retirement benefit over and above Provident Fund Scheme; that since 1970 till date no workman either on retirement or discharge of service has claimed gratuity as a second retirement benefit on gross salary notwithstanding Provident Fund Scheme in force, which payment he has received based on the calculation of gratuity in the Industrial & Commercial Employment (Standing Orders) Ordinance, 1968 but based on the settlement meant for workmen and on established custom usage and practice on basic salary.  

5.         Contents of instant petition further reveals that respondent No.1 on his retirement on 16.06.2002 received payment in relation to gratuity for his entire service on the basis of basic wages. The respondent No.1 was served with a notice under section 25-A of the Industrial Relations Ordinance, 1969. He filed a complaint in terms of section 15 of the Payment of Wages Act, 1936, in which he claimed that he was entitled to receive gratuity on gross-salary of Rs.17,835/- per month for the earlier duration of his length of service but he has received gratuity on basic salary and according to him covering period 22.09.1969 to 16.06.2002 an amount of Rs.3,64,638/- was less paid to him than his legal entitlement for gratuity on gross salary. He claimed the said amount as arrears of gratuity and on decision of authority and the appellate forum being aggrieved, the petitioner company approached this Court.


6.         Arguments advanced by both the sides are considered and record has also been perused in the light of citations of superior courts.


7.         Learned counsel for the petitioner at the outset submits that the learned Labour Court did not consider the citation in the case of INDEPENDENT NEWSPAPERS CORPORATION (PVT) LTD. & ANOTHER V/S CHAIRMAN, FOURTH WAGE BOARD AND IMPLEMENTATION TRIBUNAL FOR NEWSPAPER EMPLOYEES, GOVERNMENT OF PAKISTAN, ISLAMABAD AND 2 OTHERS (1993 SCMR 1533), wherein point for determination has been interpreted and decided. For the sake of understanding learned counsel read out the middle of para 14 and 15 of afore cited judgment, which speaks in the following manner:-


It is not the respondent’s case that the conditions for applicability of clause (6) of Standing Order No.12 are lacking in this case. Para 6 of Standing Order No.12 provides for payment of gratuity to the workman at a particular rate which is not relevant for the purpose of these appeals. What is relevant is the proviso to clause 6 which runs as under:


“Provided that, where the employer has established a provident fund to which the workman is a contributory the contribution of the employer to which is not less than the contribution made by the workman, no such gratuity shall be payable for the period during which such Provident Fund has been in existence.”


15.       The argument of Mr. Khalid Ishaque is that since the appellant Corporation makes contribution to the Provident Fund in terms of the proviso it is not liable to pay the Gratuity. The appellant’s claim that it has established a Provident Fund, to which its contribution is not less than that of the Newspaper employees, has not been refuted before us.


It is correct that according to section 2(h) the gratuity forms part of the wages, but the conditions regulating the payment of Gratuity are to be found in section 17 read with clause (g) of Standing Order No.12. Consequently, where the contribution of the employer to the Provident Fund established by him for the benefit of the employees is not less than the contribution made by the latter, he would not be obliged to pay the gratuity to his employees at the time of their retirement. It is clear to us that while granting the gratuity, the Board failed to examine the case from this angle and the High Court fell in error in upholding the award. It is hardly needs any emphases that there is no estoppels against law. Even if the corporation acquiesced in the previous awards, there was no bar in questioning the validity of this payment under the 4th Award, which furnished a fresh cause of action to the appellant. The direction to the appellant to pay gratuity to its employees is thus declared as without lawful authority.



8.         Learned counsel for the petitioner submits that it is very clear that under section 12(6) of Industrial & Commercial Employment (Standing Orders) Ordinance, 1968 that no gratuity is liable to be paid for the period during which Provident Fund Scheme has been in existence hence the claim of respondent No.1 is against the law; more particularly, Provident Fund Scheme was introduced as per memorandum of settlement dated 12.2.1970 under Article 5 page No.3 of Memorandum of settlement and page 81 of the petition; whereas under Article 12 side by side gratuity was also agreed to be paid under Article 12 page No.4 of the memorandum of settlement and page 82 of the petition. It was agreed in Article 12 that from the date on which the provident fund scheme was introduced the provident fund scheme will supersede gratuity hence in view of Article 12 provident fund scheme attained the statutory status in place of gratuity with the consent of petitioner. Learned counsel has drawn the attention of this Court to the cross-examination of respondent No.1, available at page 169, of the petition; in 15th line it was stated by him as under:


I do not know whether these 20 employees retired from the company were paid Gratuity on basic wages. I do not know if no employees of the company is retired and paid Gratuity on basic wages filed any case against the company before any court of law. I do not know that since 1970 onward uptil date, the past practice using and existence to pay Gratuity on basic wages and not on gross wages. I do not know that I was also paid Gratuity on basic wages at the time of my retirement as per past practice of the company.



9.         Learned counsel submits that if a person replies that he do not know and the same person while giving statement on oath normally admits that he is well conversant with the facts of case, ultimately or contradictory with each other as the reply was not favouring any either ways. It is submitted that the gratuity on the basis of basic wages was paid to the respondent No.1 and gratuity on gross wages become without cause of action which was ignored by the learned Labour Court. More so the gratuity is not applicable as statutory right as if it has to be treated as statutory gratuity then the period of service and rate of gratuity cannot be settled mutually by superseding section 12(6) of Standing Orders Ordinance, 1968 hence the claim of respondent No.1 was against the law. learned counsel further submits that citations relied upon by learned Labour Court in its decision were related to the gratuity where provident fund scheme was not in existence, therefore, those citations were not relevant as gratuity was not applicable as statutory right, in such a case the definition of wages as mentioned in Payment of Wages Act, 1936 is also not applicable and the company is not supposed to pay the gratuity on the basis of the definition of wages.


10.       Conversely, learned counsel for respondent No.1 advanced his arguments by filing the synopsis as well and submitted that provident fund and gratuity both are being paid to the workers and the gratuity on the gross wages. Learned counsel much emphasized that gratuity to be paid and calculated on the gross wages as held in the case of ZAIN PACKAGING INDUSTRIES LTD. KARACHI V/S ABDUL RASHID & 2 OTHERS (1994 SCMR 2222) and case of PUNJAB ROAD TRANSPORT CORPORATION V/S FAQIR MUHMAMAD & ANOTHER (2002 PLC 269). Learned counsel next argued that the company illegally deducted the gratuity amount of Rs.3,64,638/- of respondent No.1 which was calculated on basic instead of gross salary. It is submitted that impugned decision has been delivered by proper appreciation of evidence and law established in this respect. It is further submitted that gratuity should be paid on the basis of gross wages including fringe benefits which were on permanent basis and were part of basic pay as held in the case of Zain Packaging (supra) and MUHAMMAD SALEEM AWAN V/S NWFP FOREST DEVELOPMENT CORPORATION AND ANOTHER (2003 PLC 8).


11.       In the case of Zain Packaging (supra) the word “Wages” used in section 12 of the Pakistan Industrial and Commercial Employment (Standing Orders) Ordinance, 1968 interpreted that in its ordinary sense includes all payments made to a workman by his employer on a regular and permanent basis periodically in lieu of his services. For the sake of convenience section 12(6) of the aforesaid Ordinance 1968 is reproduced herein below :-

12. Termination of employment.–

(1) to (5)  . . . . . .

(6)  Where a workman resigns from service or his services are terminated by the employer, for any reason other than misconduct, he shall, in addition to any other benefit to which he may be entitled under this Ordinance or in accordance with the terms of his employment or any custom, usage or any settlement or an award of a Labour Court under the Industrial Relations Ordinance, 1969 (XXIII of 1969), be paid gratuity equivalent to [thirty days], wages, calculated on the basis of the [wages admissible to him in the last month of service if he is a fixed-rated workman or the highest pay drawn by him during the last twelve months if he is a piece-rated workman], for every completed year of service or any part thereof in excess of six months:


Provided that, where the employer has established a provident fund to which the workman is a contributor and the contribution of the employer to which is not less than the contribution made by the workman, no such gratuity shall be payable for the period during which such provident fund has been in existence


Provided further that if through collective bargaining the employer offers and contributes to an “Approved Pension Fund” as defined in the Income Tax Ordinance, 2001 (XLIX of 2001), and where the contribution of the employer is not less than fifty per cent of the limit prescribed in the aforesaid Ordinance, and to which the workman is also a contributor for the remaining fifty per cent or less, no gratuity shall be payable for the period during which such contributions has been made.



12.       Plain reading of aforementioned provision of law depicts that gratuity amount would be calculated on the basis of all payments made  on permanent basis and regularly to an employee by his employer irrespective of fact that those were termed as allowances as all allowances given to employee would be included in term of wages and employee would be entitled to payment of amount of gratuity on the basis of such wages as admissible to him during service as held in the aforesaid law declared by Hon'ble Apex Court. Thus the contention of learned counsel for the respondent No.1 that gratuity amount is to be calculated on the basis of gross pay is relevant and justifiable.


13.       Keeping into account all the facts and relevant law on the subject, the respondent No.2 has rightly came to the conclusion that respondent No.1 is entitled to the balance gratuity amount which was illegally withheld by the petitioner on erroneous notions.


14.       Apart from the merits of the case, the learned counsel for respondent No.1 has contended that the instant petition is not maintainable in law as the alternate remedy in shape of revision as provided in IRA was available to the petitioner as held in TEHSIL NAZIM TMA OKARA V/S ABBAS ALI & 2 OTHERS (2010 PLC 259) and SYED MATCH COMPANY LTD. V/S AUTHORITY UNDER PAYMENT OF WAGES ACT & OTHERS (2003 PLC (CS) 395) wherein it is held that no appeal under this clause shall lie unless the memorandum of appeal is accompanied by a certificate of authority to the effect that appellant has deposited with the authority the amount payable under directions appealed against. Reliance has also been placed on MUHAMMAD HUSAIN MUNIR & OTHERS V/S SIKANDAR & OTHERS (PLD 1974 SC 139).


15.       Whatever mentioned above, I reached at irresistible conclusion that there is no occasion to set aside the impugned decision of the learned Labour Court which is otherwise well reasoned and speaking one. Consequently, the obvious calculation would be that the gratuity amount was to be calculated on the basis of payments made permanently and regularly to respondent No.1 by his employer. Before parting with the judgment, I feel necessary to mention here that the employer was not prepared to pay the mentioned amount to the employee who is suffering the agony of lengthy proceedings in the Courts and incurred heavy expanses on litigation and company officials were found adamant not to pay outstanding amount to the petitioner which he is otherwise legally entitle as per law. Resultantly, the petition is having no merits for consideration and is hereby dismissed with cost.



*Aamir/PS*                                                                                                     J U D G E