DILSHAD HUSSAIN Versus ISLAMIC REPUBLIC OF PAKISTAN
This appeal challenged the dismissal of a writ petition regarding the distribution of interest accrued on the Workers' Participation Fund. The appellants, workers of Wah Industries Ltd., contested a circular directing the distribution of interest between workers and the Government, arguing they were entitled to the entire interest. The core legal question was whether the interest accrued on the allocated funds under the Companies Profits (Workers Participation) Act, 1968, belongs to the workers or is subject to diversion. The Supreme Court held that the interest accrued on the allocated funds is payable to the workers of the company, provided that the necessary legal formalities, such as the constitution of the Board of Trustees, are satisfied. The Court clarified that while there is a statutory cap on the principal amount a worker can receive from the annual allocation, this limitation does not apply to the interest accrued on the fund. The principle established is that accrued interest on the Workers' Participation Fund constitutes a benefit for the workers, distinct from the principal allocation limits.
- Are workers entitled to the interest accrued on the Workers' Participation Fund established under the Companies Profits (Workers Participation) Act, 1968?
- Does the statutory cap on the principal amount allocated to a worker under the Companies Profits (Workers Participation) Act, 1968, also apply to the interest accrued on that fund?
- Is the payment of accrued interest on the Workers' Participation Fund conditional upon the constitution of a Board of Trustees?
- Companies Profits (Workers Participation) Act, 1968
- Section 2(c), Companies Profits (Workers Participation) Act, 1968
- Section 3, Companies Profits (Workers Participation) Act, 1968
- Section 3(1), Companies Profits (Workers Participation) Act, 1968
- Section 3(1)(b), Companies Profits (Workers Participation) Act, 1968
- Section 4, Companies Profits (Workers Participation) Act, 1968
- Section 23B, Industrial Relations Ordinance, 1969
- Companies Act, 1913
- Workers' Welfare Fund Ordinance, 1971
- Section 3, Workers' Welfare Fund Ordinance, 1971
IFTIKHAR MUHAMMAD CHAUDHRY, J.‑‑‑ This appeal by leave of the Court has been filed against the judgment, dated 4th November, 1998, passed by Lahore High Court, Lahore whereby I.C.A. filed by appellants against the judgment dated 10th November, 1994, passed by a learned Single Judge., in Chambers of the High Court in Writ Petition No.734 of 1994, has been dismissed.
2. Precisely stating facts of the case are that appellants being workers of Wah Industries Ltd. had challenged the order/Circular No.1 of 1993 bearing No.IMP (III)2(1)/91, dated 12th June, 1993, whereby instructions were issued that all listed and private limited Companies falling under the Companies Profits (Workers Participation) Act, 1968 (hereinafter referred to as "the Act, 1968") are directed to compute interest on the total allocated amount of workers participation under clause 2(2) of the Schedule from the first day of next succeeding year, in which the scheme becomes applicable to the companies and distribute the same proportionately between workers and Government, in accordance with clarification as made in the circular of the Institute of Chartered Accounts of Pakistan.
3. Stance of the appellants was that they are entitled to distribution/ share in the entire interest accrued and the proportionate share, given to the Government, was illegal and ultra vires . Therefore, they instituted Writ Petition No.734 of 1994 before the Lahore High Court, Lahore , which was dismissed vide judgment dated 10th November, 1994 . Concluding para . therefrom is reproduced hereinbelow :‑‑
"(4) I have gone through the Act as well as the Scheme. Nothing is contained therein which supports the plea of the petitioners. The fund created under the Act consists of contribution made by the Company as well as Workers in prescribed ratio. It is reasonable as well as logical to conclude that any profit accruing on this fund should be distributed according to the investment made in the fund. The impugned Notification is neither unwarranted in law nor discriminatory, nor any vested right of the petitioners has been taken away by that. The petition is absolutely misconceived and is, therefore, dismissed. C.M. No.2191 of 1994 for restoration is also disposed of."
Appellants preferred I.C.A. against the aforesaid order, which I has also been dismissed by means of impugned order dated 4th November, 1998 . Relevant para . therefrom reads as under thus:‑‑
"Besides the above, we have also examined the merits of the case and do not find any error or illegality in the order of the learned Single Judge in Chamber. Furthermore, the proposition canvassed by the appellants in the present matter has already been adjudged and determined by the Division Bench of the Sindh High Court in C.P. No.P‑639 of 1995, which does not support the view point of the applicants."
4. Learned counsel for appellants contended that according to the Act, 1968 and the scheme framed thereunder , the workers are entitled to the entire interest, which has accrued on allocated funds, established under section 3(1) of the Act, 1968.
5. On the other hand learned Deputy Attorney‑General submitted that under paragraph No.4( d) of the Scheme, a worker was not entitled to receive the amount of interest exceeding Rs. 3,000 at the time when writ petition was filed anti now Rs.6,000 as amended under paragraph 4(d) of the Scheme. The balance amount of the annual allocation funds, constituted under section 3 of the Workers' Welfare Fund Ordinance, 1971 shall be credited to the fund created under Ordinance, 1971. According to him in identical case of National Tanker Company (Pvt.) Ltd. v. Federal Government of Pakistan 1999 YLR 650 the High Court of Sindh vide judgment, dated 3rd March, 1998 has held that "the workers shall not be entitled to the profit accrued on the allocated funds".
6. We have heard the learned counsel for the parties and have gone through the various provisions of the Act, 1968, as well as the Scheme appended therewith under section 2(c) of the Act, 1968. As per section 3(1 )( b) every company falling within the meaning of Companies Act, 1913 is bound to establish the Workers' Participation Fund out of 5% of its profits. For reference section 3(1 )( b) and (2) are reproduced herein-below:‑‑
"(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 percent. of its profits during such year, which shall, where the accounts have been audited by an auditor appointed under section 23B 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) 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."
7. It may be noted that for the purpose of management of funds, after its establishment by a company, a Board of Trustees has to be constituted under section 4 of the Act, 1968 and under para.4 of the scheme, procedure has been prescribed for the purpose of distribution of benefits to the workers. For convenience para . 4 of the scheme is reproduced herein-below :‑ ‑
"(4) The distribution of shares amongst the above three categories of workers is in the ratio of 4:2:1. The lowest paid are given the maximum amount and the other two categories in proportion to the above prescribed` ratio. Workers with more than six months employment are eligible to the benefits or the profit sharing with the condition that no worker shall in any year be entitled out of the annual allocation to units exceeding Rs.6 ,000 in value."
8. It may not be out of context to note that the amount allocated or accruing to the funds has also been made available for investment under sub‑ para . (7) of para.2 of the scheme, to the company for its business operations. The rate of interest, on such amount, which shall be invested/utilized by the company for its business operations, has been prescribed in paragraph 2 of the Scheme, which reads as under thus :‑ ‑
"(2) The company shall pay to the Fund in respect of the amount in the Fund available to it for its business operations as aforesaid interest at the rate of 2‑1/2 percent. above the bank rate or 75 percent. of the rate at which dividend is declared on its ordinary shares, whichever is higher. In case there is more than one class of ordinary shares on which different rates of dividend have been declared, then the weighted average of the different rates of dividend shall be taken for the purpose of determining the rate of interest. 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. Even when the company does not wish to utilize the amount available to it under sub‑paragraph (1), interest at the rate aforesaid shall be payable by the company for the period between the date of allocation of any amount to the Fund and the date of its investment under sub‑paragraph (7)."
9. Undoubtedly out' of the allocated funds, a worker is not entitled more than Rs.3,000 or Rs.6,000, whatsoever the case may be, and if any amount is left due, it will be transferred to the fund constituted under section 3 of the Workers' Welfare Fund Ordinance, 1971, ‑but this amount of Rs.3,000 or Rs.6,000 has nothing to do, as far as the interest is concerned, which accrues upon the amount of the allocated fund, if it has been utilized by the company in its business and has paid interest thereon, as envisaged under paragraph 2, reproduced hereinabove.
10. It is pertinent to mention here that High Court of Sindh , in its earlier judgment pronounced in C.P. No.D‑682 of 1991, while taking into consideration the above provisions of para.5, has opined that "the worker is entitled for the interest which has accrued on the investment of allocated funds" but in the subsequent judgment, learned Division Bench did not agree with this conclusion in the case of National Tanker Company (Pvt.) Ltd. (ibid) as petition filed by the company was dismissed on 3rd March, 1998. However, this judgment was challenged before this Court in Civil Appeal No. 1231 of 1998 and vide judgment dated 18th February, 1998, authored by Mr. Justice Munir A. Sheikh (as he then was) it has been concluded that:‑‑
"(5) The High Court was justified in law in not granting relief of the refund of the said amount at present on account of non‑compliance of the provisions as to constitution of the Board of Trustees and intimation of their names to the Government and other formalities as mentioned in the judgment under appeal but the fact remains that the amount, profits accrued on the amount, is to be paid to the workers of the company after compliance with the provisions of law."
Therefore, in view of above judgment of the Court, we are persuaded to hold that the amount of profit accrued on the allocated fund has to be paid to the workers of the company, after compliance with the provisions of law.
Thus, for the foregoing reasons, appeal is allowed with no order as to costs.
M.B.A./D‑17/S Appeal allowed.