UNITED WOOLEN MILLS WORKERS’ UNION Versus PRESIDING OFFICER LABOUR COURT NO. III

This petition is directed against an order dated 19‑7‑1986, passed by the learned Presiding Officer, Sind Labour Court No.III at Karachi, in the matter of Application No.230 of 1986, allowing Respondent No.2's application under section 11‑A of the West Pakistan Industrial and Commercial Employment (Standing Orders) Ordinance, 1968, hereinafter referred to as the Ordinance, granting permission to respondent No.2 to close down the establishment known as United Woollen Mills Limited, located at E/15, S.I.T.E. Karachi subject to the payment to the workers/ employees all their legal dues admissible under the law and also subject to the condition that the respondent No.2/applicant shall give preference to the present workers for employment in case they were to start similar type of business within a period of 12 months: The petitioner which is a registered Workers Union and was the Collective Bargaining Agent (hereinafter referred to as the C.B.A.), at the relevant time, and was party to the above application, being aggrieved by the above order has filed the present Constitutional petition.

2. The brief facts leading to the filing of the above petition are that upon an application filed by the petitioner under section 23‑B of the Industrial Relations Ordinance, 1969, hereinafter referred to as the I.R.O., the Government appointed Auditor for re‑auditing respondent No.2's accounts for the years 1979 to 1982‑83. It is the case of the petitioner that upon re‑auditing the Government's Auditor reported an increase in the amount of profit for the financial year ending on 30‑6‑1981 by Rs.26,43,003 and for the financial year expiring on 30‑6‑1982 the Government's Auditor reduced the amount of loss claimed by respondent No.2 to the extent of Rs.1,55,000. Respondent No.Z being aggrieved by the above Government's Auditor's report filed Constitutional Petition No,D‑943/82 in this Court challenging the above report However, it seems that the above petition was withdrawn by respondent No.2 on 1 9‑2‑1585 as the petitioner entered into a settlement with respondent No.2 dated 17‑2‑1985, whereby the latter agreed to pay ex‑gratia a sum of Rs.9,00,000 to the workers as their shares of profit for the period from 1‑7‑1979 to 30‑6‑1984. It also seems that on 2‑7‑1985 the petitioner served a notice under section 26(1) of the I.R.O. for raising certain demands. After that the petitioner served a strike notice on 13‑7‑1985. It further seems that respondent No.2 also raised certain demands against the workers. The petitioner as well as respondent No.2 filed their respective applications under section 32(1‑A) of the I.R.O. in respect of their respective demands in the Sind Labour Court No.I1I at Karachi (Annexures G and G‑1 to the petition). It also seems that while the above applications were pending, respondent No.2 filed aforesaid application under section 11‑A of the Ordinance on 19‑8‑1985, which was contested by the petitioner inasmuch as a written reply was filed denying the averments contained in the application. Respondent No.2 in support of their above application filed affidavit‑in‑evidence of their ‑Chief Accountant, Abdul Hameed and also of their Chartered Accountant, Sardar Farooq Khan. They were cross‑examined by the learned counsel for the petitioner, whereas the petitioner filed affidavit of one Nabi Ahmed son of late Muhammad Ahmad, who claimed to be the General Secretary of United Workers Federation. The learned Labour Court after hearing the parties, allowed the above application by the aforesaid order dated 19‑7‑1986. The petitioner being aggrieved by the above order, has filed the present petition.

3. In support of the above petition, Mr. Ali Amjad learned counsel for the petitioner has urged as follows:

(i) That the learned Labour Court erred in relying upon respondent No.2's Auditor's report in presence of the Government Auditor's report.

(ii) That since respondent No.2 had withdrawn their constitutional petition against the Government's Auditor's report, they were estopped from contending that the same was not reliable.

(iii) That the learned Labour Court was not justified in ignoring the Government Auditor's report on the ground that no one was examined to prove the same.

(iv) That the learned Labour Court acted beyond jurisdiction by holding that respondent No.2 were entitled to decide whether to continue to run the factory or not to run the same by virtue of fundamental rights.

(v) That the learned Labour Court failed to take into consideration the following important pieces of evidence:

(a) That respondent No.2 had offered to sell to the public 50$ of their shares at the rate of 12.25 per share against the face value of Rs.10 per share.

(b) That respondent No.2 issued bonus shares doubling the value of the shares in the hand of the share‑holders for the year 1984‑85.

(c) That respondent No.2 advanced a loan of Rs.1,16,20,000 to its sister concern, International Floor Covering and another sum of Rs.2,00,00,000 to another sister concern.

(d) That the alleged loss for the financial year ending on 30‑6‑1985 namely Rs.18,17,086 was to be wiped out by the aforesaid sum of Rs.26,44,000 being the amount of increased profit for the financial year expiring on 30‑6‑1982.

(vi) That factually there was no loss and if there was any loss that was on account of financial expenses by way of interest payable on the loans taken by respondent No.2 for advancing the same to its sister concerns.

On the other hand Mr. Afsar Abidi learned counsel for respondent No.2 has contended as follows:

(i) That the petitioner and all the workers had alternate remedy in the form of an application under section 25‑A of the I.R.O. and, therefore, the above petition is not competent.

(ii) That the petition involves disputed questions of facts which cannot be resolved through the Constitutional petition.

(iii) That respondent No.2's Auditor's report was not nullified by the Government Auditor's report.

(iv) That the mere fact that respondent No.2 had agreed to pay ex‑gratia profit for the period commencing from 1‑7‑1979 to 30‑6‑1984 and had withdrawn the writ petition filed against the Government's Auditor's report does not mean that respondent‑ No.2 had accepted the correctness of the Government's Auditor's report.

(v) That the findings of the learned Labour Court as to the working of respondent No.2 are based on material on record and are in consonance with law.

4. I may take up the first contention of Mr. Afsar Abidi, learned counsel for respondent No.2 that the petitioner and their workers have alternate remedy in the form of an application under section 25‑A of the I.R.O., and, therefore, the petition is not competent. In furtherance of his above submission he has referred to the case of Nazeer Ahmad and another v. Presiding Officer and 5 others reported in 1986 P L C 1052, in which a learned Single Judge of this Court held that the petitioners who in the capacity of individual workers filed their application for being impleaded as intervenor in proceedings under Standing Order 11‑A of the Ordinance, had no vested right to become a party and appropriate remedy for them was in the form of an application under section 25‑A of the I.R.O.

The above case has no application to the instant case as admittedly the petitioner as the C.B.A. was a party to the application under Standing Order 11‑A of the Ordinance. It is also an admitted position that the petitioner had not filed any application under section 25‑A of the I.R.O. but according to learned counsel for respondent No.2 some applications have been filed by the workers upon termination of their services. In my view, if the petitioner can show that the learned Labour Court's order suffers from any legal infirmity as to render the same as without jurisdiction or in excess of jurisdiction or violative of some provision of law, the above petition is competent as admittedly there is no right to appeal against the impugned order. I am also inclined to hold that a C.B.A. who is a party to a proceeding H under Standing Order 11‑A of the Ordinance, before a Labour Court cannot impugn the order passed therein through an application under section 25‑A of the I.R.O. before the same Court. I have deliberately refrained myself from expressing on the question, whether the workers can file application under section 25‑A of the I.R.O. against the termination of their services, as the above point is not involved in the present case and secondly, I would not like to pre‑empt the decision of the Labour Court, as admittedly some of the workers had filed applications under the above provision of the I.R.O. as per statement of the learned counsel for respondent No.2.

5. Adverting to the contention of Mr. Ali Amjad as to the evidentiary value of respondent No.2's Auditor's report vis‑a‑vis to Government's Auditor's report, it may be observed that under section 145 of the late Companies Act, 1913 (Corresponding provision, section 255 in the Companies Ordinance, 1984), the powers and duties of the Auditors were defined, the purpose of which was to have the correct picture of the financial position and of the working of a company. It is the statutory requirement of a company to get its annual accounts C audited by a qualified auditor. Whereas section 23‑B of the I.R.O. contemplates workers' participation in the management in every factory employing 50 persons or more, subsection (10) of above section 23‑B entitles a collective bargaining agent for an establishment which is a factory and in which the number of workers employed in any shift at any time during a year is fifty or more, to apply to the Provincial Government to nominate an Auditor to audit the accounts of the factory once after the closing of every accounting year and for that purpose to inspect the accounts, records, premises and stores of the factory once every year. It may also be observed that subsection (13) of the above section provides that this section shall have effect notwithstanding anything contained in the Companies Act (VII of 1913), or any other law for the time being in force or in any agreement or contract or memorandum or articles of association. The object of above section 145 of the Companies Act seems to be to protect the interest of the shareholders of a company by ensuring that the accounts of the company should reflect the correct financial position, whereas the purpose of above section 23‑B of the I.R.O. appears to be to protect the interest of the workers who are entitled to have share in the profit to some extent by ensuring that the accounts of the company should correctly reflect the profit.

It is true that under subsection (13) of above section 23‑B of the I.R.0. it has been provided that the above section will prevail notwithstanding anything contained in the Companies Act, 1913 or any other law for the time being in force but in my view it does not lead to an inference that the provisions of the Companies Act or the audit carried out by the company's auditors are rendered redundant or infructuous. The only effect of subsection (13) of section 23‑B of the I. R.O. seems to be that for determining the right of the workers as to their share to the profit, the Government Auditor's report shall, prevail over the Company's Auditor's report.

Mr. Afsar Abidi has referred to the case of Messrs Electric Lamp Manufacturers of Pakistan Ltd. Karachi through its General Manager v. Government of Pakistan through Secretary, Ministry of Labour, Islamabad and 3 others P L D 1978 Karachi 972, in which a Division Bench of this Court while construing section 23‑B (10) & (13) of the I . R.O. and section 145 of the Companies Act, 1913 held that on an overall examination and comparison of the objects and intendment of section 145 of the Companies .Act, 1913, and subsections (1) and (11) of section 23‑8 of the Ordinance, it seems that the two provisions are of similar scope and whereas an auditor appointed under section 145, owes an obligation to the shareholders of the Company to report to them a correct view of Company's affairs, and an auditor nominated under the latter provision does the same duty for the benefit of the workers in order to assess correctly the profit earned by the Company in the year under survey. It was also held that the Government's Auditor has no power to deviate from the above object and to conduct an enquiry foreign to the above object. In the above case, it was held that the assessment of profit of the Company on the basis of Government Auditor's report who acted in excess of his authority, was without jurisdiction.

I am also inclined to concur with the learned Labour Court that in case the petitioner wanted to rely upon the Government's Auditor's report, they should have examined the authors of the same in order to provide an opportunity to respondent No.2 to cross‑examine them in order to demonstrate that the Company's Auditor's report for the years in question was more reliable than the Government's Auditor's report. Simpliciter production of the same either through the cross‑examination of respondent No.2's Chief Accountant or through the petitioner's witness who was not even a member of the C.B.A. was not sufficient. Furthermore, if we were to overlook the above technical aspect, the factual position would be that there were two, pieces of evidence before the learned Labour Court, namely, ;one the Company's Auditor's report and the other the Government's Auditor's report, it was within the jurisdiction of the learned Labour Court to have relied upon on any, one of the above pieces of evidence before it, and, therefore, by relying upon the Company's Auditor's report the Labour Court has not committed any illegality.

6. As regards the other submissions of Mr. All Amjad as to the merits of the order, it may be pertinent to refer to the provisions of Standing Order 11‑A of the Ordinance, which reads as follows:

"11‑A. Closure of establishment.‑‑Notwithstanding anything contained in Standing Order 11, no employer shall terminate the employment of more than fifty per cent of the workmen or close down the whole of the establishment without prior permission of the Labour Court in this behalf, except in the event of fire, catastrophe, stoppage of power supply, epidemics or civil commotion.

Explanation. ‑‑'Close down' in this Standing Order includes lay off of workmen beyond fourteen days where such lay‑off results in closure of an establishment but does not include lock‑out declared, commenced or continued in accordance with the provisions of the Industrial Relations Ordinance, 1969 (XXIII of 1969)."

A perusal of the above‑quoted Standing Order indicates that it provides that no employer shall terminate the employment of more than fifty per cent of the workmen or close down the whole of the establishment without prior permission of the Labour Court in this behalf except in the event of fire, catastrophe, stoppage of water supply, epidemics or civil commotion. It may further be noticed that the explanation defined the words "close down" as to include lay‑off of workmen beyond fourteen days where such lay‑off results in closure of an establishment but does not include lock‑out declared, commenced or continued in accordance with the provisions of the I.R.O. 1969. It is evident that an employer can terminate the services upto 50 per cent of workmen in accordance with law even without obtaining any permission from a Labour Court. However, permission is required when he wishes to terminate the services of the workmen more than fifty per cent or wishes to close down the whole of the establishment. It may be pointed out that the above‑quoted provision does not spell out the conditions which are pre‑conditioned for maintaining an application under the above provision. In other words, it is left to the discretion of the Labour Court to decide the question, whether an employer, who has applied tinder the above provision has made out a case for permission and in order to decide the above question the Labour Court will have to take into consideration all the aspects of the working of the employers' establishment. In my view, there is no legal requirement that in order to maintain an application under the above provision of the Standing Orders Ordinance an employer must prove that it has become impossible to run the establishment without incurring loss. However, he will have to prove that in view of the various factors his establishment is no longer from the point of view of a prudent businessman viable. In the instant case the learned Labour Court has concluded as a matter of fact as follows:

"The applicants have brought on record documentary proof to show that they are suffering financial losses on the basis of audited accounts. The advocate of the respondents cross -examined both the witnesses of the applicant company at great length. It is proved from the documentary evidence that applicant company suffered financial losses on the basis of audited accounts. The applicant company established through documentary evidence that there is decline in business and huge accumulation of stock. The applicant company convinced this Court from documents that they have taken heavy loans from financial institutions and according to applicant company they are not in a position to repay loans taken by them. Therefore, the applicant company considered it expedient to close down the establishment ..................................

It is further apparent from the record that the applicant company was converted to public limited company. The shares of the company were floated in the general public for subscription. There was poor response. The Karachi Stock Exchange Limited, vide their letter Ex.AW/10 refused to enlist the company as public limited company .

It is a fact that there was no continuous losses from 1977‑78 till 1984‑85 but audited balance sheets clearly show that the company suffered huge losses. The loss is Rs.one million eight hundred seventy‑two thousand eighty‑six and seventy paisa. There is huge accumulation of stock and there is decline in the sales. The company has to meet demands of its creditors. Despite the fact that there were no continuous losses for years together, but at the same time it is proved beyond reasonable doubts that the applicant Co: is unable to run the establishment any more."

The above findings are supported by some material on record, and cannot be said to be based on no evidence or based on misreading of evidence. Though appraisal of evidence as a Court of appeal in a constitutional petition is not permissible, but even if I were to constitute this Court as a Court of appeal for appraising the evidence afresh and take into consideration the facts highlighted by Mr. Ali Amjad hereinabove, the factums that respondent No.2 was not earning profit compatible with the investments, there was less demand of the woollen yarn on account of increase in demand of synthetic yarn resulting into less production, accumulation of the stock, inability to pay the loans in time and the closure of a number of other similar mills in Pakistan stand proved. The above facts were sufficient to justify the grant of the application.

7. Mr. Ali Amjad has referred to the latest pronouncement of the Hon'ble Supreme Court in the case of Utility Stores Corporation of Pakistan Limited v. Punjab Labour Appellate Tribunal and others reported in P L D 1987 S C 44 7, in which inter alia it has been held that a Tribunal invested with the jurisdiction to decide a particular matter has no jurisdiction to decide 'rightly' or 'wrongly' but the condition of grant of jurisdiction is that it should decide the matter in accordance with law and that a Tribunal when goes wrong in law, it goes outside jurisdiction conferred on it because Tribunal has jurisdiction to decide 'rightly' but not the jurisdiction to decide 'wrongly'.

In my view, the ratio of the above case is not applicable to the instant case for the reason that the view which found favour with the learned Labour Court that respondent No.2's factory was no longer viable project for the reasons reproduced hereinabove, cannot oe said to be contrary to the material on record, though a contrary view could have been taken. I am inclined to agree with the learned counsel of respondent No.2, Mr. Afsar Abidi that the above petition involves complicated disputed questions of facts, which cannot be investigated into in exercise of constitutional jurisdiction.

8. I would, therefore, dismiss the above petition but there will be no order as to costs.

I am not inclined to grant application for amendment of the petition and, therefore, the same is also dismissed.

M.Y.H. / U‑2 8/ K Application dismissed.