Confusion over WWF & WPPT

Huzaima Bukhari & Dr. Ikramul Haq

‘Pakistan People’s Party regime from 1971 to 1977 provided some sort of socialistic framework for the economy. The validity of measures taken during that time will be judged by history. The purpose of this article is to explain that a charge for workers’ welfare fund, under the Workers’ Welfare Fund regulations of 1971 is a part of a pro-worker legislation by a ‘socialistic’ government. Gen Zia-ul-Haq changed almost everything that Bhutto introduced except for two taxes under the nomenclature of Workers’ Welfare Fund and Workers’ Profit Participation Fund; these funds were continued as they provided a continuous revenue stream for the government. In the following paragraphs I will discuss the pertinent facts about these provisions and suggestions for improvement”—Syed Shabbar Zaidi.

The above quotation has been taken from ‘Workers’ Welfare Fund: a tax or a fund? (Business Recorder,December 10, 2020). The learned author, former pro-bono Chairman of the Federal Board of Revenue [FBR] opined that contributions made to Workers Welfare Fund (WWF) under Workers Welfare Ordinance, 1971 and in Workers’ Participation Fund (WPF) complying with the Companies Profits (Workers’ Participation) Act, 1968 were taxes.  He attributed imposition of these laws to PPP, whereas latter was passed in 1968 by the Parliament then and former by military dictator, Yahya Khan on December 9, 1971. Zulfikar Ali Bhutto took charge of two positions from Yahya Khan, President and the first civilian Chief Martial Law Administrator on December 20, 1971]. On the nature of these levies, the Supreme Court of Pakistan in Workers Welfare Funds m/o Human Resources Development, Islamabad through Secretary and others v East Pakistan Chrome Tannery (Pvt.) Ltd through its GM (Finance), Lahore etc. and others[(2016) 114 TAX 385 (S.C. Pak.)], held these are not “taxes” and amendments made in Workers Welfare Ordinance, 1971 and some other laws vide Money Bill were ultra vires of the Constitution of Islamic Republic of Pakistan [“the Constitution]”.

It is worth noting that both these levies are allowed as “deductible allowance” to a taxpayer under the Income Tax Ordinance, 2001 that read as under:

60A. Workers’ Welfare Fund.– A person shall be entitled to a deductible allowance for the amount of any Workers’ Welfare Fund paid by the person in tax year under Workers’ Welfare Fund Ordinance, 1971 (XXXVI of 1971).

60B. Workers’ Participation Fund.– A person shall be entitled to a deductible allowance for the amount of any Workers’ Participation Fund paid by the person in a tax year in accordance with the provisions of the Companies Profit (Workers’ Participation) Act, 1968 (XII of 1968).

The Lahore High Court in East Pakistan Chrome Tannery (Pvt.) Ltd Vs. Federation of Pakistan and others (2012) 105 TAX 81 (H.C. Lah.) held as under:

“20. Looking at it through a different dimension, Section 4(7) of WWF Ordinance provides:

(7)        The payment made by an industrial establishment to the Fund under sub section (1) shall be treated as an expenditure for purposes of assessment of income tax. (emphasis supplied)

Sections 21(a) and 60A of the Income Tax Ordinance, 2001 further provide:

“21. Deductions not allowed: Except as otherwise provided in this Ordinance, no deduction shall be allowed in computing the income of a person under the head “Income from Business” for‑

(a)        any cess, rate or tax paid or payable by the person in Pakistan or a foreign country that is levied on the profits or gains of the business or assessed as a percentage or otherwise on the basis of such profits or gains.”

“60A.  Workers’ Welfare Fund.- A person shall be entitled to a deductible allowance for the amount of any Workers’ Welfare Fund paid by the person in tax year under Workers’ Welfare Fund Ordinance, 1971 (XXXVI of 1971).”

The above provisions show that contribution towards the Fund is to be treated as an expenditure for the purposes of assessment of income tax and also as a deductible allowance which cannot be the case if the Fund is treated as a tax under the Income Tax Ordinance, 2001. This further defeats the argument advanced by the respondents that the Fund is a tax on income”.

The above judgement of single judge of Lahore High Court in a writ petition was approved by the Supreme Court of Pakistan in [(2016) 114 TAX 385 (S.C. Pak.)] and Shahbaz Garments (Pvt.) Ltd v Pakistan through Secretary Ministry of Finance, Revenue Division, Islamabad and others (2013) 107 TAX 89 (H.C. Kar.), passed by Full Bench of the Sindh High Court holding this as “tax”, was disapproved. The Supreme Court held as under:

“2.       The facts pertaining to these matters are broadly divided into three categories for ease of reference. The first set of facts are that Sections 2 and 4 of the Worker Welfare Ordinance, 1971 (Ordinance of 1971) were amended by Section 12 of the Finance Act of 2006 and subsequently by Section 8 of the Finance Act of 2008 which broadened the scope of the obligation on industrial establishments to contribute towards the Workers’ Welfare Fund established under Section 3 of the Ordinance of 1971. The said amendments (and notices demanding enhanced payment by virtue of the amendments) were challenged through writ petitions before various High Courts of the country. It is pertinent to mention that there are divergent views of the learned High Courts on this question. The view of the learned Lahore High Court in the judgment dated 19.8.2011 reported as East Pakistan Chrome Tannery (Pvt.) Ltd Vs. Federation of Pakistan and others (2012) 105 TAX 81 (H.C. Lah.)=(2011 PTD 2643) is that the levy in question was a fee and not a tax, therefore the amendments made by the Finance Acts of 2006 and 2008 to the Ordinance of 1971 could not have been lawfully brought through a money bill, rather should have been brought through the regular legislative procedure under the Constitution. The learned Peshawar High Court, vide judgment dated 29.5.2014, followed suit. Subsequently the learned Peshawar High Court disposed of numerous tax references on the basis of this decision, against which the appeals are before us. We would like to point out at the very outset that as regards those cases in which the revenue authorities/collecting agencies have assailed the judgment of the learned Peshawar High Court, although no rights of the collecting agencies have been affected as their job is to merely collect contributions for the Workers’ Welfare Fund, we are nevertheless deciding those cases as well keeping in view the importance of the matter and the conflicting judgments impugned before us. There is a contrary view of the Full Bench of the learned High Court of Sindh expressed in the judgment dated 1.3.2013 reported as Shahbaz Garments (Pvt.) Ltd Vs. Pakistan through Secretary Ministry of Finance, Revenue Division, Islamabad and others (2013) 107 TAX 89 (H.C. Kar.) = (PLD 2013 Kar 449) (Full Bench judgment) to the effect that the levy in question was a tax and not a fee, therefore the amendments made by the Finance Acts of 2006 and 2008 to the Ordinance of 1971 were lawfully brought through a money bill. The aforementioned judgments have been challenged by the parties before us.

3.         The second set of facts are that various provisions of the Employees Old Age Benefits Act, 1976 (Act of 1976) pertaining to contributions to be made there under were amended by Section 9 of the Finance Act of 2008 effectively widening the scope of the obligation on employers to contribute towards the Employees’ Old-Age Benefits Fund established under Section 17 of the Act of 1976. These amendments were challenged through constitution petitions before the learned High Court of Sindh which, through its judgment dated 3.10.2012 reported as Soneri Bank Limited through Jaffar Ali Khan and others Vs. Federation of Pakistan through Secretary Law and Justice Division, Pak Secretariat, Islamabad and others (2013 PLC 134), held that the levy in question was a fee and not a tax, therefore the amendments made by the Finance Act of 2008 to the Act of 1976 could not have been lawfully brought through a money bill.

4.         The third set of facts are that various provisions of the Workmen Compensation Act, 1923, the West Pakistan Industrial and Commercial Employees (Standing Orders) Ordinance, 1968 (Ordinance of 1968), the Companies’ Profit Workers’ Participation Act, 1968 (Act of 1968), the Minimum Wages for Unskilled Workers Ordinance, 1969 (Ordinance of 1969) and the Act of 1976 were amended through the Finance Act of 2007 which amendment(s) in effect broadened the scope of the obligation of the employers in the respective statutes (the obligation(s) in each statute shall be discussed during the course of the opinion). These amendments were challenged through a constitution petition before the learned High Court of Sindh which, through its judgment dated 26.2.2011, held that the changes sought to be made by amendments through the Finance Act of 2007 did not fall within the purview of Article 73(2) of the Constitution, hence, the said amendments could not have been lawfully brought through a money bill. All the aforementioned judgments have been challenged before us”.

Note:  Review Petition in CA of 583 of 2015 in the above judgement is still pending before the Supreme Court.

Sections 2 and 4 of the Workers Welfare Ordinance, 1971 were amended by the Finance Act of 2006 and subsequently by the Finance Act of 2008 to broaden the scope of the obligation on industrial establishments to contribute towards the Workers’ Welfare Fund, established under Section 3 of the Ordinance of 1971. These amendments were declared ultra vires Constitution by Lahore High Court in East Pakistan Chrome Tannery (Pvt.) Ltd v Federation of Pakistan and others (2012) 105 TAX 81 (H.C. Lah.). This order was endorsed in 2016 by the Supreme Court in the judgement cited above. Theissue was whether WWFis a fee or tax. The Supreme Court said it was not ‘tax’. Therefore, the amendments made by the Finance Acts of 2006 and 2008 as Money Bill were unconstitutional.

Through the Finance Act 2008, various provisions of the Employees Old Age Benefits Act, 1976 pertaining to contributions to be made thereunder, were also amended widening the scope of obligation on employers to contribute towards the Employees’ Old-Age Benefits Fund established under Section 17 of the Act of 1976. These amendments were challenged through constitution petitions before the Sindh High Court which, through its judgment dated 3.10.2012 reported as Soneri Bank Limited through Jaffar Ali Khan and others v Federation of Pakistan through Secretary Law and Justice Division, Pak Secretariat, Islamabad and others(2013 PLC 134), held that the levy was a fee and not a tax, therefore, the amendments made by the Finance Act of 2008 as Money Bill were unconstitutional.

Through the Finance Act of 2007 various provisions of the Workmen Compensation Act, 1923, the West Pakistan Industrial and Commercial Employees (Standing Orders) Ordinance, 1968, the Companies’ Profit Workers’ Participation Act, 1968, the Minimum Wages for Unskilled Workers Ordinance, 1969 and the Act of 1976 were amended through the Finance Act of 2007 to broaden the scope of the obligation of the employers in the respective statutes. These amendments were challenged before the High Court of Sindh which, through its judgment dated 26.9.2011, held that the amendments through the Finance Act of 2007 not falling within the purview of Article 73(2) of the Constitution could not have been lawfully inserted through Money Bill. The judgments of Lahore and Sindh High Courts were challenged in the Supreme Court that upheld the same in (2016) 114 TAX 385 (S.C. Pak.)] with the conclusion: “There may very well be certain levies/contributions that do not fall within the purview of Article 73(3) but still do not qualify the test of Article 73(2) and therefore cannot be introduced by way of a Money Bill, and instead have to follow the regular legislative procedure……”  

The above judgement was issued after 18th Constitutional Amendment [the “18th Amendment”] but the changes in laws under discussion were made prior to it, hence, the issue of jurisdiction between the federal and provincial legislature was not under dispute. Before the 18th Amendment, the Federal Board of Revenue (FBR) had the power to collect contributions under Workers’ Welfare Funds Ordinance, 1971 and Profits (Workers’ Participation) Act, 1968 from all over  the country as both the levies were calculated with reference to taxable income under the income tax law.

After the 18th Amendment, the Sindh Assembly was the first province to pass the Sindh Workers Welfare Fund Act, 2014 to collect WWF. The Sindh Companies Profits (Workers’ Participation) Act, 2015) was passed by the Provincial Assembly of Sindh on April 22, 2016 with retrospective affect from 1st July, 2011. The Punjab Assembly following the Sindh Assembly enacted Punjab Workers Welfare Fund of 2019.

It is strange that Sindh and Punjab Assemblies, while enacting the Sindh Workers Welfare Fund Act, 2014 and Punjab Workers Welfare Act 2019, respectively, failed to realise that entities having trans-provincial operations earn income from more than one province. How can a province demand percentage of taxable income not earned in that province? It is a gross violation of Article 141 of the Constitution of Islamic Republic of Pakistan and order of the Supreme Court in Messers Sui Southern Gas Ltd & Others v Federation of Pakistan & Other 2018 SCMR 802 holding in para  20: “At this juncture it is to be noted that when a provincial legislature is not competent to legislate with regard to the workmen of trans-provincial establishments, obviously the Federation has to interfere in the matter with a Federal Legislation to preserve and protect the fundamental rights of the said workmen ensured under Article 17 of the Constitution….”

In the Sindh High Court, these levies were challenged before the Sindh High Court on various grounds. The Sindh High Court (SHC) in Shafiquddin Moinee v Federation of Pakistan through Secretary, Ministry of Human Resources Development, Islamabad & 2 Others 2018 CLD 1088 held that the Sindh Companies Profits (Workers’ Participation) Act, 2015 would apply to all trans-provincial companies employing a total of 100 or more workers at any time of the year, and operating across the country irrespective of the regional location of their registrations. It elaborated that the principle of territorial limitation was not violated as it was only to establish parameters that would make the scheme applicable. The condition which related to value of fixed assets of the company, according to SHC, was irrelevant as the same could be located within or outside the Province. It directed that the law in the province of Sindh was to be applied and workers were to get an amount proportionate to their number calculated. The workers in the province of Punjab were to get an amount proportionate to their number calculated at five percent and the same was not discriminatory. It enunciated that the legislative competence was exclusively provincial and territorial extent was limited. According to this judgement, each Province was entitled to legislate in its own manner in respect of a matter that was exclusively within its domain and it was irrelevant as to where the registered office and/or industrial undertaking of trans-provincial company were located i.e. that same could be located in the Province of Sindh or elsewhere and while making computation, the whole of profits made by company were to be used, regardless of where they were earned in the entire country.

In its order, the Sindh High said the purpose of WPPF was the welfare of labour and there were no problems applying it to all the workers of a company throughout Pakistan. It retained this character on the commencement of the Constitution and up to the 18th Amendment (from 1973 to 2010). The concluding paragraphs of the judgement are as under:

33. Secondly, on the view that has been taken the specific problem identified by the learned Additional Attorney General, relating to dispute resolution also disappears. It is obvious that in our view, the 1968 Act as applicable in the other Provinces and the Capital respectively will apply there in the same manner as the Sindh Act in this Province, i.e. in respect of all the workers within the relevant territorial domain. Thus, if a worker, say in Punjab, has a dispute with a company that has its registered office here, he does not have to come to this Province for redressal; he can simply invoke the procedure available under the 1968 Act, as applying in Punjab as provincial legislation. The reverse would, obviously, also be true. Thirdly, a potential issue of a variation in the amount of distributable profits would also cease to be a problem. Currently, in each Province and in the Capital, the same percentage of the total profits is to be distributed, being five percent. But of course, that need not always be the case. Since the competence is now exclusively provincial, each Province (or the Federation in respect of the Capital) can vary the amount. Suppose the Sindh Act were to be amended so as to increase the amount to, say, seven percent. What would be the position of a trans-provincial company that had its registered office in, say, Punjab where the amount continued to remain at five percent? Could such a company argue that it was only liable to distribute to the workers in Sindh a proportionate amount calculated on the basis of five percent? In our view, the answer would have to be in the negative. The law in this Province would have to be applied, and workers here would get an amount proportionate to their number calculated at seven percent. Of course, the workers in Punjab would get an amount proportionate to their number calculated at five percent. But would this not be discriminatory? Again, the answer is that it would not. The reason is that the legislative competence is exclusively provincial, and the territorial extent is limited. Each Province is entitled to legislate in its own manner in respect of a matter that is exclusively within its domain.

34. In view of the foregoing discussion, we therefore answer the issue specified in para 2 above, which relates to the third category identified in the order of 19.09.2017, as follows. In the case of trans-provincial companies, it is the Sindh Act that applies, but interpreted, read and applied such that the obligation under the Act is only to make distribution to the workers in this Province, and only of an amount that is proportionate to their number here. It is irrelevant where the registered office and/or the industrial undertaking of the trans-provincial company are located, i.e., they could be located in this Province or elsewhere. Furthermore, in making the computation, the whole of the profits made by the company are to be used, regardless of where they were earned in the country.

The above judgemnet of Supreme Court in Shafiquddin Moinee v Federation of Pakistan through Secretary, Ministry of Human Resources Development, Islamabad & 2 Others 2018 CLD 1088 was challenged in the Supreme Court. The Apex Court granted leave to appeal and suspended its operation on 10.7.2018. The order of the Supreme Court is as under:

“The controversy before the High Court as to the application of rival Federal and Provincial Law viz Companies Profits (Workers’ Participation) Act, 1968 (the Federal Law) or The Sindh Companies (Workers’ Participation) Act, 2015. Accordingly to the learned counsel learned bench seized of the matter has erred in as much as Provincial Law has been made applicable to the workers within the provincial territory irrespective of the companies’ operational and or registered office. According to the learned counsel it is contrary to the principle laid down in the case of Messers Sui Southern Gas Company Ltd, and others versus Federation of Pakistan and others (2018 SCMR 802) wherein the apex Court has recognized trans-provincial legislation in respect of the companies operating nationwide. It is further pointed out that issue noted above is already subjudice in another Civil Petition No.1604 of 2018 titled as OGDCL versus Federation of Pakistan wherein leave to appeal has been granted. Accordingly, leave to appeal is also granted in this case as well, let his matter also come up alongwith the petition noted above as a connected matter subject to approval of Hon’ble Chief Justice of Pakistan.

            2. Notice. In view of the facts noted above operation of the impugned judgment is also suspended”.

The order of the Sindh High Court in Shafiquddin Moinee v Federation of Pakistan through Secretary, Ministry of Human Resources Development, Islamabad & 2 Others 2018 CLD 1088 is suspended but not yet reversed by the Supreme Court. Now a co-equal bench of Sindh High Court is hearing the cases of levy under Sindh Workers Welfare Fund Act, 2014 and  Sindh Companies Profits (Workers’ Participation) Act, 2015. The bench of co-equal strength cannot take a different view from Shafiquddin Moinee v Federation of Pakistan through Secretary, Ministry of Human Resources Development, Islamabad & 2 Others 2018 CLD 1088 unless a larger bench is constituted as held by Supreme Court in PLD 1995 Supreme Court 423. It is also worth mentioning that in all these cases, the dispute is between the Federal and Provincial Governments and High Courts cannot hear these matters in view of Article 184(1) of the Constitution as held in The Punjab Province v Federation of Pakistan [(1960) 2-TAX (Suppl.–3) (S.C.Pak).

The Supreme Court in Human Right Case No. 33954-P of 2018 on March 3, 2020 passed the following order:

“The learned Additional Advocate General, Sindh, by way of HRMA NO.39 of 2020, has filed a report in which he has shown an amount of Rs.16,060,433,143/- as the total amount deposited with the Nazir of High Court of Sindh. He has stated in the report that as many as 219 writ petitions/suits are pending in the High Court of Sindh at Karachi on the point in issue and in 18 cases, though employers have deposited some amounts, but the Fund Amount has not been fully deposited by them and the remaining matters are fixed in Court on 16.3.2020, when he shall endeavor to obtain an order of deposit from all the employers of the Fund amount. We note that on the last date of hearing i.e. 13.02.2020 the Nazir of the High Court of Sindh had submitted a report by way of HRMA No.21 of 2020 in which he had shown that the amount that is deposited in his office by 18 companies is in the sum of Rs.12,196,841,154/- including profit.

       2. Let the Nazir submit a further report showing the exact sum which is lying deposited with him. He shall also provide details of each deposit separately and file the relevant documents along with the report. The figure of the deposits made by the employers under the Sindh Companies Profits (Workers Participation) Act, 2015 and the amount in respect of the Sindh Workers’ Welfare Fund Act, 2014 be shown separately. Such report be made available within a period of two weeks.

       3. As regards the report submitted by the Province of Punjab, we have noted that disbursement of certain benefits have been made to a small number of workers under the heads of Talent Scholarship, Marriage Grant and Death Grant. Total cases entertained in the years 2018-19 were 49142 and in the years 2019-20 they are 9781 uptil now. We note that there are thousands of factories operating in the Province of Punjab which are covered by the Act of 1968 and millions of workers are employed in such factories but benefit under the Punjab Workers Welfare Fund Act, 2019 (the Act of 2019) is only being extended to a small number of people as noted above. What is happening with regard to remaining workers, who are entitled to the benefits of this law is not mentioned. Let a comprehensive report in this regard be submitted by the Workers’ Welfare Board constituted under the Act of 2019 as to how many factories are operating in the Province of Punjab, which are covered by the Act and from whom contributions are being received, and how many workers are employed in such establishments, and why the remaining workers are not being paid the Fund Amount.

       4. We may note that as many as 8000 residential houses have been constructed, all over the country, by the Workers’ Welfare Fund and such houses are lying vacant uptil now. The Federal Government as well as all the Provincial Governments and Administration of the Islamabad Capital Territory shall submit report(s) in this regard stating as to when and how they propose to distribute these houses and indicate timelines during which this will be done. Photographs of the houses shall also be attached with the reports.

       5. The learned Additional Attorney General seeks time to obtain further instructions from the Federal Government regarding payment of the Fund Amount by the Federal Government to the Provincial Government.

       6. The learned Additional Advocate General, Sindh shall also submit a comprehensive report in line with the report submitted by the Province of Punjab as to how may factories are operating in the Province of Sindh and the number of workers employed therein. Similar information, as required from the Province of Sindh, shall also be furnished by the Provinces of Khyber Pakhtunkhwa, Balochistan and the ICT. Adjourned to a date after one month.

       7. CMA Nos.137 and 140 of 2019. Mr. Dil Muhammad Alizai, learned ASC for the Applicants, seeks permission to withdraw these applications. The same are accordingly dismissed.

       8. CMA No.38  of 2020. This application seeking impleadment, being not maintainable, is dismissed”.

The Sindh High Court on 16-03-2020 in C.Ps. No.D-2689 of 2017, 2950/2012, 640/2013, 7939/2015, 1323/2016, 6578 & 6751 of 2016, 935, 993, 1546, 2078, 2664, 2811, 2812, 2853, 2987, 3303, 3867, 3879, 4052, 4130, 4163, 5024, 5527, 5528, 6227 & 7675 of 2017, 520, 521, 522, 523, 576, 1408, 3213, 3819, 4246, 4705, 6639, 6855, 7047, 7983, 8204, 8340, 8849, 8899 & 9010 of 2018, 209, 370, 579, 1002, 1003, 1178, 1498, 1552, 1669, 1670, 1671, 1672, 1673, 1674, 1675, 1676, 2136, 3761, 3864, 3865, 4406, 5951, 5952, 6106, 6107, 6236, 6237, 6485, 6486, 8387, 8410, 8411 of 2019, passed the following order:

“Mr. Ijaz Ahmed Zahid, learned counsel for petitioner in C.P. No.D-1498 of 2019, files a statement along with annexure, which is taken on record.

Mr. Ghulam Shabbir Shah, learned Addl. Advocate General has placed on record a copy of order dated 03.03.2020 passed by the Hon’ble Supreme Court of Pakistan in Human Rights Case No.33954-P/2018 and has also drawn the attention of this Court to order dated 17.9.2019, whereby, petitioners were directed to file a statement alongwith proof of payment of WWF and WPF paid by the petitioners during the period under controversy with advance copy to the learned Additional Advocate General and learned DAG, however, submits that compliance of the aforesaid order has not been made, whereas, only 18 petitioners have deposited the disputed amount before the Nazir of this Court and the remaining are not depositing recurring liability of the workers’ welfare fund and workers’ participation fund before the Nazir of this Court.

Learned Nazir present in Court has placed copy of report dated 16.01.2020, submitted before the Hon’ble Supreme Court in Human Rights Case No.33954-P/2018, according to which, an amount of Rs.12,196,841,154.00 (Rupees twelve billion, one hundred ninety six million, eighty hundred forty one thousand, one hundred fifty four), towards WWF and WPF, including profit amount, has been deposited by 18 petitioners. The statement filed by learned Nazir is taken on record.

Learned counsel representing the petitioners, operating as tans-provisional organization, who claimed to have been depositing/seeking discharge of their liability of WWF/WPPF through adjustment to the Federal Government, submit that they have already filed such statement(s), however, in order to ensure compliance of the Court’s order as referred to herein above, they will file a fresh statement(s) showing payment/adjustment of their up-to-date liability in respect of WWF and WPPF, within two weeks. Let the needful be done within two weeks, whereas, copy of such statement(s) along with proof of payment/adjustment be supplied in advance to the learned Additional Advocate Sindh as well as Assistant Attorney General by such petitioners.

Learned counsel representing the petitioners, who claim that they are making payment or required to pay WWF/WPPF to SRB are also directed to continue depositing the amount of WWF and WPPF to the SRB directly, or before the Nazir of this Court as per Court’s order, whereas, the outstanding disputed amount, if any, shall be deposited within 15 days, before the Nazir of this court, failing which interim order passed earlier will be recalled.

Learned counsel for the parties are also directed to assist the Court as to whether, in view of the fact that the Hon’ble Supreme Court is now seized of the subject controversy relating to payment of WWF/WPPF in Human Rights Case No.33954-P/2018, this Court may proceed to decide these petitioners, and if the issues before the Hon’ble Supreme Court is somehow different, then clarification to this effect may be sought and intimated to the Court on the next date.

To come up on 16.04.2020. Interim orders passed earlier to continue till the next date of hearing”.

The Sindh High Court earlier order of 17-09-2019 mentioned above was as under:

“After hearing learned Counsel for the parties at some length with regard to the controversy agitated through instant petitions, it appears that these cases can be categorized in three different categories; (i) petitions wherein legislative competence of the Provinces to legislate in respect of matters pertaining to trans-provincial establishment/entities has been challenged in view of Entries 58 and 59 to the Federal Legislative List, Schedule-IV of the Constitution and in view of recent judgments of Honourable Supreme Court in the case of Sindh Revenue Board vs. Civil Aviation Authority and others (2017 SCMR 1344) and Sui-Southern Gas Company Limited and others vs. Federation of Pakistan and others (2018 SCMR 802), (ii) petitions wherein the authority of Federation to collect Workers Welfare Fund after 18^th Amendment and enactment of Sindh Workers Welfare Fund Act, 2014 as well as the authority to collect under Sindh Companies Profit (Workers’ Participation) Act, 2015, whereas its retrospective application with effect from 2011 has also been challenged; and (iii) petitions wherein in addition to hereinabove challenges to the legislative competence of Federation and Provinces in respect of Workers Welfare Fund and Companies Profits (Workers’ Participation), the jurisdiction of Sindh Revenue Board to levy and collect has also been challenged, whereas, learned counsel for the parties have submitted that since all the aforesaid petitions will depend upon interpretation of similar provisions of the Constitution, including Article 141, 142, 270(AA) read with Entries 58 and 59 to the Federal Legislative List, Schedule-IV of the Constitution, therefore, request that all the aforesaid petitions may be decided through a common judgment.

“Let all the learned counsel for the parties shall come prepared to proceed with the matters on the next when instant petition shall be heard and decided at Katcha Peshi stage.  In the meanwhile if in some petitions comments are not filed, let the same be filed positively before the next date of hearing, with advance copy to the learned counsel for the petitioners, however, no further opportunity will be granted in this regard and the matters will be decided on the basis of comments already filed in the connected petitions. Learned counsel for petitioners are also directed to file a statement along with proof of payment of WWF and WPP paid by them during the period under controversy with advance copy to the learned counsel for respondents as well as learned DAG and Additional Advocate General Sindh for the purpose of verification.

“Learned counsel for the parties are at liberty to file a statement with regard to other connected petitions, if any, on the subject controversy within seven days and office is directed to fix all such identical petitions on the next date.

To come up on 09.10.2019 at 12:00 noon. Interim orders passed earlier to continue till then”.

In the meantime, the provincial authorities, it appears, without taking into account, the orders of the Supreme Court and Sindh High Court, are issuing administrative instruction creating confusion in the business and professional circles.

The Punjab Law and Parliamentary Affairs Department, in its Letter No. Legis.13-77/2010(C-II)(P-I)6218, issued on December 15, 2020, addressed to the Secretary of the Government of the Punjab, Labour & Human Resource Department, has conveyed the following:

• Before the Constitution (Eighteenth Amendment) Act, 2010, the subjects, inter alia, ‘welfare of labour’ and ‘conditions of labour’, existed at entry No. 26 in the Concurrent Legislative List, Fourth Schedule of the Constitution of Pakistan. However, after omission of the Concurrent Legislative List, the said subjects were not included in the Federal Legislative List; meaning thereby they devolved upon the Provinces.
• Under clause (c) of Article 142 of the Constitution, a Provincial Assembly shall, and Majlis-e-Shoora (Parliament) shall not, have power to make laws with respect to any matter not enumerated in the Federal Legislative List. Further, Article 143 envisages repugnancy of Provincial laws only when the Majlis-e-Shoora (Parliament) has competence to make such laws. Since Majlis-e-Shoora (Parliament) is not competent to make laws on the above subjects now, and the Provinces have the exclusive domain to legislate on these subjects, the question of supremacy of the federal law does not arise.
• Under clause (7) of Article 270AA, all taxes and fees levied under any law in force immediately before the commencement of the 18th Amendment, shall continue to be levied until they are varied or abolished by an Act of the appropriate legislature, which is Provincial Assembly of the Punjab in the present case.
• In view of the above legal scenario, Provincial Assembly of the Punjab enacted the Punjab Workers Welfare Fund Act 2019 which came into force on 13.12.2019, and the said Act repealed the Workers Welfare Fund Ordinance, 1971 to the extent of the Punjab. Hence, the Workers Welfare fund Ordinance, 1971 is no more applicable to the Punjab with effect from 13.12.2019. The Federal Government or any of its agencies is not legally competent to collect workers welfare fund form the Punjab. 

Earlier, the Federal Board of Revenue (FBR), in response to a letter by a chartered accountant firm in its Letter C.No.1(110)R&S/2020 dated December 3, 2020, provided the diametrically opposite view claiming: “In view of decision by the Council of Common Interest (CCI) “WWF shall remain with the Federal Government till such time a mutually agreed mechanism is developed”. It is clarified that Federal WWF Ordinance, 1971 will apply all over Pakistan and FBR is the collecting authority in this regard.

It is strange that Punjab where the coalition Government of Pakistan Tehreek-i-Insaf (PTI) is issuing contradictory statement and that too after agreement in CCI as per FBR. 

The representatives of workers have been consistently emphasising the view that social security net should not be distributed among the states; rather it should be managed through the centre and implemented by the provinces. The trans-provincial fund, assets, institutions and the programs run by EOBI and Workers Welfare Fund (WWF) are difficult to be divided among the provinces. Besides, the migration of the workers would be a big challenge, if the subject considered is to be devolved, the welfare of the workers would be affected—for details see Pro-people Laws, Insensitive Legislators, Courting the Law (Pakistan’s Ist Legal & News Portal) , November 24, 2020.

The Supreme Court in the case of Messers Sui Southern Gas Ltd & Others v Federation of Pakistan & Other 2018 SCMR 802 has extensively elucidated that the post-Eighteenth Amendment position vis-à-vis legislative competence of federation and federating units, holding as under:

“2. The Islamic Republic of Pakistan is a democratic State (Federation) with its Federating Units (Provinces) and the Constitution of the Islamic Republic Pakistan, 1973 (Constitution) recognizes and creates a balance between the authority of the Federation and the autonomy of the Provinces, which recognition has been given an iron cladding by virtue of the Eighteenth Amendment, passed vide the Constitution (Eighteenth Amendment) Act, 2010. This Amendment to the Constitution has inter alia introduced a drastic enhancement in the legislative authority of the Provinces by deleting the Concurrent Legislative List (CLL), whereby previously both the Parliament and the Provincial legislatures could legislate on the subjects enumerated therein. The omission of the CLL, left only a single Legislative List in the Constitution which exclusively list subjects that can be legislated upon by the Parliament alone, and by virtue of Article 142(c) of the Constitution any subject not enumerated in these two lists would subject to the Constitution, be within the legislative competence of the Provinces. Entry No. 26 of the erstwhile CLL contained the subjects of “welfare of labor; conditions of labor, provident funds; employer’s liability and workmen’s compensation, health insurance including invalidity pensions, old age pensions”, whereas, Entry 27 of the same dealt with the subjects of “trade unions; industrial and labor disputes”. Thus, prior to Eighteenth Amendment, the subject of labour and trade unions were in the domain of both the Parliament as well as the Provincial Assemblies. The labour laws enacted by the Parliament which were applicable in the Federation as well as the Federating Units. However, after the Eighteenth Amendment, the Parliament enacted the Industrial Relations Act 2012 (IRA 2012) which was challenged before the concerned High Courts (all the provincial High Courts as also the Islamabad High Court) mainly on the ground that the same is incompetently enacted by the Parliament as the subject of labour and the trade unions was no more in the legislative domain of the Parliament rather within the domain of the Provincial Assemblies. All the High Courts held (through judgments impugned herein as also other judgments) in favour of the constitutionality/validity of the IRA 2012.

20. At this juncture it is to be noted that when a provincial legislature is not competent to legislate with regard to the workmen of trans-provincial establishments, obviously the Federation has to interfere in the matter with a Federal Legislation to preserve and protect the fundamental rights of the said workmen ensured under Article 17 of the Constitution. We are in agreement with the observation made by the learned High Court that though in a Federal system, provincial autonomy means capacity of a province to govern itself without interference from the Federal Government or the Federal legislature, but as the Provincial legislature does not possess extra-territorial legislative authority i.e. it cannot legislate regarding the establishments operating beyond the territorial boundaries of that province. In absence of a Federal legislation, the right to form a trade union that can operate beyond the provincial boundaries could not be secured by any provincial law, and as such, any matter or activity of a trans-provincial nature would remain unregulated. The only solution to the above said problem is a Federal legislation. The effect of non-promulgation of IRA 2012 would be that the employer would not recognize the right of the workmen to form a countrywide trade union and carry out unified activities in his establishment at trans-provincial level; and also the number of workmen working in each unit of an establishment working in a certain Province would be counted separately which in turn would have adverse impact on the rights of the workmen, in so far as applicability of benefits and security of job granted under various labour laws are concerned as certain rights granted under various labour laws become available to the workmen depending upon the total strength of the workmen in an establishment. Needless to observe that as mentioned in its preamble, the object of promulgation of IRA 2012 is “to consolidate and rationalize the law relating to formation of trade unions, and improvement of relations between employers and workmen in the Islamabad Capital Territory and in trans-provincial establishments and industry”. Further, as per Section 3 thereof “it shall apply to all persons employed in any establishment or industry, in the Islamabad Capital Territory or carrying on business in more than one province”. Hence, the parliament in its wisdom has intentionally left it for a Province to make legislation concerning the establishments/trade unions functioning only within the limits of that Province, without transgressing the territorial limits of the said Province. Thus, neither does the IRA 2012 in any manner, defeat the object of the Eighteenth Amendment nor does it destroys or usurps the provincial autonomy or the principle on which the Federation was formed under the Constitution; rather it facilitates to regulate the right to form unions at trans-provincial level, which could not be attained through a provincial law.

23. For the foregoing reasons, the appeals as also the petition are dismissed and it is held as under:–

• the Federal Legislature has extra-territorial authority but no such extra-territorial authority has been conferred to the Provincial Legislature by the Constitution;
• the Federal legislature does, but the Provincial Legislature does not, have legislative competence to legislate to regulate the trade unions functioning at trans-provincial level;
• the matters relating to trade unions and labour disputes, etc., having been dealt with and protected under the International Conventions, are covered under Entries No.3 and 32 of Part-I of the FLL. Thus, the Federal Legislature has legislative competence to legislate in this regard;
• under the command of Entry No.13 in Part-II of the FLL, the Federation has competence to enact laws relating to the inter-provincial matters, Entry No.18 thereof further enlarges the scope of the said Entry; therefore, the Federal Legislature has legislative competence to legislate in this regard too;
• the IRA 2012 neither defeats the object of the Eighteenth Amendment to the Constitution nor does it destroy or usurp the provincial autonomy;
• the IRA 2012 has been validly enacted by the Parliament and is intra vires the Constitution;
• the workers of the establishments/industries functioning in the Islamabad Capital Territory or carrying on business in more than one provinces shall be governed by the Federal legislation i.e. IRO 2012; whereas, the workers of establishments/industries functioning or carrying on business only within the territorial limits of a province shall be governed by the concerned provincial legislations;
• as we have held that the IRA 2012 is valid piece of legislation, it is held that the National Industrial Relations Commission (NIRC) formed under Section 35 of the IRA 2012 has jurisdiction to decide the labour disputes, etc., relating to the employees/workers of companies/corporations/institutions/establishments functioning in more than one Province;
• the IRA 2012, being a procedural law, would be applicable retrospectively w.e.f. 01.05.2010, when the IRO 2008 ceased to exist; and
• M/s Shaheen Airport Services is not a charitable organization and IRA 2012 is applicable to it as it is operating in more than one Province.

 [Underlined by us for emphasis]

Earlier, the Supreme Court of Pakistan in SRB v Civil Aviation Authority of Pakistan 2017 SCMR 1344 held as under:

23. Item 59 of Part I and item 18 of Part II of the Federal Legislative List of our Constitution provide that the “matters incidental or ancillary to any matter enumerated in the Federal Legislative List” are also within the exclusive domain of the Federal Legislature. These provisions are similar to the American “necessary and proper” powers. Chief Justice Muhammad Haleem, writing for the Supreme Court, in the case of Abdur Rahim v Federation of Pakistan (PLD 1988 Supreme Court 670, at page 676) opined that the words incidental or ancillary should not be construed narrowly and they don’t necessarily mean lesser things:

               “Although the words ‘incidental’ and ‘ancillary’ literally mean things of lesser or subordinate degree or of consequential nature but in the legislative interpretation they mean more than this. While interpreting the words ‘incidental’ and ‘ancillary’ in Messrs Haider Automobile Ltd. v. Pakistan (PLD 1969 SC 623), it was observed:

                     “The items in the legislative list, as was observed in the case of United Provinces v. Atiqa Begum and others are not to be read in any narrow or pedantic sense. Each general word therein should be held to extend to all ancillary or subsidiary matters which can fairly and reasonably be said to be comprehended within it. These items describe only comprehensive categories of legislation by a word of broad and general meaning.”

     Justice Fazal Karim in his definitive two volume book “Judicial Review of Public Actions” (published by Universal Law Publishing Co. 2006, at page 1225 of volume 2) writes:

               “In sum, the doctrine of ‘incidental or ancillary’ powers is like the American ‘necessary and proper’ doctrine a doctrine of implied power and as James Madison put it:

                     “Had the Constitution been silent on this head, there can be no doubt that all the particular powers requisite as means of executing the general powers would have resulted to the government by unavoidable implication. No axiom is more clearly established in law, or in reason, than that whenever the end is required, the means are authorized; whenever a general power to do a thing is given, every particular power necessary for doing it is included.”

34. The case of Pakistan Workers Federation, Balochistan v Government of Pakistan (2014 PLC 351) involved the post Eighteenth Amendment scenario and the constitutional power to legislate on the subject of trade unions, industrial and labour disputes and labour welfare (items 26, 27, 28, 30 and 31 of the Concurrent Legislative List). The Concurrent Legislative List was omitted by the Eighteenth Amendment. The question arose whether the Federal Legislature could still make laws in respect of matters that were mentioned in the Concurrent Legislative List. A Divisional Bench of the Balochistan High Court appointed Mr. Raza Rabbani as amicus to assist the Court. Mr. Rabbani in addition to being a senior counsel was a senator and the Chairman of the Senate of Pakistan. The judgment in the case was authored by me as Chief Justice of the Balochistan High Court. It will be appropriate to reproduce the following extracts from the judgment to show what was sought to be achieved by the Eighteenth Amendment:

               “6. Mr. Raza Rabbani brought a rare insight into the deliberations as he was the Chairman of the Parliamentary Committee on Constitutional Reforms (herein after referred to as “the Committee”) whose report dated 31st March, 2010 resulted in the Constitution (Eighteenth Amendment) Act, 2010. The Committee comprised of 26 Members representing all political parties, including those political parties which did not have representation in Parliament.” (paragraph 6, page 361)

               “We were informed that the first meeting of the Committee took place on 25th June, 2009, when the Committee elected its Chairman, namely Mr. Raza Rabbani. Mr. Rabbani stated that all the decisions of the Committee were by consensus and only notes of reiteration were recorded by ‘dissenters’. The Committee proposed 102 amendments to 97 Articles of the Constitution, primarily with a view to do away with the mischief of the Eighth and Seventeenth Amendments to the Constitution that had been enacted by dictators. Section 96 of the Constitution (Eighteen Amendment) Act, 2010 substituted Article 270-AA; the earlier Article 270-AA had been validated and substituted by the Constitution (Seventeenth Amendment) Act, 2003 and had been inserted by the Legal Framework Order (Chief Executive Order No.24 of 2002).” (paragraph 6, page 360)

               “7. Mr. Raza Rabbani referred to clauses (6), (8) and (9) of Article 270-AA, which are reproduced hereunder:

                     “(6) Notwithstanding omission of the Concurrent Legislative List by the Constitution (Eighteenth Amendment) Act, 2010, all laws with respect to any of the matters enumerated in the said List (including Ordinances, Orders, rules, bye-laws, regulations and notifications and other legal instruments having the force of law) in force in Pakistan or any part thereof, or having extra-territorial operation, immediately before the commencement of the Constitution (Eighteenth Amendment) Act, 2010, shall continue to remain in force until altered, repealed or amended by the competent authority.”

                     “(8) On the omission of the Concurrent Legislative List, the process of devolution of the matters mentioned in the said List to the Provinces shall be completed by the thirtieth day of June, two thousand and eleven.”

                     “(9) For purposes of the devolution process under clause (8), the Federal Government shall constitute an Implementation Commission as it may deem fit within fifteen days of the commencement of the Constitution (Eighteenth Amendment) Act, 2010.”

               “The Implementation Commission, referred to in Article 270-AA(9), held 68 meetings and devolved 17 ministries in three phases, as per notifications issued by the Federal Cabinet Establishment Division dated 2nd December, 2010 (First Phase), 5th April, 2011 (Second Phase) and 29th June, 2011 (Third Phase). The process of devolution was required to be completed by the 30th June, 2011, as stipulated in Article 270-AA (8), thus stood concluded one day before the last date.”

               “Mr. Rabbani stated that, to the extent that Parliament can make laws for Islamabad Capital Territory there is no objection or challenge to the Industrial Relations Act, 2012. He submitted that Parliament can also legislate in respect of the subjects mentioned in the Federal Legislative List including Item 31 of Part I in respect of ‘corporation’ and matters related therewith.”

               “He also referred to Items 4 and 13 of Part II of the Fourth Schedule respectively “Council of Common Interests” and “Inter-provincial matters and co-ordination”. Article 154 of the Constitution provides that, “the Council shall formulate and regulate the policies in relation to matters in Part II of the Federal Legislative List and shall exercise supervision and control over related institutions” and that the highlighted words are noteworthy. Part II of the Fourth Schedule includes ‘railways’ (Item 1), ‘mineral oil and natural gas’ (item 2), ‘development of industries’ (item 3), ‘electricity’ (item 4), ‘major ports’ (item 5) ‘all regulatory authorities established under a Federal Law’ (item 6).”

               “In his opinion Parliament could legislate in respect of inter or trans-provincial bodies or institutions that covered any of the said items. Reference was then made to Article 38(a), which requires that the State shall ensure “equitable adjustment of rights between employers and employees” and that the definition of ‘State’ is to be read in the context, and could mean Federal Government/Parliament or a Provincial Government/Provincial Assembly (Article 7 of the Constitution); however, as “inter-provincial matters and coordination” fell within the domain of Parliament the ‘State’ means Parliament, which is competent to enact laws in respect whereof.” (paragraph 7, pages 361-2)

               35. Mr. Raza Rabbani’s submissions in the aforesaid case also help in understanding the background and the manner in which the Eighteenth Amendment to the Constitution was discussed, enacted and implemented and also what were the objectives that were sought to be achieved. Mr. Rabbani stated, and the Balochistan High Court agreed with him, that despite the removal of the Concurrent Legislative List from the Constitution the Federal Legislature may still legislate in respect of a subject that was mentioned in the Concurrent Legislative List provided it came within the purview of another subject on the Federal Legislative List or was incidental or ancillary thereto…..”

[underlined and bold by us for emphasis]

The above pronouncements of the Supreme Court clearly direct that all the laws related to “equitable adjustment of rights between employers and employees” and welfare of workers and providing social security to citizens exclusively fall in the domain of the Parliament and not provincial assemblies even after the 18th Amendment. These are binding under Article 189 of the Constitution. In the light of above orders of the Supreme Court, the provincial laws made like WWF, WPPT, and EOBI and others before or after the 18th Amendment can be void under Article 143 of the Constitution which reads as under:

143.—Inconsistency between Federal and Provincial law.— If any provision of an Act of a Provincial Assembly is repugnant to any provision of an Act of Majlis­-e-Shoora (Parliament) which Majlis-e-Shoora (Parliament) is competent to enact, then the Act of Majlis-e-Shoora (Parliament), whether passed before or after the Act of the Provincial Assembly, shall prevail and the Act of the Provincial Assembly shall, to the extent of the repugnancy, be void.

On December 21, 2020, the war of words took place between PPP and PTI on the issue of WWF and EOIB. According to a Press report, the Sindh Education and Labour Minister, Saeed Ghani, “slammed the “illegal and unconstitutional seizure of the EOBI and Workers Welfare Fund by the Federal Government. In retaliation, Leader of the Opposition in the Sindh Assembly Firdous Shamim Naqvi said, the PPP minister was “misleading the people only for political point-scoring”. He added that “the federation wrote a letter asking the Federal Board of Revenue to collect taxes from the agencies that operate inter-provincially. And such a simple thing is not understood by a minister”. He claimed that all formalities on part of the federal government “are already done and the people of Sindh have not been able to avail the benefits of these institutions [EOBI and Workers Welfare Fund] only due to incompetence of the Sindh government.” The EOB Act 1976 was enforced with effect from April 1, 1976, to achieve the objective of Article 38C of the Constitution, by providing for compulsory social insurance. It extends old-age benefits to insured persons or their survivors. Under EOB Scheme, insured persons are entitled to avail benefit like, Old-Age Pension (on the event of retirement), Invalidity Pension (In case of permanent disability), Old-Age Grant (an Insured Person attained superannuation age, but does not possess the minimum threshold for pension) and Survivor’s Pension (after Insured Person dies).

It is time that the Federal and Provincial Governments, instead of issuing contradictory instructions and creating further confusion in business and professional circles, should request the Supreme Court for declaratory judgement, especially when the matter is already seized by the Supreme Court in Human Right Case [33954-P of 2018] though it did not take note of Article 184 when dispute is between or among the governments. Nobody assisted the Supreme Court that it has original and exclusive jurisdiction, ousting all courts, including Sindh High Court where petitions are pending. The governments must approach the Supreme Court for a declaratory judgement under Article 184(1) & (2) that reads as under:

184. Original jurisdiction of Supreme Court.-(1) The Supreme Court shall, to the exclusion of every other Court, have original jurisdiction in any dispute between any two or more Governments.

Explanation.-In this clause, “Governments” means the Federal Government and the Provincial Governments.

(2) In the exercise of the jurisdiction conferred on it by clause (1), the Supreme Court shall pronounce declaratory judgments only.

The representatives of workers have been consistently emphasising the view that social security net should not be distributed among the provinces, rather it should be managed through the federation and implemented by the federating units. The trans-provincial fund, assets, institutions and the programs run by EOBI and Workers Welfare Fund (WWF) are difficult to be divided among the provinces. Besides, migration of workers would be a big challenge. They rightly pointed out that subject can be devolved but welfare of the workers/citizens cannot.

The Supreme Court already held in the case of Government of Sindh through Secretary Health Department and Others v Dr. Nadeem Rizvi and others [2020 SCMR 1]: “The performance of its positive obligations under the fundamental rights, for example right to life, prevention of slavery, forced labour, human trafficking, etc. constitute a “purpose” of the Federation for which it can carry out projects throughout Pakistan. For performance of the said purpose, it is not necessary to look into the legislative list when the main body of the Constitution provides the requisite powers. Refer to Province of Sindh v. MQM (PLD 2014 SC 531)”. Thus subject of labour though devolved through 18thAmendment, the workers and citizens are not—they remain the responsibility of Federation as elaborated in Pakistan Workers Federation, Balochistan v Government of Pakistan (2014 PLC 351).

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The writers, lawyers and partners in Huzaima, Ikram & Ijaz, are Adjunct Faculty at Lahore University of Management Sciences (LUMS)