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 an article, Workers’ Welfare Fund: a tax or a fund?, published in an English daily on December 10, 2020, in which the 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 [he attributes both to PPP whereas latter was passed in 1968 by then Parliament and former 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] are “tax”. This assertion is against the judgements of Supreme Court and High Courts holding these are not “tax”. He is factually and legally wrong. It appears that he has inadvertently ignored the binding judgement of Supreme Court 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.)] holding that amendments in these laws vide Money Bill was unconstitutional. In later part we will discuss this and various other judgements as well as vital issue of their importance and mechanism to collect these in the wake of the Constitution (Eighteenth Amendment) Act, 2010 [18th Amendment].
The author has recommended abolishing both these enactments assuming these “taxes” are extra burden on the employers’ income. He observed: “From 1971 onwards billions of rupees have been collected by the Federal Government in the guise of WWF”. The Federal Government has been collecting WWF under the valid law of the land and transferred the contributions in the Workers’ Welfare Fund. The importance of this levy and its untilisation is highlighted by Syed Zulfiqar Abbas Bukhari, Special Assistant to Prime Minister (Minister of State) as under:
Raising the living standard and socio-economic uplift of industrial workers is the cornerstone of the Government policy, which is being achieved by providing the basic and other social amenities of life to workers in the country. WWF has been playing vital and progressive role in providing various important services to the industrial workers. WWF has established many housing schemes for workers throughout the country and development works of new schemes are under progress. In medical sector, WWF has established hospitals and dispensaries in the areas of workers’ concentration. As for the education sector, primary to higher secondary level educational and training institutions have been established and being run all over the country. WWF also awards fully funded scholarships to the talented children of industrial workers. A number of other welfare activities such as marriage grant and death grant are also being run by WWF.
Further schemes funded through this levy are available at the website of Worker Welfare Fund, Government of Pakistan: http://www.wwf.gov.pk/Download
Mr. Shabbar argues that for all purposes “it is straight tax at the rate of 2% on the profit of the company”. In theory, he says, “this amount is to be spent by the Ministry of Labour for projects for the welfare of workers”. The author then admits that “there may be some projects to justify the continuation of this levy however it is a stark reality that such expenditure is not commensurate with the amount collected”. According to him, “WWF is a tax for all practical purposes should be abolished as it adds to the cost of doing business and at the same time it promotes underreporting of profit”. “Furthermore, he adds, “many entities do not want to establish as a body corporate whereby WWF and WPPF which aggregates to 7% of profit become applicable”. After building his case on these, he finally says that “there is no rationale for continuation of WWF”.
The following arguments and statements, made by him in the article, are reproduced below in verbatim. These need to be analysed and debated as the issue of prime importance for the welfare of working class:
- “The problem related to WWF has aggravated after the 18th Amendment whereby this matter has effectively been devolved to provinces.
- In effect, there is no legal basis for the continuation of Federal WWF. Nevertheless, under the specific provisions of the Constitution Federal Government can continue collection of WWF until and unless a legislation to this effect is made by the provinces. This status continued till recently when there was no WWF legislation in the provinces. Now, three provinces namely Punjab, Sindh and KPK have legislated with respect to WWF. In this situation even under the Constitution’s transitory provisions there cannot be any collection of WWF by the Federation.
- In this regard there is lot of confusion amongst the taxpayers and the tax collectors on this subject. The federal government has not surrendered its right to collect WWF and notices are being issued for non-compliance.
- “I am not aware of the activity by the provincial governments in this matter. The problem in this respect took an interesting turn when Federal Board of Revenue issued a letter in response to a query by an accounting firm that WWF shall be recoverable by the Federal Board of Revenue under the WWF Ordinance, 1971 in pursuance of the decision by the Council of Common Interest. This means that there has been no devolution with regard to this levy”.
- “In my view, this assertion is not entirely in line with the provisions of the Constitution. When matters relating to labour have been devolved to provinces then there is no provision under the Constitution that any such levy which is not a tax and not permissible to be treated as tax can be recovered under a Federal law. This matter should not be treated as similar to the case of Federal Excise Duty and Sales Tax on Services which all relate to taxes. I reiterate that WWF is not a tax under the Federal Legislative list.
- With regard to Federal Legislative list of the Constitution one personal episode will explain the confusion that has been created on this subject. One day, late at night, I received a call from a former Law Minister, who happens to a very famous lawyer of the country, to enquire from me as an accountant the meaning of the term ‘capital asset’. I tried to explain to him as far as I could. I asked him the reason for asking this question. He replied that he has to argue a case before the Supreme Court and he could not find a plausible definition of the term ‘capital asset’ as used in Federal Legislative List of the Constitution. Later, when both of us did some research it transpired that this list is a reproduction of the Government of India Act, 1935 and all our constitutions have adopted the same without any further thinking and considering developments that have taken place in the meantime.
- In the light of the aforesaid status of the Federal Legislative List of the Constitution it is my firm view that WWF Ordinance, 1971 cannot be given an artificial life after the legislation of WWF by the provinces. There can be an argument that legislations have been made however their implementation has not yet been decided therefore the old law being WWF legislation by the Federal Government is applicable. I am not a lawyer to give opinion on this matter, however, keeping in view the nature of WWF and its abuse in the past by way of utilization of this levy it is high time to decide that Federal WWF is not payable. Furthermore, there should be clear directions through Council of Common Interest to the Provinces that all levies like WWF or WPPF if legislated should be on a fixed payment basis not related to the profit of the industrial entity. Since the expenditure under WWF is to be made on national or provincial basis therefore there is no reason to have WWF based on profit on an entity. In other words WWF Ordinance, 1971 does not meet the criterion of an equitable law. Since a transition has been adopted through the 18th Amendment this amendment is necessarily required be made.
- As a student of taxation I am not aware of any country where there is a straight levy based on the profit of the entity in the guise of WWF. In a separate article, I would explain the issue relating to WPPF. In summary it is my suggestion that the status of the recent letter issued by the FBR should be re-examined and businesses be relieved from this unreasonable levy, which is nothing but a direct tax on profit. Higher taxes are always the basis of tax evasion”.
Needless to point out that the author has deferred the issue of WPPF and on WWF adjudged it a “tax”, and then asked the state to abolish these levies as these are anti-business. He did not bother to mention that the state under the Constitution of Pakistan of Islamic Republic [“the Constitutions”] and under the international treaties is bound to enforce laws for the benefit of workers. He conveniently missed the point that both these levies are allowed as deduction from total income under the following provisions of the Income Tax Ordinance, 2001:
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 above provisions dismantle the claim of the author that these are “tax” as elaborated by Lahore High Court in East Pakistan Chrome Tannery (Pvt.) Ltd Vs. Federation of Pakistan and others (2012) 105 TAX 81 (H.C. Lah.) 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 was approved by the Supreme Court of Pakistan in [(2016) 114 TAX 385 (S.C. Pak.)] holding 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 in 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……..”
We mentioned in our article, Pro-people Laws, Insensitive Legislators, Surkhyian, November 15, 2020, as under:
“The above shows the sheer incompetence of our governments and parliamentarians that they could not distinguish which laws are to be presented as Money Bill and which one should go to both the Houses. The beneficial amendments made wrongly in labour laws for the working classes over a decade back have not been corrected by Pakistan People Party (PPP) and Pakistan Muslim League (Nawaz) during the “Decade of Democracy” [2008-18] and by the coalition government of Pakistan Tehreek-i-Insaf (PTI) since coming into power in August 2018. It can be termed as the worst expression of callousness towards the labourers. All the parties during election claims claim to be champions of the cause of the downtrodden but in reality this is merely for lip service. The PMLN and PPP got ten years to rectify the mistake pointed out by the courts but they remained unmoved. The same apathy is demonstrated by the PTI Government. This confirms that when the matter comes to welfare of the workers, our legislators are totally insensitive but when issue is of raising their own salaries, laws are passed within a few minutes in the Senate and National Assembly. They did not bother that their lapse has affected over half a million pensioners under EOBI and some five million workers of various categories including women, registered for contributions”.
It is obvious that Mr. Shabbar Zaidi has not read the article, but one cannot believe that he is not aware of the judgement of the Supreme Court cited above that is binding on all institutions and authorities under Article 189 of the Constitution.
It was held by Indian Supreme Court in M/S Star Diamond v. Union of India (PTCL 1988 FC 229) that its decisions laying down the proposition in law are laws binding on all, regardless whether they were party to the proceedings or not. The Supreme Court of Pakistan quoted it in Shahid Pervaiz v Ejaz Ahmad and others 2017 SCMR 206 [page 254, para 105] held as under:
“Under Article 189, this Court is the court of last resort and laws declared or principles enunciated by it are binding on all the subordinate courts and authorities in Pakistan as reflected in Farhat Azeem v. Waheed Rasul (PLD 2000 SC 18). We have also held that the decisions of this Court laying down the proposition in law are laws binding on all, regardless whether they were party to the proceedings or not M/S Star Diamond C v. Union of India (PTCL 1988 FC 229). It has also been held by us that even a decision of Supreme Court for which no reasons are given would be binding upon the Courts in the country Sardar Ali v. Conservator of forests [1987 PLC (C.S) 55]. Likewise where an amendment in an Act was made prior to a decision of Supreme Court, declaration of law by Supreme Court would override the amendment in the Act and nullify its effect by virtue of Article 189 of the Constitution (PLD 1986 SC 14. Finally, the doctrine of stare decisis is not applicable to this Court. This Court in the case of Hitachi Limited v Rupali Polyester [1998 SCMR 1618], has concluded that the Supreme Court is not a slave of doctrine of stare decisis and can change or modify its view with the passage of time. All the courts and public institutions are bound to follow the principles laid down by this Court. No exception to this principle can be created under the garb of rule of procedural niceties.”
[underlined by us for emphasis]
Any adverse, derogatory and/or contemptuous remarks about the judgement of the apex court by any subordinate court or an authority can lead to serious consequences as explained in the following judgement reported as Mirza Shaukat Baig and Other v Shahid Jamil & Others PLD 2005 Supreme Court 530:
“30. The learned Division Bench of Lahore High Court has ignored the case law enunciated in different judgments pronounced by this Court on the grounds which are not tenable and by ignoring the fact that the judgments of this Court being apex Court are binding upon the learned High Court in the view of the provisions as enumerated in Article 189 of the Constitution of Islamic Republic of Pakistan which, inter alia, provides that any decision of the Supreme Court shall, to the extent that it decides a question of law or is based upon or initiate a principle of law shall be binding on all other Courts in Pakistan and the learned Lahore High Court is no exception to it. It is well-entrenched legal proposition that “the ultimate responsibility of interpreting the law of the land is that of the Supreme Court. Therefore any decision of the Supreme Court shall to the extent that it decides a question of law or is based upon or enunciates a principle of law is binding on all other Courts in Pakistan. A decision in suo motu Shariat review petition followed by Supreme Court would be binding on all other Courts in Pakistan. Law declared by Supreme Court becomes the law of the land and is binding not only on all Courts in Pakistan but also on all functionaries of the Government.” (PLD 1971 SC 324, PLD 1985 SC 228. It is worth mentioning here that “where a judgment of Supreme Court has become effective as from a specified date, it would be binding not only on High Court’s and Courts subordinate to it but also on all other Courts of Pakistan from that date. Therefore, High Court rightly preferred Supreme Court decision over decision of Full Bench of High Court.
The decision of Supreme Court cannot be ignored on the ground that certain grounds were not urged before Supreme Court (PLD 1987 Lah.71, 1981 SCMR 520, PLD 1973 Lah 1). Apart from the Constitutional obligation imposed upon the Courts even the propriety demands that the Courts must follow such a law without any hesitation. Unless the law so declared is altered or overruled by the Supreme Court itself, the High Court has no option but to follow it (PLD 1975 Lah. 65, PLD 1964 Peshawar 250).
31. We have also noted that the language as used in paragraphs 14, 15, 16 and 17 in the judgment impugned appears to be derogatory and contemptuous which cannot be ignored lightly and it is directed that care and caution must be observed while offering comments on any judgment delivered by this Court in order to avoid the possibility of suo motu action by the Supreme Judicial Council and initiation of proceedings under the contempt laws”.
Even in respect of a per incuriam judgement of Supreme Court, it is for the apex court to declare it so; not for any lower court. A decision is given per incuriam when Court has acted in ignorance of a previous decision of its own or of a Court of co-ordinate jurisdiction which covered the case before it in which case it must decide, which case to follow or when it has acted in ignorance of decisions of higher courts, which are binding; or when the decision is given in ignorance of the term of a statute or rule having statutory force. In recent years, the different benches of Tax and other Tribunals have started declaring as “per incuriam” earlier judgments passed by benches of co-equal strength or even benches of high strength and higher courts, which has created a situation of chaos and anarchy. This trend is disastrous as the very rationale behind doctrine of stare decisis is the need to promote certainty, stability and predictability of law in criminal, fiscal and constitutional matters–Pir Bakhsh v Chairman, Allotment Committee PLD 1987 Supreme Court 145. A decision should not be treated as given per incuriam, however, simply because of a deficiency of parties, or because the Court had not the benefit of the best argument and, as a general rule, the only cases in which decisions should be held to be given per incuriam are those given in ignorance of some inconsistent statute or binding authority—Shahid Pervaiz v Ejaz Ahmad and others 2017 SCMR 206.
Coming to the issue of recent administrative developments on the issue of mechanism of collection of various labour laws related levies, including WWF, the following are the details that need to be analysed:
GOVERNMENT OF PUNJAB
LAW AND PARLIAMENTARY AFFAIRS
Lahore, the 15th December, 2020
Governor of the Punjab
Labour & Human Resource Department
Subject: Payment of Workers Welfare Fund (WWF) to Federal Board of Revenue (FBR)
I am directed to refer your letter No.SO(Admn)9-5/2011(P), dated 15.12.2020.
2. 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.
3. 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.
4. 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.
5. 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 o 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.
Deputy Director (Legis-I)
C.No.1(110)R&S/2020 Islamabad, the 3rd December, 2020
EY Ford Rhodes
96-B-I, 4th Floor, Pace Mall Building
M.M. Alam Road, Gulberg-II
Subject: REVOLUTION MECHANISM OF WORKERS WELFARE FUND.
I am directed to refer to your letter No.LT/5076/20 dated 19th November, 2020 on the above subject.
2. In view of decision by the Council of Common Interest that “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.
Secretary (Rules & SROs)
MINISTRY OF OVERSEAS PAKISTANIS AND
HUMAN RESOURCE DEVELOPMENT
Islamabad, the 6th August, 2020
Employee Old-Age Benefits Institution (EOBI)
EOBI House, 190/1.B, Block-2, PECHS Nursery
Subject: Minutes and direction of 41st meeting of the CCI Case No.CCI.14/1/2019 dated 23.12.2019.
I am directed to refer to enclose Ministry of Inter Provincial Coordination’s letter No.2)207)/2018-CCI dated 12.03.2020 on the subject noted above wherein following clarification/decision has been issued:–
“EOBI shall remain with Federal Government and WWF shall remain with the Federal Government till such time a mutually agreed mechanism is developed”.
2. EOBI directed to take further necessary action in the matter at the earlier.
MINISTRY OF OVERSEAS PAKISTANIS AND
HUMAN RESOURCE DEVELOPMENT
Islamabad, the 9th October, 2020
Subject: Minutes of the meeting of devolution mechanism of Workers Welfare Fund.
I am directed to enclose herewith minutes of the meeting held on 02-10-2020 under the Chairmanship of Secretary, OP&HRD for developing devolution mechanism of Workers Welfare Fund, for information and necessary action please.
Section Officer (Fund/DWE)
GOVERNMENT OF PAKISTAN
MINISTRY OF OVERSEAS PAKISTANIS AND
HUMAN RESOURCE DEVELOPMENT
Islamabad, the 9th October, 2020
MINUTES OF THE MEETING
Subject: Devolution mechanism of Workers Welfare Fund.
3rd meeting on the devolution of WWF was held on 02-10-2020 under the chair of Secretary, OP&HRD. Among others the meeting was also attended by the Secretaries, Labour Department of Punjab, Sindh KPK and Additional Secretary, Balochistan.
2. At the outset, Secretary, OP&HRD gave a presentation on the background of devolution post 18th amendment. He highlighted the latest CCI decision which inter-alia stated that WWF will be devolved after devising the mechanism. The presentation given by the Secretary is annexed.
3. Secretary, Labour Punjab was of the view that although the timeline given for devolution in the 18th amendment has lapsed however they are not barred going beyond that timeline. He was of the view that Punjab has already enacted the law and is in process to inform stand-alone establishments in the Province regarding submission of 2% of declared income to Revenue Department, Government of Punjab. He requested for facilitation by the Ministry of OP&HRD for removal of any ambiguity by the FBR. He was also of the view that the liquid assets amounting to Rs.124 billion in the trust fund account of AGPR may be distributed and for this mechanism may be devised.
4. Sindh Informed that their Revenue Board is collecting the 2% and 5% required under the Ordinance 1971 and the Act 1968 respectively. He suggested for a mechanism for disbursement of liquid assets amounting to Rs.124 billion.
5. KPK, was however of the view that the timeline given by the Ministry of OP&HRD i.e. six months to one year is too short a time for completing the process of enactment. However in principle they are of the view that the existing arrangements be continued. KPK is a revenue deficient Province therefore, the stakeholders i.e. the Employer. Employees, FBR and Law needs to be taken on board before developing the subject. He suggested for constitution of a Committee comprising of Stakeholders to prepare a uniform policy for all the four Province.
6. Balochistan was of the view that a task force may be created to devise a mechanism for devolution.
7. After detailed discussion on the issues of trans-provincial and stand-alone companies the following was agreed.
i. The province who have enacted the required legislation may go for collection of 2% from the stand-alone companies in their Provinces after the resolution of collection issue with FBR.
ii. For the trans-provincial companies who have one or more offices in two or more than two Provinces will continue to contribute toward the Trust Fund Account through FBR and Participation Act, 1968.
iii. With regard to distribution of liquid assets a mechanism needs to be developed in consultation with four provinces.
iv. A reference to FBR needs to be sent requesting them for providing the list of Companies who were contributing towards the 2% payment required under WWF Ordinance, 1971.
V. The assets of around 124 Billion needs to be reconciled with Finance Division & AGPR and a formula for distribution to the Provinces needs to be worked out.
8. The meeting ended with vote of thanks from/to the Chair.
GOVERNMENT OF THE PUNJAB
LABOUR & HUMAN RESOURCE DEPARTMENT
Lahore, the 19th October, 2020
Punjab Revenue Authority
Subject: Minutes of follow up meeting to discuss devolution mechanism of Workers Welfare Fund.
I am directed to enclose herewith minutes of the follow up meeting held on 2nd October, 2020 in the Committee Room of Ministry of OP&HRD Islamabad on the subject cite above.
2. In the light of the enclosed minutes, I am further directed to request you that being “Authority” defined under Punjab Workers Welfare Fund Act, 2019, kindly take up the matter regarding collection of Workers Welfare Fund with the Federal Board of Revenue.
Deputy Secretary (Dev)
GOVERNMENT OF PAKISTAN
MINISTRY OF OVERSEAS PAKISTANIS AND
HUMAN RESOURCE DEVELOPMENT
Islamabad, the 2nd December, 2020
Mr. Muhammad Javed Ghani
Federal Board of Revenues,
Subject: Devolution mechanism of Workers Welfare Fund (WWF) under decision of Council of Common Interests (CCI).
My dear Javed Sb.,
I would like to draw your kind attention to the decision of Council of Common Interests dated 23.12.2019 (Annex.I) in which it was decided that “Workers Welfare Fund shall remain with the Federal Government till such time a mutually agreed mechanism is developed”.
2. Under the chairmanship of Special Assistant to the Prime Minister on OP&HRD, series of meetings on 03.09.2020, 18.09.2020 and 02.10.2020 were held with provincial and federal authorities. During the meeting on 02.10.2020 (Annex.II) it was inter-alia agreed between the stakeholders that “province which has enacted the required legislation may go for collection of 2% from the stand alone companies in the provinces, after resolution of collection issue with FBR”. The Government of Punjab has informed that after finalizing all modalities, they have initiated the process of implementing the law and are informing the establishments in the province regarding submission of 2% of their declared income in the defined account.
3. The Ministry of OP&HRD requested FBR vide letter dated 13th October 2020 (Annex.III) to remove all hurdles in collection of contribution by the provinces under their newly enacted laws and share detail data regarding collection of contribution under WWF Ordinance 1971. However the response from FBR is still awaited despite repeated reminders.
4. In view of above, it would be highly appreciated, if you personally intervene in the matter and expedite the comments/opinion on para 5 of Annex III to fulfill its official obligations under the CCI decision for development of a mechanism, as the Punjab and Sindh Governments are pressing for early resolution of the matter.
With warm regards
(DR. M. HASHIM POPALZAI)
GOVERNMENT OF PAKISTAN
MINISTRY OF OVERSEAS PAKISTANIS & HRD
Islamabad, the 13th October, 2020
Subject: Devolution mechanism of Workers Welfare Fund (WWF).
The undersigned is directed and to inform that Workers Welfare Fund (WWF) was established under the WWF Ordinance. 1971. The core objectives of the Fund are to provide free financing of projects, connected with establishment of housing estates for workers and other welfare means i.e. marriage & death grants and scholarships for children of workers.
MANAGEMENT OF WWF
l The Workers’ Welfare Fund is managed at the Federal level by a tripartite Governing Body, chaired by the Federal Secretary, Ministry of Overseas Pakistanis & Human Resource Development.
l At Provincial levels, it is managed by tripartite Provincial Workers’ Welfare Boards chaired by the Secretary, Labour Department of the respective Provincial Government.
l There is representation from workers, employers’ and the Government both at Federal and Provincial levels.
CONTRIBUTION COLLECTION MECHANISM OF WWF
There are two sources of income in Workers Welfare Fund:
l Under Section 4 of WWF Ordinance, 1971, 2% of income of every industrial establishment having total income of not less than Rs.0.5 million in an accounting year. This amount is collected by FBR and credited to the Workers Welfare Fund Account maintained by AGPR;
l Left-over amount of 5% of profit after distribution among eligible workers under Companies Profit (Workers Participation) Act, 1968 (Chapter “The Schedule Scheme” Section 4). This amount is directly transferred to the Workers Welfare Fund Trust Fund Account maintained by AGPR.
l In addition to above, a sum of Rs. 100 million as seed money were provided by the Federal Government in 1971 to setup the Fund.
THE CONSTITUTION (EIGHTEEN AMENDMENT) ACT, 2010 AND DEVOLUTION OF WWF HISTORICAL BACKGROUND
l The Constitution (Eighteen Amendment) Act, 2010 omitted the Concurrent Legislative List (CLL), resultantly, the subjects enumerated in the CLL were devolved to the provinces including Entry No.26 therein relating the “Welfare of labour; conditions of labour, provident funds; employers’ liability and workmen’s compensation health insurance including invalidity pensions, old age pensions. However, for convenience of laws it is provided in clause (6) of Article 270AA that all laws relating to any of the above matters enumerated in the said list which were in force in Pakistan or any part thereof, before he commencement of Eighteenth Amendment shall continue to remain in force until altered, repealed or amended by the competent authority i.e. the appropriate legislature.
l The cabinet Division, on 29th June 2011 notified administration of WWF Ordinance 1971, Companies Profit (Workers Participation) Act 1968 and Employees Old age Benefits Act 1976 to the IPC Division. Later on the administration of above laws and organizations were transferred to the Federal Minister of Overseas Pakistani and HRD.
l In 2012 the Government of Punjab filed a petition before the Supreme Court of Pakistan challenging the above notification of the Cabinet Division which is still pending. However the province of Punjab in 2019 has enacted its own Punjab WWF Act 2019.
l The province of Sindh enacted Sindh EOB Act 2014 and Sindh WWF Act 2014 repealing the Federal laws i.e. EOBI Act 1976 and WWF Ordinance 1971 to the extent of Sindh province.
l The Law and Justice Division in its reference dated 1st January 2016 opined that “after 30.06.2011, the assets and liabilities of WWF and EOBI cannot be transferred to the province, however, they are at liberty to legislate on the devolved subject and create their own institutions relating to WWF and EOBI but they cannot claim the assets, are be responsible for liabilities of such institutions”.
l The Supreme Court of Pakistan in its short order dated 24.04.2018 observed that “we believe that it would be appropriate to give an opportunity to the Governments to resolve these issues regarding devolution before we step into breach”.
l The matter of devolution of EOBI and WWF has remained under consideration of CCI since 2017. Lastly, CCI considered the report of committee constituted by CCI on devolution of EOBI and WWF to the Provinces in its meeting held on 23.12.2019. Decision of CCI in the subject case is as follows:–
“EOBI shall remain with the Federal Government and WWF shall remain with the Federal Government till such time a mutually agreed mechanism in developed”.
2. In pursuance of Council of Common Interests (CCI) above dated decision a meeting to discuss devolution mechanism of Workers Welfare Fund was held in this Ministry on 12.03.2020 and 3.9.2020 under the chair of SAPM for OP&HRD and follow of meetings dated 18.9.2020 and 2.10.2020 (Minutes of the meetings dated 3.9.2020, 18.9.2020 and 2.10.2020 at Annexures I, II & III). It was concluded / decided in the above meetings that provincial governments would devise mutually agreeable devolution mechanism of Workers Welfare Fund (WWF) and submit detailed proposals to this ministry in compliance of the above CCI decision.
3. It is intimated that the decision (II) of the meeting dated 3.9.2020, FBR provided a written reply in this regard (Annexure IV) and the gist of the reply is as under:
FBR is legally barred u/s 216 of Income Tax Ordinance, 2001 to share the classified income tax return with the provinces. For the sake of ready reference, sub-section (2) of section 216 of ITO, 2001 is given as under:
“No court or other authority shall be save as provided in this ordinance, entitle to require any public servant to produce before it any written, accounts, or documents contained in, or forming a part of records relating to any proceedings under this ordinance, or any records of the income Tax Department generally, or any thereof, or to give evidence before it in respect thereof”
4. On the above legal reservation of FBR, the provinces particularly Punjab and Sindh have desired that FBR may remove all road blocks in collection of contribution by Punjab Revenue Board/Sindh Revenue Authority and share detail data regarding collection of contribution under WWF ordinance specifically number of establishments and workers.
5. It is therefore requested to please furnish comments/opinion on Para 4 with Clause (6) of Article 270AA and sub section 2 of section 216 of the Income Tax Ordinance, 2001 urgently to resolve the matter as provinces are desirous to take over the collection of WWF under the WWF ordinance, 1971.
MINISTRY OF OVERSEAS PAKISTANIS &
HUMAN RESOURCE DEVELOPMENT (OPS&HRD)
Islamabad, the 20th October, 2020
Subject: Devolution mechanism of Workers Welfare Fund (WWF).
Reference this Ministry’s O.M No.1-1/2020-Fund/Devolution dated 13.10.2020 on the subject noted above.
2. Federal Board of Revenue (FBR) is once again requested to expedite the comments/opinion on fast track basis, please
Deputy Secretary (HRD-1)
GOVERNMENT OF PAKISTAN
MINISTRY OF OVERSEAS PAKISTANIS &
HUMAN RESOURCE DEVELOPMENT
Islamabad, the 4th November, 2020
Subject: Devolution mechanism of Workers Welfare Fund (WWF).
Reference this Ministry’s O.M of even number dated 13-10-2020 and 20-10-2020 on the subject noted above (copies enclosed).
Federal Board of Revenue (FBR) is requested to expedite its comments in the matter
JOINT SECRETARY (HRD)
It is strange that in all the above official correspondence, there is no mention that at present, the matter is sub judice in the Supreme Court in a human rights case and Sindh High Court by way of petitions. 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 annexures, 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 18th 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 petition______ instant petitions on the next date.
To come up on 09.10.2019 at 12:00 noon. Interim orders passed earlier to continue till then”.
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 please read Pro-people Laws, Insensitive Legislators, Surkhyian, November 15, 2020.
It is obvious the Special Assistant to Prime Minister/Minister of State for Overseas Pakistanis & Human Resource Development is not properly briefed about the issue that it is the duty of state to ensure welfare of workers affected and take remedial measures to retrieve losses caused to the Funds/Institutions established under these laws for the welfare of millions of the workers and their families.
The viewpoint of workers is supported by the Constitution and the following decisions of the Supreme Court, which as explained above, are binding on all subordinate courts and executive.
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 are void under Article 143 of the Constitution which read 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.
It is high time that the Government of PTI should come to the rescue of the affectees by bringing curative amendments as suggested in Pro-people Laws, Insensitive Legislators, Surkhyian, November 15, 2020 and through supporting the case of workers in Supreme on the basis of above cited cases [2018 SCMR 802 & 2017 SCMR 1344].
The better course is to approach Supreme Court of Pakistan having exclusive jurisdiction in the matter under Article 184(1) & (2) that read 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 Federal Government should request the Supreme Court for declaratory judgement to hold that all the provincial laws are void on the basis of constitutional provisions and its judgements cited above that international treaties signed by Pakistan, “equitable adjustment of rights between employers and employees” and welfare of workers and providing social security to all citizens exclusively fall in the domain of the Parliament and not provincial assemblies even after the 18th Amendment. As mentioned above, 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. They will support the case of Federal Government in Human Rights case pending before the Supreme Court.
Ms. Huzaima Bukhari, Advocate High Court and Visiting Faculty at Lahore University of Management Sciences (LUMS), is author of numerous books and articles on Pakistani tax laws. She is editor of Taxation and partner of Huzaima & Ikram, a leading law firm of Pakistan. From 1984 to 2003, she was associated with Civil Services of Pakistan. Since 1989, she has been teaching tax laws at various institutions including government-run training institutes in Lahore. She specialises in the areas of international tax laws, corporate and commercial laws. She is review editor for many publications of Amsterdam-based International Bureau of Fiscal Documentation (IBFD) and contributes regularly to their journals. She has to her credit over 1500 articles on issues of public importance, printed in various journals, magazines and newspapers at home and abroad.She has also coauthored with Dr. Ikramul Haq many books that include Pakistan: Enigma of Taxation, Towards Flat, Low-rate, Broad and Predictable Taxes, Law & Practice of Income Tax, Law , Practice of Sales Tax, Law and Practice of Corporate Law, Law & Practice of Federal Excise, Law & Practice of Sales Tax on Services, Federal Tax Laws of Pakistan, Provincial Tax Laws, Practical Handbook of Income Tax, Tax Laws of Pakistan, Principles of Income Tax with Glossary andMaster Tax Guide, Income Tax Digest 1886-2011 (with judicial analysis). She regularly writes columns for Pakistani newspapers and has contributed over 1500 articles on issues of public finance, taxation, economy and on various social issues in various journals, magazines and newspapers at home and abroad.
Dr. Ikramul Haq, Advocate Supreme Court, specialises in constitutional, corporate and tax laws. He established Huzaima & Ikram in 1996 and is presently its chief partner as well as partner in Huzaima Ikram & Ijaz. He studied journalism, English literature and law. He is Chief Editor of Taxation andVisiting Faculty at Lahore University of Management Sciences (LUMS). He has also coauthored with Huzaima Bukhari many books that include Pakistan: Enigma of Taxation, Towards Flat, Low-rate, Broad and Predictable Taxes, Law & Practice of Income Tax, Law , Practice of Sales Tax, Law and Practice of Corporate Law, Law & Practice of Federal Excise, Law & Practice of Sales Tax on Services, Federal Tax Laws of Pakistan, Provincial Tax Laws, Practical Handbook of Income Tax, Tax Laws of Pakistan, Principles of Income Tax with Glossary andMaster Tax Guide, Income Tax Digest 1886-2011 (with judicial analysis). He is author of Commentary on Avoidance of Double Taxation Agreements signed by Pakistan, Pakistan: From Hash to Heroin, its sequelPakistan: Drug-trap to Debt-trap and Practical Handbook of Income Tax. He regularly writes columns for many Pakistani newspapers and international journals and has contributed over 2500 articles on a variety of issues of public interest, printed in various journals, magazines and newspapers at home and abroad.