Departments’ Status as Establishments under Employees’ Old-Age Benefits Act

Departments' Status as Establishments under Employees’ Old-Age Benefits Act Case Laws Civil Law Employment & Incentives EOBI Knowledge - Civil Law Litigation & Arbitration Solutions - Civil Law Statutory Corporation Supreme Court Mr. Justice Mian Saqib Nisar in his judgment has decided the issue regarding PIA’s kitchen and engineering departments’ status as establishments under Employees’ Old-Age Benefits Act 1976 in Civil Appeal No. 95 of 2005.

1. This appeal, by leave of the Court, entails the facts, in that, the appellant had challenged the order dated 24.11.1995 passed by the Adjudicating Authority of the Employees’ Old Age Benefits Institutions (EOBI), whereby the kitchen and engineering departments of the appellant were declared to be establishments within the purview of the Employees’ Old-Age Benefits Act, 1976 (the Act), before the Board of Trustees of EOBI/respondent No.1 which dismissed the appeal vide order dated 10.6.1996. Both these orders were assailed by the appellant by filing a constitutional petition before the learned High Court of Sindh, which (petition) was dismissed vide the impugned judgment, hence the appellant approached this Court. Leave in this case was granted vide order dated 3.2.2005, the relevant part wherefrom is reproduced as under:

“(i) Whether clause (c) & (f) and proviso of section 47 of Employees Old Age Benefits Act XIV of 1976 read with section 33 of the said Act have been correctly and rightly interpreted by the High Court?

(ii) Whether the definition of “Manufacture” and “Manufacturing Process” given in the various dictionaries in the absence of definition under the Factories Act could be made basis of the judgment against the petitioner?

(iii) Whether the provision of Act XIV, 1976 and Factories Act, 1934 and the P.I.A.C. Act, 1956 have been erroneously interpreted/considered in the impugned judgment? and

(iv) Whether the petitioner-Corporation being statutory corporation under Government of Pakistan through Ministry of Defence, would be governed by any other law than P.I.A.C. Act, 1956 and Rules & Regulations made thereunder?”

Adding to the facts, it may be mentioned that the Assistant Director (Inspection), EOBI moved a complaint under Section 33 of the Act before the Adjudicating Authority, EOBI that the kitchen and the engineering departments of the appellant require compulsory registration with EOBI and are liable to pay contributions under the Act, which the appellant has not so done and this is a lapse on its part, thus a direction to that effect be given. The Adjudicating Officer, after seeking a reply from the appellant, passed the order dated 24.10.1995 wherein considering that both the kitchen and the engineering departments have been registered by the appellant under the Factories Act, 1934 (Factories Act) and also by interpreting various relevant provisions of the Act has come to the conclusion that the departments are “establishments” within the purview of the law and they require compulsory registration. It may be mentioned that with regard to the interpretation of the relevant provisions the working/functioning of both the departments have been taken into consideration. In appeal before respondent No.1, the order dated 24.10.1995 has been upheld but on examination of the order dated 10.6.1996 passed by it, we find that such upholding has been done without giving any separate or additional reasons.

2. Learned counsel for the appellant has argued that clauses (c) and (f) of Section 47 read with Section 33 of the Act have not been correctly and rightly interpreted by the learned High Court; the departments, such as the kitchen and engineering departments, of the appellant cannot be segregated into separate entities to be termed as “establishments” for the purposes of invoking the provisions of the Act; Section 3 of the Act contemplates the concept of an “establishment” which is an organization as a whole and not of its different departments/components; the term “establishment” as defined in Section 2(e) of the Act is not applicable to the various departments of an establishment as a whole; the fact that the two departments were registered under the Factories Act, cannot be taken as a ground for registering those departments for the purposes of the Act on account of Section 2(e)(iii) (of the Act); the kitchen and engineering departments do not engage in manufacturing process.

3. On the other hand learned counsel for the respondent has argued that the factum of registration of the kitchen and engineering departments under the Factories Act is sufficient per se to render them to be liable to registration under the Act and therefore the question of whether or not they are “factories” by virtue of their respective functions does not remain. Further, he made reference to Section 4(2)(e) of the Pakistan International Airlines Corporation Act, 1956 (PIAC Act) and the relevant portion of the impugned judgment, to argue that since the appellant repairs equipment of other airlines, the exemption under Section 47 of the Act does not apply. He further stated that the appellant being a corporation registered under the Companies Ordinance, 1984 (Ordinance) was no longer immune from the applicability of the Act. To support his arguments, learned counsel for the respondent relied upon Province of N.W.F.P. through Secretary, Local Government and Rural Development, Peshawar v. Pakistan Telecommunication Corporation through Chairman and others (PLD 2005 SC 670), Don Basco High School v. Assistant Director, E.O.B.I. and others (PLD 1989 SC 128) and Lahore Race Club through Secretary v. Deputy Director, Employees’ Old-Age Benefits Institution, Lahore and 2 others (1998 SCMR 1571). The learned Deputy Attorney General has submitted that the order of respondent No.1 is sketchy and that there was no proper adjudication of the matter neither by the Adjudicating Authority nor the respondent No.1, making this a case fit for remand.

4. Heard. The key questions involved in this matter are:- first, whether the kitchen and engineering departments of the appellant are “establishments” within the meaning assigned in the Act; and secondly, whether the Act is not applicable to the appellant by virtue of Section 47 of the Act. In order to appreciate the above, the relevant provisions (parts) of the law are reproduced as below:

“Employees’ Old-Age Benefits Act, 1976
2. Definitions. – In this Act, unless the context otherwise requires:
(e) “establishment” means-
(iii) a factory as defined in the Factories Act, 1934 (XXV of 1934);

47. Act Not to Apply to Certain Persons.– Nothing in this Act shall apply to:
(f) person in the service of statutory bodies other than those employed in or in connection with the affairs of a factory as defined in section 2 (j) of the Factories Act, 1934 (XXV of 1934), or a mine as defined in the Mines Act, 1923 (IV of 1923):

Provided that workshop maintained exclusively for the purposes of repair or maintenance of equipment or vehicles used in such statutory bodies shall not be treated as factories for the purposes of this clause;

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