Subject:  Controversy Regarding Payment of Employees' Share of Contribution

Kindly refer to the subject noted above and find enclosed herewith Board’s decision in the case of M/s. Rashid Textile Industries VS EOBI Faisalabad Zone dated 08.12.2003 wherein the appellant challenged the liability to deduct and pay employees’ share of contribution @ Rs.20/- per employee per month under Section 9B of EOB Act-1976 w.e.f. 01.07.2001. 

 2.       The Board after considering the facts, the amendments in EOB Act-1976/Rules and the case law cited by the learned Counsel of the appellant came to the conclusion that the substantive law creating liability for payment of employees’ share of contribution under Section 9B of EOB Act-1976 was promulgated expressly w.e.f. 01.07.2001.  It contains specific provision of prescription of procedure for collection of EOB contribution from the employees.  The delegated legislation being consistent with the principal legislation is valid and does not justify avoidance of responsibility of collection and deposit of contribution by the employers.

 3.       The enforcement of collection of the employees’ contribution through employers with effect from 01.07.2001 was therefore held to be in accordance with the law.  The relevant extract from the judgment is reproduced below:-

“8.  The most relevant principle of law enunciated by Honourable Supreme Court of Pakistan has been relied and cited by the Lahore High Court Lahore in its judgment reported as PLJ 1988 Lahore 1953.  The relevant extract is reproduced below:-

“It is a settled principle that unless the statute expressly so provides, no rule or notification under a statute can be enforced with retroactive operation (Faizullah Khan Vs. government of Pakistan PLD 1976 SC 290).  The rule has been reiterated by the Supreme Court in recent decision of Hashwani Hotel Vs. Federation of Pakistan (PLD 1997 SC 315.”

 9.   It is clear from the above that where legislature expressly provides for retrospective application, the law shall be so applicable.  In the instant case, the amendment in the law for making payment of employees’ share of contribution has been expressly made applicable since 01.07.2001. Thus the liability for payment of employees’ share of contribution @ Rs.20 per worker per month had been expressly created with effect from 01.07.2001. It may be pertinent to mention that this provision was introduced on recommendation of Labour Associations to ensure participation of labourers in the pension scheme and to make sure that their registration with EOBI is made and employers’ contribution for them is paid.  The rules simply provide a procedure and mechanism for collection and deposit of employees’ share of contribution.  Since the substantive law creating liability for payment of employees’ share of contribution under Section 9B of EOB Act-1976 was promulgated expressly with effect from 01.07.2001 and contained specific provision of prescription of procedure for collection of the employees’ contribution, the delegated legislation being consistent with the principal legislation is valid and does not justify avoidance of responsibility of collection and deposit of the contribution by the employers.  There being no legal justification of interference on this ground the plea is untenable hence can not be accepted.”

 Lahore High Court Lahore’s order in Appeals NO.6937/2003 and 6939/2003

 4.       The honourable Lahore High Court Lahore in its unreported judgment in the case of M/s. Silver Fiber Spinning Mill and M/s. Nazir Cotton versus Government of Pakistan) dated 10.12.2003 has also considered the issue and decided that contribution of Rs.20 under Section 9B has to be made by the worker but the mechanism of collection has been provided in the Rules according to which it is duty of the petitioner to deduct the amount and deposit with the department.  The relevant extract is reproduced below:-

“…… though the contribution of Rs.20 under section 9B, has to be made by the worker, but the mechanism of collection has been provided in the rules; according to which, it is the duty of the petitioners to deduct the amount and deposit with the department.  The petitioners are not called upon in any manner, to pay the amount from their own pocket but are saddled with the legal duty to deduct the amount from the salary/wages of the employee at the time of such payment and to deposit with the concerned agency; this is with the object of effective application of the provisions of Section 9B and also for facilitating the collection of the amount.  Therefore, the case of the petitioners has no genuine and bona fide grouse against Section 9B or the relevant rules. The other attack about the vires of Section 9B and the rules, prescribing for the collection by the petitioners. As averted in petitions are unfounded. Such law is perfectly valid.  No case for interference in the Constitution jurisdiction is made out.  Resultantly, both the writ petitions are dismissed.”

 5.       The judgment of the Honourable Lahore High Court Lahore is placed as annex-II for perusal, reference and compliance of officers accordingly.

 

 

                                                                                                         (Muhammad Shafi Malik)

                                                                                                                   Chairman

 

All Zonal Heads/Adjudicating Authorities.