IN THE SUPREME COURT OF PAKISTAN

(Appellate Jurisdiction)

PRESENT: Mr. Justice Mian Saqib Nisar

Mr. Justice Iqbal Hameedur Rahman
Mr. Justice Tariq Parvez

CIVIL APPEAL NO. 95/2005

(Against the judgment dated 5.12.2003
passed by High Court of Sindh, Karachi
passed in Cons.P. No.1443/1996)

M/s Pakistan International Airlines Corporation

Appellant(s)
Versus

The Board of Trustees, EOBI etc.

Respondent(s)

For the Appellant(s): Mr. Anwar Mansoor Khan, Sr. ASC.

Mr. Mehr Khan Malik, AOR.

For the Respondent(s): Mr. Tariq Bilal, ASC.

Mr. Babar Bilal, ASC.
Mr. M. S. Khattak, AOR.
Noor Ahmed, Dy. Director, Law, EOBI

On Court’s Notice: Mr. Abdul Rasheed Awan, D.A.G.

Date of Hearing: 20.01.2016.

ORDER

MIAN SAQIB NISAR, J:- 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
 Civil Appeal No. 95/2005 2

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
 Civil Appeal No. 95/2005 3

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

 Civil Appeal No. 95/2005 4

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,–
 Civil Appeal No. 95/2005 5

(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;

Factories Act, 1934

2. Definitions.– In this Act, unless there is anything
repugnant in the subject or context—

(g) “manufacturing process” means any process—

(i) for making, altering, repairing, ornamenting,

finishing or packing, or otherwise treating any article
or substance with a view to its use, sale, transport,
delivery or disposal, or

(j) “factory” means any premises, including the precincts

thereof, wherein ten or more workers are working, or were
working on any day of the preceding twelve months, and in any
part of which a manufacturing process is being carried on or
is ordinarily carried on with or without the aid of power but
does not include a mine, subject to the operation of the Mines
Act, 1923 (IV of 1923);”

5. Now coming to the first question as to whether the kitchen

and engineering departments of the appellant are “establishments”

 Civil Appeal No. 95/2005 6

within the meaning assigned in the Act, Section 1(4) of the Act provides

for the Act to be applicable to every establishment, Section 3 states that

there is to be compulsory insurance of all employees in an establishment,

and Section 11 deals with registration of establishments, which

(registration) was directed by all the fora below in the instant matter, thus

an elucidation of the meaning of “establishment” is necessary. However

before proceeding we find it pertinent to deal with the argument of the

learned counsel for the appellant that the various departments of an

organisation cannot be “establishments” rather it has to be the

organisation as a whole; suffice it to say that there may very well be

organisations comprising of a vast array of sub-organisations wherein

each sub-organisation carries out an activity that may be wholly or

substantially different from that of another sub-organisation, rendering

only one or some of the sub-organisations as “establishment(s)” under

the Act and not the others. To hold that an “establishment” as provided

for under the Act only contemplates organisations as a whole/composite

and not its individual departments/sub-organisations would mean to

deprive the employees of insurance benefits who would otherwise be

entitled as the sub-organisation they work for may fall within the

definition of “establishment” under the Act. Hence, we are of the opinion

that the kitchen and engineering departments of the appellant are not

precluded from falling within the definition of “establishment” as

provided for under the Act.

The definition of “establishment” has been provided in Section 2(e),

the relevant sub-clause of which is (iii), that is, a “factory as defined in the

Factories Act, 1934”. “Factory” has been defined in Section 2(j) of the

Factories Act (reproduced above), wherein the determinative factor for our

purposes is that of “manufacturing process”, which in turn has been

 Civil Appeal No. 95/2005 7

assigned a meaning in Section 2(g) of the Factories Act, the germane sub-

clause of which is (i). The question boils down to whether such

“manufacturing process” is being carried out in the kitchen and/or

engineering departments of the appellant. With regard to the kitchen

department, flight kitchen production or flight catering consists of mass-

scale food production, where food is prepared, cooked and arranged for

final service for countless number of passengers and flight crew on

numerous local and international fights round the clock every day. This

makes it lose its semblance to a regular kitchen, and renders it more

akin to a food manufacturing plant, where finished dishes are made from

the raw material (fresh food items, etc.) and finally packed and loaded onto

flight catering carts for use on-board the appellant’s air carriers, thereby

bringing such process within the “process for making…packing…any article or

substance with a view to its use…” making it a “manufacturing process” and

consequently rendering the kitchen department a “factory” in terms of

the Factories Act. Accordingly, such department would necessarily

constitute an “establishment” for the purposes of the Act. Suffice it to say

that there is no provision in the Act which provides that objects ancillary

to the main object of an organisation such as the appellant would not be

subject to the application of the Act, and the argument of the learned

counsel for the appellant in this regard is unconvincing. Further with

regard to his submission that the food is being prepared for the

appellant’s own use, we do not find this to be a reason within the

relevant law to make the Act inapplicable to the kitchen department, and

in any case, the services being provided by the said department are very

much a part and parcel of the appellant’s object to provide air-transport

to passengers. With respect to the engineering department, even if it is

accepted that no manufacturing whatsoever is taking place within such

 Civil Appeal No. 95/2005 8

department as submitted by the learned counsel for the appellant, but

repairing and servicing of airplanes, which is admittedly being carried

out, would certainly bring it within the definition of “factory” since a

“manufacturing process” is taking place, which encompasses “repairing”

of the airplanes “with a view to its use” as per Sections 2(g)(i) and 2(j) of the

Factories Act. Consequently, the engineering department is also an

“establishment” under the Act.

6. Adverting to the second question, we find it important to

state at this juncture that this appeal was previously decided vide

judgment dated 19.4.2011 on the primary ground that Section 47 was

only meant for “persons” employed to be excused from making

payments/contributions as required by the Act, and not the appellant as

an employer. Subsequently the review petition filed by the appellant was

allowed and the appeal restored to its original number for re-hearing vide

order dated 4.3.2015 on the main ground that Section 47 was a part of

the original Act at which time employees were under no obligation to

make any payments/contributions to the EOBI Fund, suffice it to say

that we find this to be the correct position and thus the appellant as an

employer is entitled to take the benefit of the provisions of Section 47.

For ease of reference, Section 47(f) may be divided into three

parts:- (i) persons in the service of statutory bodies; (ii) other than those

employed in or in connection with the affairs of a factory as defined in

Section 2(j) of the Factories Act; and (iii) the proviso, that workshops

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 Section 47(f). It is an undisputed fact,

that the appellant is a statutory body, having been established by

statute, i.e. the Pakistan International Airlines Corporation Act, 1956,

 Civil Appeal No. 95/2005 9

and its employees consequently in the service of a statutory body. It may

be pertinent to mention here that we find force in the argument of the

learned counsel for the appellant that the mere factum of registration of

the kitchen and engineering departments under the Factories Act (which is

undisputed) will not be sufficient to satisfy the second part of Section 47 for

the reason that the phrase “registered under” was taken out of Section 47(f)

of the Act and replaced with “as defined in” by virtue of an amendment

(Employees’ Old-Age Benefits (Amendment) Ordinance, 1983). Be that as it may, as

opined above in paragraph 5, the kitchen and engineering departments

are nevertheless “factories” within the meaning provided in Section 2(j) of

the Factories Act, hence the Act would be applicable to the employees of

the appellant working in the said departments. The attempt of the

learned counsel for the appellant to bring at least the engineering

department within the purview of the proviso to Section 47(f) by stating

that such department repairs airplanes of the appellant only is inapt, as

it has come on the record (in the form of an affidavit vide CMA No.385/2016) that

repair and maintenance services are also being provided to airplanes of

airlines other than that of the appellant, which in any case is a public

domain fact in our opinion; and that the appellant also repairs and

services the aircrafts and equipment of the Pakistan Navy and Air Force

was admitted by the appellant in the proceedings before the Adjudicating

Authority, EOBI, therefore, bringing the appellant out of the ambit of the

proviso to Section 47(f), consequently rendering the provisions of the Act

applicable to the persons working in the engineering department of the

appellant.

7. Finally, there is nothing on the record such as a Form A or

Form 29 issued by the Securities & Exchange Commission of Pakistan to

suggest that the appellant has been conclusively converted into a limited
 Civil Appeal No. 95/2005 10

company under the Ordinance to enable us to decisively hold that the

Act would apply to the appellant on this account.

8. In light of the foregoing, we find that no case for interference

with the impugned judgment has been made out; therefore, this appeal is

dismissed with no order as to costs.

Judge

Judge

Judge

Announced in open Court

on 09.02.2016 at Islamabad
Not Approved For Reporting
Ghulam Raza/*