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Whether Withdrawal of Prospective Resignation Before its Effective Date is Permissible?

Submitted By Firm: Trilegal

Contact(s): Ajay Raghavan

Author(s):

Date Published: 4/15/2013

Article Type: Legal Update

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Background

Resignation from employment can be presented either (i) prospectively (where it takes effect from a specified date in the future) or (ii) in presenti (where it is intended to take effect immediately).  The ability of an employee to withdraw a resignation has been the subject of several judicial pronouncements.  Courts have consistently held that an employee can withdraw a resignation at any time before it becomes effective.  However, a constitutional bench of the Supreme Court of India, in the case of India (UOI) and Ors. v Gopal Chandra Misra and Ors.[1] indicated there may be exceptions created to this rule through legal, contractual or constitutional prohibitions.  In the recent case of India Yamaha Motors (Pvt.) Ltd. vs. Labour Court – II and Anr. (Yamaha Case),[2] the Allahabad High Court has accepted such an exception, applied the observations of the Supreme Court of India to the facts of the case and upheld a prohibition on the withdrawal of a resignation by an employee.

Yamaha Case

The Allahabad High Court was recently called upon to decide on the issue of whether, an employee who has tendered his resignation, intending it to be effective on a prospective date, can withdraw it if it has already been accepted by the employer in accordance with the service rules.  The employee concerned in this case, tendered his resignation by providing one month’s notice (where the effective last date of employment was one month away), as required under the terms of his employment.  A clause in the certified standing orders (Service Rules) of the establishment provided for the acceptance of the resignation with immediate effect at the discretion of the employer, on the payment of wages for the unexpired period of notice.  The employer exercised his right as provided under this clause and accepted the employee’s resignation before the expiry of the notice period and paid for the remaining notice period.  In this case, the court upheld the provision of the Service Rules and held that once the resignation has been accepted by the employer, and appropriate payments are made to him, the employee does not have a right to withdraw his resignation.

Analysis

In the Yamaha Case, the Allahabad High Court relied on a judgment of the Supreme Court of India in Union of India (UOI) and Ors. v Gopal Chandra Misra and Ors. [3].  In that case, a constitutional bench of the Supreme Court had observed that, “in the absence of a legal, contractual or constitutional bar, a prospective resignation can be withdrawn at any time before it becomes effective, and it becomes effective when it operates to terminate the employment or the office-tenure of the resignor.”  While this statement has been referred to in several cases over time, it is interesting to note that the decisions of the courts in these cases have been influenced by the manner in which this legal/contractual bar is sought to be introduced.

In the case of Punjab National Bank v P.K. Mittal,[4] (PNB Case), the service regulations provided that, “No officer shall resign from the service of the bank otherwise than on the expiry of three months from the service on the bank of a notice in writing of such resignation.  Provided further that the competent authority may reduce the period of three months, or remit the requirement of notice”.  Please note that this restriction was worded in a manner that allowed the employer the unilateral right to force an earlier resignation on an employee, that too, without compensation for the unexpired period of notice.  The Supreme Court opined that this provision could not be interpreted to allow the employer to thrust a resignation on an employee with effect from a date different from the one which the employee chose in accordance with the terms of the service regulations.  Therefore, the court held that this provision only allowed an employer to remit or reduce the notice period if there was a request made for the same by the employee and that otherwise, in accordance with the general rule discussed above, an employee could withdraw his resignation at any time before the effective date.

However, in the M.P. State Agro Industrial Development Corporation v Rakesh Kumar Gupta[5] case (Agro Case), the Madhya Pradesh (MP) High Court dealt with service regulations which provided that, “resignation may be accepted by the appointing authority with immediate effect or at any time before the expiry of the period of notice”.  In this case, the service regulations also allowed an employee to be compensated for the unexpired period of notice if his prospective resignation was accepted with immediate effect.  The MP High Court distinguished the facts of this case from the PNB Case and held that acceptance of a resignation at an earlier date in accordance with the service regulations (with compensation for the remaining portion of the notice period) was legal.

While the PNB Case dealt with a situation where an employee’s effective date of resignation was reduced (without payment) such that it was no longer voluntary, the Yamaha and the Agro Cases dealt with a situation where even though an employee’s resignation is 'accepted' before the effective date, the employee is not deprived of his wages till the expiry of the effective date of resignation.  Therefore, it becomes important for employers to carefully structure the restrictions on withdrawal of resignations in employment agreements and service regulations.

Conclusion

This decision highlights the importance of carefully structuring checks in service regulations and employment agreements allowing the employer some flexibility in preventing an employee from withdrawing resignations after a period.  While employers cannot unilaterally reduce or waive an employee’s notice of resignation (without payment) such that the resignation is no longer voluntary, they should try and structure service regulations and employment agreements such that they retain their ability to (i) accept a resignation before its effective date; (ii) prohibit withdrawal of resignation upon acceptance; and (iii) pay compensation in lieu of notice if notice period is reduced.  The last provision may particularly be useful in instances where the employer – employee relationships are not terminated on cordial terms.



[1]               AIR 1978 SC 694

[2]               2012 LLR 1276

[3]               AIR 1978 SC 694

[4]               Civil Appeal No. 2014 of 1986

[5]               1998(1)JLJ87

 

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