Supreme Court clarifies resignation rules for employees under the Industrial Employment Act: Sanjay Jain vs. National Aviation Co. (2018)

Date of the Judgment: 1st November 2018

Citation: (2018) INSC 950

Judges: Hon’ble Mr. Justice Arun Mishra and Hon’ble Mr. Justice Vineet Saran

Can an employee’s resignation be rejected by an employer even after the employee has served the required notice period? The Supreme Court of India addressed this crucial question in a case concerning the interpretation of Certified Standing Orders under the Industrial Employment (Standing Orders) Act, 1946. The court clarified the circumstances under which a resignation becomes effective, emphasizing the rights of employees to resign after serving the stipulated notice period. This judgment was delivered by a two-judge bench comprising Hon’ble Mr. Justice Arun Mishra and Hon’ble Mr. Justice Vineet Saran.

Case Background

Sanjay Jain, the appellant, joined Air India Ltd. as an Assistant Aircraft Engineer on September 1, 1992. His appointment letter stipulated that he was required to serve Air India for a minimum of five years. By the time he resigned, he had completed more than five years of service. The Certified Standing Orders of Air India, framed under the Industrial Employment (Standing Orders) Act, 1946, governed the terms and conditions of service, including resignation procedures.

On September 1, 2006, Mr. Jain submitted his resignation, stating it would be effective from October 1, 2006, thus completing a 30-day notice period. After resigning, he joined Jet Airways on October 3, 2006. When he approached Air India for his pending dues, including provident fund, gratuity, and unpaid wages, Air India refused, stating that his resignation had not been accepted and asked him to report for duty via a letter dated July 16, 2008. Mr. Jain then raised a grievance and ultimately filed a writ petition in the High Court of Bombay, which was dismissed on July 23, 2010. Subsequently, he appealed to the Supreme Court.

Timeline:

Legal Framework

The case revolves around the interpretation of the Certified Standing Orders of Air India, specifically Standing Orders 17 and 18, framed under the Industrial Employment (Standing Orders) Act, 1946. These orders define the conditions for termination of service and resignation of employees.

Standing Order 17 outlines the conditions under which the services of a workman may be terminated:

• “(a) Of a permanent workman by giving 30 days notice in writing or wages in lieu of notice.”
• “(b) Of a workman on probation by giving 7 days notice by giving 24 hours notice in writing or wages/stipend in lieu of notice.”
• “(c) Of a temporary workman including apprentice by giving 24 hours notice in writing or wages/stipend in lieu of notice.”

Standing Order 18 deals with resignation:

• “(i) No workman shall resign from the service of the Company except by giving such notice as he would have received under Standing Order 17 if his services were to be terminated, or compensation in lieu of such notice, unless, at the request of the workman, the notice is waived or shorter notice accepted in writing by the Competent Authority.”
• “(ii) A resignation given under (I) above may be accepted with immediate effect or at any time before the expiry of the period of notice, in which case the workman shall be paid his wages in respect of the entire period of notice given by him.”
• “(v) Notwithstanding anything contained in clause (I) and (iii) above, a workman shall not be entitled to tender his resignation and any resignation tendered by him shall not be effective or operative against the company, unless the company decides to accept the resignation, if, at the time when such resignation is tendered, disciplinary action is pending against him or is intended or proposed to be taken against him by the appropriate authority.”

Arguments

Appellant’s Arguments:

• The appellant contended that under Standing Order 18 of the Industrial Employment (Standing Orders) Act, 1946, there was no requirement for acceptance of resignation if a 30-day notice period was served.
• The appellant argued that his resignation was effective on October 1, 2006, as he had given a 30-day notice, and no disciplinary action was pending or contemplated against him.
• The appellant relied on Punjab National Bank v. P.K. Mittal (1989) Supp. (2) SCC 175, State of U.P. v. Achal Singh (2018) 10 SCALE 89, and Dinesh Chandra Sangma v. State of Assam (1977) 4 SCC 441, to support his claim that acceptance of resignation is not always necessary.

Respondent’s Arguments:

• The respondent argued that acceptance of resignation was necessary, relying on the decision in Moti Ram v. Param Dev and Anr. (1993) 2 SCC 725.
• The respondent contended that a contract of employment requires a bilateral act for termination, meaning the resignation is effective only upon acceptance by the employer.

[TABLE] showing the sub-submissions categorized by main submissions of all sides pertaining to the issue.

Issues Framed by the Supreme Court

The primary issue before the Supreme Court was:

1. Whether the appellant ceased to be an employee of the respondent on 1st October 2006 since he had resigned on 1.9.2006 as 30 days period came to an end on the aforesaid date.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Supreme Court considered the following authorities:

Cases:

• Punjab National Bank v. P.K. Mittal (1989) Supp. (2) SCC 175 – Supreme Court of India: The court relied on this case to highlight that resignation is a voluntary act and becomes effective after the notice period, without requiring acceptance, unless specified otherwise.
• State of U.P. v. Achal Singh (2018) 10 SCALE 89 – Supreme Court of India: This case was cited to emphasize that the necessity for acceptance of resignation depends on the specific language of the applicable rules.
• Dinesh Chandra Sangma v. State of Assam (1977) 4 SCC 441 – Supreme Court of India: This case was used to illustrate that when a statutory rule is fulfilled, a retirement becomes effective without requiring consent from the employer.
• Moti Ram v. Param Dev and Anr. (1993) 2 SCC 725 – Supreme Court of India: The court distinguished this case, stating that its factual matrix was different and that it does not apply to the present case, where the Standing Orders do not require acceptance of resignation after the notice period.
• Raj Kumar v. Union of India [1968] 3 SCR 857– Supreme Court of India: The court discussed this case to highlight that in the case of public servants, resignation is effective only upon acceptance.
• Union of India v. Shri Gopal Chandra Misra & Ors [1978] 3 SCR 12– Supreme Court of India: This case was discussed to show that resignation is a spontaneous relinquishment of one’s own right and can be unilateral or bilateral depending on the nature of the office.

Statutes and Orders:

• Industrial Employment (Standing Orders) Act, 1946: The Act under which the Certified Standing Orders of Air India were framed.
• Standing Order 17 of Air India: Defines the conditions for termination of service.
• Standing Order 18 of Air India: Defines the conditions for resignation.

[TABLE] of which authority were considered by the court and HOW.

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• The Supreme Court relied on Punjab National Bank v. P.K. Mittal (1989) Supp. (2) SCC 175* to emphasize that resignation is a voluntary act by an employee, and if the employee gives a notice of resignation, it becomes effective on the expiry of the notice period, without requiring any acceptance by the employer.
• The Supreme Court cited State of U.P. v. Achal Singh (2018) 10 SCALE 89* to support the view that whether a voluntary retirement or resignation is automatic or requires an order depends on the language used in the specific rule.
• The Supreme Court referred to Dinesh Chandra Sangma v. State of Assam (1977) 4 SCC 441* to highlight that when an employee fulfills the conditions of a statutory rule for retirement, it becomes effective without needing the consent of the employer.
• The Supreme Court distinguished Moti Ram v. Param Dev and Anr. (1993) 2 SCC 725*, stating that it was not applicable to the present case because the facts were different, and the applicable Standing Order did not require acceptance of resignation after the notice period.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the interpretation of Standing Order 18 of the Certified Standing Orders of Air India. The Court emphasized that the language of the Standing Order clearly states that a resignation becomes effective after a 30-day notice period, without requiring acceptance, unless disciplinary proceedings are pending or contemplated. The Court also considered the employee’s right to resign and not be forced to serve if they are unwilling, provided they adhere to the notice requirements.

The Court also distinguished the case from those involving government employees or cases where specific rules require acceptance of resignation. It emphasized that the specific phraseology of the rules and standing orders governing the employment contract is paramount in determining whether acceptance of a resignation is necessary.

[TABLE] ranked based on percentage to show the ranking of sentiment analysis of reasons given by the Supreme Court as to what weighed in the mind of the court to come to the conclusion with the various points emphasised in the reasoning portion.

Fact:Law Ratio Table

Fact: The factual aspects of the case, such as the dates of resignation, notice period, and the specific clauses of the Standing Orders, were considered by the Court.

Law: The legal considerations included the interpretation of Standing Orders 17 and 18, the Industrial Employment (Standing Orders) Act, 1946, and the precedents set by previous Supreme Court decisions.

Logical Reasoning:

The Court considered alternative interpretations, such as the respondent’s argument that acceptance was necessary, but rejected them because they did not align with the specific language of Standing Order 18. The Court also clarified that the decision in Moti Ram v. Param Dev and Anr. (1993) 2 SCC 725 was not applicable due to the different factual context and the specific provisions of the Standing Orders in this case.

The Supreme Court held that the appellant’s resignation was effective on the lapse of the 30-day notice period. The Court reasoned that the right to resign is a fundamental right of an employee, and they cannot be forced to serve if they are unwilling, provided they adhere to the terms of their employment contract or standing orders.

The key reasons for the decision include:

• The plain reading of Standing Order 18 indicates that acceptance is not required for a resignation with a 30-day notice period.
• The employee’s right to resign is upheld, and they cannot be forced to serve if they are unwilling, provided they adhere to the terms of their employment contract or standing orders.
• The factual matrix of the case did not involve any pending disciplinary action or any other impediment to the employee’s resignation.

The Court quoted the following from Punjab National Bank v. P.K. Mittal (1989) Supp. (2) SCC 175:

“resignation is a voluntary act of an employee. He may choose to resign with immediate effect or with a notice of less than three months if the bank agrees to the same. He may also resign at a future date on the expiry, or beyond the period, of three months but for this no further consent of the bank is necessary.”

The Court also quoted the following from Moti Ram v. Param Dev and Anr. (1993) 2 SCC 725:

“As pointed out by this Court, ‘resignation’ means the spontaneous relinquishment of one’s own right and in relation to an office, it connotes the act of giving up or relinquishing the office.”

The Court further quoted the following from Dinesh Chandra Sangma v. State of Assam (1977) 4 SCC 441:

“The appellant has voluntarily retired by giving three months’ notice not in accordance with an express or implied term of his contract of employment, but in pursuance of a statutory rule.”

There was no minority opinion in this case, as both judges concurred in the decision.

Key Takeaways

• An employee’s resignation is effective after serving the notice period as per the applicable standing orders, without requiring acceptance from the employer, unless there is a specific provision to the contrary.
• If the standing orders specify a notice period for resignation, and the employee serves that notice, the resignation is effective on the expiry of the notice period, provided no disciplinary action is pending or contemplated.
• The specific language of the rules or standing orders governing employment is crucial in determining whether acceptance of resignation is necessary.
• Employees have the right to resign and cannot be forced to serve if they are unwilling, provided they adhere to the notice requirements.

Directions

The Supreme Court quashed the judgment of the High Court and the order of the respondent declining to accept the resignation. It directed the respondent to pay the appellant his pending dues, including:

• Provident fund with prevailing interest rates.
• Gratuity, if payable, with interest at 6% per annum.
• Any other benefits, with interest at 6% per annum.

The Court ordered that the outstanding amount should be paid within three months from the date of the judgment.

Development of Law

The ratio decidendi of this case is that a resignation becomes effective after serving the notice period as specified in the applicable standing orders, and no acceptance is required unless the standing orders specifically state otherwise or disciplinary proceedings are pending or contemplated. This judgment clarifies the position of law regarding resignation under the Industrial Employment (Standing Orders) Act, 1946, and emphasizes the importance of the specific language of the rules governing employment contracts. It reinforces the right of an employee to resign and not be forced to serve if they are unwilling, provided they adhere to the notice requirements.

Conclusion

The Supreme Court’s judgment in Sanjay Jain vs. National Aviation Co. of India Ltd. clarifies that an employee’s resignation is effective upon serving the required notice period as per the applicable standing orders, without needing acceptance from the employer, unless disciplinary proceedings are pending or contemplated. This decision emphasizes the importance of the specific language of employment rules and upholds an employee’s right to resign, reinforcing the voluntary nature of employment contracts within the framework of the Industrial Employment (Standing Orders) Act, 1946.