Supreme Court clarifies the distinction between Resignation and Voluntary Retirement in Pension Cases: BSES Yamuna Power Ltd. vs. Ghanshyam Chand Sharma (2019) INSC 974 (5 December 2019)

Introduction

Date of the Judgment: 5 December 2019

Citation: (2019) INSC 974

Judges: Dr Dhananjaya Y Chandrachud, J, Hrishikesh Roy, J

Can an employee who has resigned from service be granted pensionary benefits by reclassifying their resignation as voluntary retirement? The Supreme Court of India recently addressed this question, clarifying the distinction between resignation and voluntary retirement in the context of pension benefits. This judgment is crucial for understanding the legal implications of these two distinct forms of leaving employment. The judgment was delivered by a two-judge bench comprising Justice Dr. Dhananjaya Y Chandrachud and Justice Hrishikesh Roy, with the opinion authored by Justice Dr. Dhananjaya Y Chandrachud.

Case Background

The first respondent, Ghanshyam Chand Sharma, was initially employed as a daily-rated mazdoor on 9 July 1968. His services were regularized as a Peon on 22 December 1971. On 7 July 1990, he submitted his resignation, which was accepted by the appellant, BSES Yamuna Power Ltd., effective from 10 July 1990. Subsequently, the appellant denied him pensionary benefits on the grounds that he had not completed twenty years of service and that his resignation resulted in the forfeiture of his past service.

Timeline

Legal Framework

The primary legal provision at the center of this case is Rule 26 of the Central Civil Service (Pension) Rules, 1972 (CCS Pension Rules). This rule explicitly addresses the forfeiture of past service upon resignation. Rule 26 of the CCS Pension Rules states:

“26. Forfeiture of service on resignation (1) Resignation from a service or a post, unless it is allowed to be withdrawn in the public interest by the Appointing Authority, entails a forfeiture of past service…”

This rule stipulates that when an employee resigns, their past service is forfeited unless the resignation is withdrawn in the public interest by the appointing authority. This forfeiture of past service has a direct impact on the employee’s eligibility for pensionary benefits.

Arguments

Appellant’s Arguments:

• The appellant argued that the first respondent’s resignation resulted in the forfeiture of his past service, making him ineligible for pensionary benefits, as per Rule 26 of the CCS Pension Rules.
• The appellant contended that the High Court erred in reclassifying the first respondent’s resignation as voluntary retirement based on the judgment in Asger Ibrahim Amin v LIC [2016] 13 SCC 797.
• The appellant highlighted that the Supreme Court in Senior Divisional Manager, LIC v Shree Lal Meena [2019] 4 SCC 479 had overruled the view taken in Asger Ibrahim Amin, clarifying that resignation and voluntary retirement are distinct concepts with different legal consequences.
• The appellant emphasized that even if the first respondent had completed twenty years of service, his resignation still resulted in the forfeiture of his past service, as per Rule 26 of the CCS Pension Rules.

Respondent’s Arguments:

• The first respondent argued that his resignation should be treated as voluntary retirement since he had completed more than twenty years of service, making him eligible for pensionary benefits.
• The first respondent relied on the judgment in Asger Ibrahim Amin, where the Supreme Court held that the court should independently determine whether the termination of service amounted to a resignation or a voluntary retirement.
• The first respondent contended that the appellant’s denial of his application for voluntary retirement was illegal, as he had completed twenty years of service.

[TABLE] of Submissions:

Issues Framed by the Supreme Court

The Supreme Court framed the following issue for consideration:

1. Whether the first respondent’s resignation can be reclassified as voluntary retirement for the purpose of granting pensionary benefits.

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:

• Asger Ibrahim Amin v LIC [2016] 13 SCC 797 – The High Court relied on this case to reclassify the resignation as voluntary retirement. The Supreme Court overruled this case.
• Senior Divisional Manager, LIC v Shree Lal Meena [2015] 17 SCC 43 (Shree Lal Meena I) – A co-ordinate bench questioned the correctness of Asger Ibrahim Amin and referred the matter to a larger bench.
• Senior Divisional Manager, LIC v Shree Lal Meena [2019] 4 SCC 479 (Shree Lal Meena II) – A three-judge bench overruled Asger Ibrahim Amin, holding that resignation and voluntary retirement are distinct and cannot be interchanged.
• RBI v Cecil Dennis Solomon [2004] 9 SCC 461 – The Court quoted this case to highlight the distinction between the expressions “superannuation”, “voluntary retirement”, “compulsory retirement” and “resignation” in service jurisprudence.

Legal Provisions:

• Rule 26 of the Central Civil Service (Pension) Rules, 1972 – This rule states that resignation results in forfeiture of past service.

[TABLE] of Authorities:

Judgment

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

How each authority was viewed by the Court?

• The Court overruled Asger Ibrahim Amin v LIC [2016] 13 SCC 797*, stating that it incorrectly allowed for the reclassification of resignation as voluntary retirement.
• The Court followed Senior Divisional Manager, LIC v Shree Lal Meena [2019] 4 SCC 479*, which clarified that resignation and voluntary retirement are distinct concepts with different legal consequences.
• The Court applied Rule 26 of the Central Civil Service (Pension) Rules, 1972, to conclude that the first respondent’s resignation resulted in the forfeiture of his past service.
• The Court quoted RBI v Cecil Dennis Solomon [2004] 9 SCC 461* to highlight the distinction between different forms of leaving service.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the clear distinction between resignation and voluntary retirement as laid down in service jurisprudence and the explicit provisions of Rule 26 of the CCS Pension Rules. The Court emphasized that a resignation is a voluntary act that results in the forfeiture of past service unless withdrawn in the public interest. The Court rejected the notion that a resignation can be reclassified as voluntary retirement simply because an employee has completed the requisite years of service for voluntary retirement. This was to ensure that the express provisions of the pension rules were not rendered nugatory. The Court also noted that the decision to resign is a conscious decision that carries its own legal consequences, and it cannot be substituted for voluntary retirement.

Sentiment Analysis of Reasons given by the Supreme Court:

Ratio of Fact:Law

Logical Reasoning:

The Court considered the argument that the first respondent had completed twenty years of service and should be eligible for voluntary retirement. However, it rejected this argument, stating that the first respondent’s decision to resign was a conscious decision, and the legal consequences of resignation under Rule 26 of the CCS Pension Rules apply irrespective of the length of service. The Court emphasized that “the decision to resign is materially distinct from a decision to seek voluntary retirement.” It also noted that “the two may not be substituted for each other based on the length of an employee’s tenure.” The Court clarified that if it were to reclassify the resignation as voluntary retirement, it would “obfuscate the distinction between the concepts of resignation and voluntary retirement and render the operation of Rule 26 nugatory.”

The Court also addressed the argument that the denial of voluntary retirement was illegal. It held that even if the denial was illegal, the first respondent’s subsequent resignation resulted in the forfeiture of past service. The Court noted that the first respondent did not challenge the denial of voluntary retirement between 25 May 1990 and 7 July 1990 and, in fact, admitted to having resigned in a legal notice dated 1 December 1992. Thus, the denial of voluntary retirement could not be used to claim pensionary benefits when the first respondent had admittedly resigned.

Key Takeaways

• Resignation vs. Voluntary Retirement: The Supreme Court reaffirmed that resignation and voluntary retirement are distinct concepts with different legal implications. Resignation results in the forfeiture of past service, while voluntary retirement may entitle an employee to pensionary benefits.
• Overruling of Asger Ibrahim Amin: The judgment in Asger Ibrahim Amin, which allowed for the reclassification of resignation as voluntary retirement, has been explicitly overruled.
• Application of Rule 26 of CCS Pension Rules: The Court emphasized that Rule 26 of the CCS Pension Rules must be strictly applied, meaning that resignation results in the forfeiture of past service unless withdrawn in the public interest.
• Implications for Employees: Employees must be aware of the legal consequences of resignation, particularly concerning pensionary benefits. Resigning from service will generally result in the forfeiture of past service, regardless of the length of service.
• Future Impact: This judgment clarifies the legal position on the distinction between resignation and voluntary retirement, providing a clear precedent for future cases involving pensionary benefits.

Directions

The Supreme Court set aside the impugned order of the High Court of Delhi dated 26 May 2017. There was no order as to costs.

Development of Law

Ratio Decidendi: The ratio decidendi of this case is that resignation and voluntary retirement are distinct concepts with different legal consequences. A resignation results in the forfeiture of past service as per Rule 26 of the CCS Pension Rules, and it cannot be reclassified as voluntary retirement simply because an employee has completed the requisite years of service for voluntary retirement. This judgment overrules the previous position taken in Asger Ibrahim Amin, thereby clarifying the law on this issue.

Conclusion

In conclusion, the Supreme Court’s judgment in BSES Yamuna Power Ltd. vs. Ghanshyam Chand Sharma clarifies the legal distinction between resignation and voluntary retirement, particularly in the context of pensionary benefits. The Court held that a resignation results in the forfeiture of past service under Rule 26 of the CCS Pension Rules and cannot be reclassified as voluntary retirement, even if the employee has completed the requisite years of service. This judgment overrules the earlier view in Asger Ibrahim Amin, providing a clear precedent for future cases. The decision emphasizes the importance of understanding the legal consequences of resignation and highlights the need for employees to make informed choices regarding their employment status.