Supreme Court Upholds Voluntary Retirement Acceptance Despite Employee’s Withdrawal Attempt: New Victoria Mills vs. Shrikant Arya (2021)

Date of the Judgment: 27 September 2021

Citation: [Not Available in Source]

Judges: Sanjay Kishan Kaul, J., M.M. Sundresh, J.

The Supreme Court of India addressed the question of whether an employee could withdraw a voluntary retirement application after its acceptance by the employer, but before the actual retirement date. This case arose from a dispute between M/s. New Victoria Mills and one of its employees, Shrikant Arya, regarding his attempt to withdraw his voluntary retirement application after it had been accepted but before his relieving date. The two-judge bench, comprising Justices Sanjay Kishan Kaul and M.M. Sundresh, delivered the judgment, with Justice Sanjay Kishan Kaul authoring the opinion.

Case Background

Shrikant Arya, the respondent, was employed as a Supervisor (Maintenance) at M/s. New Victoria Mills (Appellant No. 1) since 1991. The mill was a unit of the National Textile Corporation (Uttar Pradesh) Limited, Kanpur (Appellant No. 2), which is a subsidiary of the National Textile Corporation Limited (Appellant No. 3). Due to financial difficulties in the textile industry, the Board for Industrial and Financial Reconstruction (BIFR) recommended the closure of several mills, including M/s. New Victoria Mills. To protect employees, BIFR mandated a Modified Voluntary Retirement Scheme (MVRS) for employees of these mills.

Shrikant Arya applied for voluntary retirement under the MVRS on 12 July 2002, requesting that all his service benefits be disbursed. A dispute about the deposit of his provident fund contributions, dating back to 1991, was ongoing. On 3 March 2003, Arya requested that his MVRS application be kept suspended until his provident fund issues were resolved, fearing that recovering the dues would be impossible after his resignation was accepted. On 28 May 2003, the mill issued a notice accepting Arya’s resignation under the MVRS, effective 1 June 2003. However, on 2 June 2003, the mill cancelled the 1 June 2003 cut-off date and instructed Arya to continue his duties. On 1 July 2003, Arya requested that his resignation be cancelled, stating that he had changed his mind, as his resignation had not yet been accepted. On 14 July 2003, the mill accepted his resignation, effective 16 July 2003, triggering the legal dispute.

Timeline:

Course of Proceedings

Shrikant Arya filed a writ petition before the High Court of Judicature at Allahabad, challenging the acceptance of his resignation and seeking reinstatement with back wages. The single judge ruled in favor of Arya, noting that his resignation was conditional on the payment of all dues, including provident fund dues and that he had withdrawn his resignation before the effective date. The court also noted that the mill had been closed down. The appellants appealed to the Division Bench of the Allahabad High Court, which upheld the single judge’s decision. The Division Bench reasoned that the acceptance of the request for voluntary retirement was a condition precedent to such a retirement and that the cancellation of the original cut-off date of 01.06.2003 and asking the respondent to join his duties once again, the post must have continued and, thus, Clause 5.1 had not come into operation. The appellants then appealed to the Supreme Court of India.

Legal Framework

The judgment primarily revolves around the interpretation of the Modified Voluntary Retirement Scheme (MVRS) and its clauses. Key clauses include:

• Clause 1.6:“The management reserves the right to refuse a MVRS application without assigning any reasons.” This clause grants the management the authority to reject an MVRS application without needing to provide a justification.
• Clause 4.0: Outlines the terminal benefits under the scheme, including:
  • Clause 4.1:“Balance in the Provident Funds Accounts payable as per Employees Provident Fund Act and rules made thereunder.” This clause ensures that employees receive their provident fund balance.
  • Clause 4.2:“Cash equivalent of accumulated earned leave/privilege/leave as per the rules of the mills/office, concerned.” This clause provides for the encashment of accumulated leave.
  • Clause 4.3:“Gratuity as per Payment of Gratuity Act or the Gratuity Scheme, if any.” This clause ensures payment of gratuity as per applicable laws or schemes.
• Clause 5.0: Specifies the procedure for the MVRS, including:
  • Clause 5.1:“An eligible employee may submit an application in the prescribed form for voluntary retirement under the scheme by tendering resignation from the post held and service in NTC to the Competent Authority. The post falling vacant as a result of an employee’s voluntary retirement under the scheme shall in all cases stand abolished simultaneously while accepting resignation and order to that effect issued simultaneously before disbursing retirement benefits to employees under this scheme and no person (Permanent/badly/substitute/temporary etc.) shall be engaged in his/her place.” This clause mandates that the post of the retiring employee is abolished simultaneously with the acceptance of the resignation, and no one can be hired in their place.
  • Clause 5.10:“Once an employee’s (sic) avails himself/herself of voluntary retirement from a PSU, he/she shall not be allowed to take up employment in any other PSU. If he/she desires to do so, he/she shall have to return the VRS compensation received by him/her to the PSU concerned where the compensation was paid out of a Government grant, the PSU concerned shall remit the refunded amount to the Government in case the PSU is already closed/merged, the VRS compensation shall be returned directly to the Government.” This clause restricts re-employment in other PSUs after availing MVRS.

Arguments

Arguments of the Appellants (M/s. New Victoria Mills & Ors.):

• The appellants argued that the respondent’s resignation was accepted on 28 May 2003, and this acceptance was not challenged. The respondent only challenged the revised cut-off date of 16 July 2003.
• They contended that the postponement of the cut-off date was for administrative reasons and did not invalidate the acceptance of the resignation.
• The appellants relied on the judgment in Air India Express Limited & Ors. v. Captain Gurdarshan Kaur Sandhu to argue that a mere delay in relieving an employee does not affect the acceptance of their resignation.
• They also cited Raj Kumar v. Union of India, where it was held that a resignation becomes effective upon acceptance by the appointing authority, regardless of the date of relieving.
• The appellants emphasized that the MVRS was beneficial to the employees, as those who did not opt for it would be retrenched under the Industrial Disputes Act, 1947, with lower financial benefits.
• They argued that the respondent’s acceptance of the cheque was under interim directions of the Court and the abolishment of the post after the closure of the Mill was not relevant.

Arguments of the Respondent (Shrikant Arya):

• The respondent argued that his resignation was conditional on the clearance of his provident fund dues.
• He contended that he had withdrawn his resignation on 1 July 2003, before the effective date of 16 July 2003.
• The respondent relied on J.N. Srivastava v. Union of India & Anr. and Shambhu Murari Sinha v. Project & Development India & Anr. to argue that an employee can withdraw their voluntary retirement application before the actual retirement date, even after acceptance.
• He argued that the jural relationship of employer and employee continued until 16 July 2003, giving him the right to withdraw his resignation.
• He contended that the MVRS was an “invitation to offer” and his application was an offer that was revoked by his letter on 3 March 2003, due to the non-resolution of his provident fund issue.
• The respondent argued that Clause 5.1 of the MVRS required the post to be abolished simultaneously with the acceptance of the resignation, which did not happen when the cut-off date was postponed.
• He also referred to an RTI reply that showed other employees had taken back their resignations, indicating that the closure of the mill did not deprive him of employment benefits.
• The respondent relied on Food Corporation of India & Anr. v. Ram Kesh Yadav & Anr., arguing that an offeror cannot accept part of the offer and reject the condition subject to which it is made.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section. However, the core issue addressed by the court was:

1. Whether the respondent could withdraw his resignation after it was accepted by the employer, but before the effective date of retirement, given the specific terms of the MVRS and the factual circumstances of the case.

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:

Judgment

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

How each authority was viewed by the Court?

• The Supreme Court followed Air India Express Limited & Ors. v. Captain Gurdarshan Kaur Sandhu [(2019) 17 SCC 129], stating that a mere delay in relieving an employee does not impact the acceptance of their resignation.
• The Court also followed Raj Kumar v. Union of India [(1968) 3 SCR 857], noting that a resignation becomes effective as soon as it is accepted by the appointing authority.
• The Court distinguished Union of India v. Gopal Chandra Misra [(1978) 2 SCC 301], stating that the case involved a resignation letter that specified a future date for its operation, which was not the case here.
• The Court distinguished J.N. Srivastava v. Union of India & Anr. [(1998) 9 SCC 559], stating that the resignation in that case was to operate prospectively from a specified date and was withdrawn before that date.
• The Court distinguished Shambhu Murari Sinha v. Project & Development India & Anr. [(2000) 5 SCC 621], stating that the employee in that case was not relieved from service and was permitted to continue working, which was not the case here.
• The Court distinguished Power Finance Corporation Limited v. Pramod Kumar Bhatia [(1997) 4 SCC 280], stating that the acceptance of the offer to voluntarily retire was subject to adjustment of the amount payable to him, and hence did not attain finality.
• The Court referred to Bank of India v. O.P . Swarnakar [(2003) 2 SCC 721] and HEC Voluntary Retd. Emps. Welfare Soc. & Anr. v. Heavy Engineering Corporation Ltd. &Ors. [(2006) 3 SCC 708], noting that voluntary retirement schemes are in the nature of an “invitation to offer.”
• The Court distinguished Food Corporation of India & Anr. v. Ram Kesh Yadav & Anr. [(2007) 9 SCC 531], stating that the case dealt with a conditional offer, which was not the situation here.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• Terms of the MVRS: The Court emphasized that the terms of the MVRS, particularly Clause 5.1, clearly stipulated that the acceptance of the resignation and the abolishment of the post were simultaneous events. This clause was crucial in determining that once the resignation was accepted on 28 May 2003, the post was abolished, and the subsequent postponement of the cut-off date was merely an administrative matter.
• Nature of Resignation: The Court held that the respondent’s resignation was not conditional on the clearance of his provident fund dues. The request for payment of all benefits was a natural consequence of the resignation under the MVRS and did not make the resignation conditional.
• Acceptance of Resignation: The Court found that the resignation was accepted on 28 May 2003, and the subsequent communications did not alter this fact. The postponement of the cut-off date did not invalidate the acceptance, and the respondent’s attempt to withdraw the resignation on 1 July 2003, was ineffective.
• Financial Condition of the Mill: The Court considered the background in which the MVRS was propounded, noting that the mill was facing financial difficulties and was recommended for closure by BIFR. The MVRS was intended to safeguard the interests of the employees, and the benefits under the scheme were more favorable than retrenchment under the Industrial Disputes Act, 1947.
• Precedents: The Court relied on precedents such as Air India Express Limited & Ors. v. Captain Gurdarshan Kaur Sandhu and Raj Kumar v. Union of India to support the view that a mere delay in relieving an employee does not impact the acceptance of their resignation and that a resignation becomes effective once accepted.

The Court’s reasoning focused on the specific terms of the MVRS, the factual timeline of events, and the relevant legal precedents to conclude that the respondent’s resignation was validly accepted, and his attempt to withdraw it was not permissible.

Sentiment Analysis

Fact:Law Ratio

Logical Reasoning

Judgment

The Supreme Court overturned the decisions of the High Court of Judicature at Allahabad. The Court held that the resignation of Shrikant Arya was validly accepted on 28 May 2003, and his subsequent attempt to withdraw it on 1 July 2003, was not permissible. The Court emphasized that the terms of the MVRS, particularly Clause 5.1, stipulate that the acceptance of the resignation and the abolition of the post are simultaneous events. The Court also noted that the postponement of the cut-off date was an administrative matter and did not invalidate the acceptance of the resignation. The Court concluded that the respondent was entitled to the benefits under the scheme, which had already been paid to him.

The Court stated, “We have no doubt that the acceptance of resignation and the abolition of the post were simultaneous exercises as that is part of Clause 5.1 of the Scheme… Thus, in our view, once the letter of resignation was accepted on 28.05.2003, the post stood abolished.”

The Court further clarified, “In contractual terms, appellant No. 1’s acceptance of the respondent’s offer of resignation as available under the MVRS was completed on 28.05.2003. The respondent cannot be permitted to take advantage of the postponement of the cut off date by a few days, during which time the respondent was asked to attend to office, albeit against no sanctioned post.”

The court also observed, “The mere delay in relieving the respondent from duties would not impact the acceptance of his resignation… A different scenario would have arisen, if the resignation letter was not in praesenti and had fixed a future date for its operation, and before that date the resignation letter was withdrawn.”

Key Takeaways

• Acceptance of Resignation: Once a resignation under a voluntary retirement scheme is accepted by the employer, it is generally considered final and cannot be unilaterally withdrawn by the employee, even if the relieving date is postponed.
• Simultaneous Abolition of Post: Under schemes like the MVRS, the acceptance of resignation and the abolishment of the post are simultaneous events, as per Clause 5.1. This means that the post ceases to exist once the resignation is accepted.
• Conditional Resignation: A request for payment of dues and benefits is a natural consequence of resignation under a scheme and does not make the resignation conditional.
• Administrative Delays: Administrative delays in relieving an employee or disbursing benefits do not invalidate the acceptance of the resignation.
• Importance of Scheme Terms: The terms of the voluntary retirement scheme are crucial in determining the rights and obligations of the employer and employee.

Directions

The Supreme Court set aside the impugned order of the Division Bench of the Allahabad High Court and allowed the appeal. The parties were directed to bear their own costs.

Development of Law

The ratio decidendi of this case is that once a resignation under a voluntary retirement scheme is accepted, it cannot be unilaterally withdrawn by the employee, even if the relieving date is postponed. This judgment clarifies the legal position regarding voluntary retirement schemes and the rights of both employers and employees. The Supreme Court upheld the importance of the terms of the scheme and the finality of the acceptance of resignation.

Conclusion

The Supreme Court’s judgment in M/s. New Victoria Mills & Ors. vs. Shrikant Arya reinforces the principle that once an employer accepts a voluntary retirement application, the employee cannot unilaterally withdraw it, even if the relieving date is postponed. The Court emphasized the importance of the specific terms of the MVRS andthe simultaneous nature of resignation acceptance and post abolishment. This case provides a crucial precedent for similar disputes, highlighting the finality of acceptance in voluntary retirement schemes and the limitations on an employee’s ability to withdraw their resignation after it has been accepted. The judgment clarifies the legal position in cases where there are administrative delays in the relieving process, and reinforces the principle that such delays do not invalidate the acceptance of the resignation. The Court’s decision ensures that both employers and employees adhere to the terms of the voluntary retirement schemes, maintaining the integrity of the process.