New Delhi: The Kerala High Court recently held that an employer cannot invoke financial hardship to compel an employee to continue in service. The Court observed that refusing to accept resignation would amount to bonded labour. The Court has directed the company to formally accept the resignation of the petitioner and and relive him from his service.
According to Bar and Bench, Justice N Nagaresh held that when an employee submits a resignation in accordance with the terms of employment and with no failure to comply with contractual conditions, the employer has a duty to accept it.
The judge explained that resignation can be refused only in certain situations like when a notice period is required or ‘heat of the moment’ resignations may be withdrawn or serious pending disciplinary proceedings involving that involves major misconduct or financial loss to the company. The Court held that none of these situations existed in the present case and the company’s refusal to accept the resignation of its employee citing financial crisis was legally unsustainable.
The judge was quoted by Bar and Bench as saying, “Financial issues or financial emergency cannot be a reason to force a Company Secretary to work for an incorporated Company against his will and without his consent,”
The disciplinary proceedings contemplated against the petitioner in the circumstances can only be seen as an attempt by the respondents to violate the right of the petitioner to resign from service,” the Court said.
The Court held that refusing to accept resignation would amount to ‘bonded labour’ which is prohibited under Article 23 of the Indian Constitution, the Bar and Bench reported.
The ruling was made in a case involving a company secretary who wanted to resign from the Traco Cable Company Limited, a State Public Sector Undertaking. Greevas Job Panakkal, the petitioner claimed that his salary payments had been irregular since October 2022, making it difficult to sustain himself or take care for his ailing mother. He submitted his resignation in March 2024.
The company’s board rejected his resignation, citing a critical financial crisis. The management directed him to resume duties and issued memos, warning him of disciplinary action. Challenging these actions, Panakkal moved the Court to direct the company to accept his resignation and quash the memos issued against him.
After reviewing the case, the Court noted that the appointment of a company secretary as per the Companies Act, 2013, was recorded with the Registrar of Companies. The company secretary could not take up a similar employment elsewhere unless an employer filed the necessary statutory forms. This would prevent the petitioner from finding another job.
The Court noted that the company had been delaying the salary of the petitioner for a long time and had even initiated disciplinary action against him. The Court found that such actions of the company could not be legally sustained as without any valid reason the petitioner was being denied his right to resign. The Court overturned the memos rejecting Panakkal’s resignation and the disciplinary proceeding notices.
The Court ordered the company to formally accept the resignation of the petitioner and relive him from his service within two months. The court further ordered the company to settle the salary areas, leave surrender benefits and other terminal dues of the employee at the earliest based on the companies financial position.
