The Kerala High Court recently observed that if an employer refuses to accept an employee’s resignation, it is “bonded labour”.
According to the Bar and bench, Justice N Nagaresh said that once an employee resigns in accordance with the terms and conditions of employment, the employer has an obligation to accept it “unless there is a breach of contractual terms”.
When can an employer refuse to resign?
Justice N Nagaresh explained that resignation can be rejected only in certain situations such as:
1. When a notice period is required
2. The “worst moment” of a resignation that can be taken back
3. Serious ongoing disciplinary proceedings involving serious misconduct
4. Financial loss of the organization
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However, the court observed that none of these situations arose in this case and that the company’s refusal to accept the resignation of its secretary due to financial crisis was legally unsustainable, the Bar and Bench said.
What did the Kerala HC say?
The judge was quoted by the Bar and Bench as saying, “Financial problems or financial distress cannot be a reason to compel a company secretary to work for a limited company against his will and without his consent.
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“The disciplinary proceedings intended against the complainant under the given circumstances can only be seen as an attempt by the respondents to violate the petitioner’s right to be informed,” the court added.
The court reportedly made it clear that refusing to accept the resignation would amount to “bonded labour”, which is prohibited under Article 23 of the Constitution of India.
what was that
The case involved a company secretary seeking to withdraw from Traco Cable Company Limited, a state-owned public sector undertaking.
One Greevas Job Panakkal was the petitioner. He claimed that his payments had been irregular since October 2022, leaving him unable to support himself or take care of his ailing mother, who required round-the-clock medical care.
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In March 2024, he submitted his resignation and requested to be released from service.
However, the company’s board rejected his resignation, saying that Panakkal’s role was indispensable and that the company was facing a critical financial crisis.
Management repeatedly ordered him to resume his duties and issued memos warning him of disciplinary action.
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Challenging these moves, Panakkal urged the court to quash the notices issued against him and order the company to accept his resignation.
After perusal of the facts and submissions, the High Court found that the appointment of the company secretary under the Companies Act 2013 was registered and unless the employer had completed the necessary statutory forms, the company secretary could not take up similar employment elsewhere.
This would effectively prevent the petitioner from securing another job, the court noted.
What did Kerala HC do then?
The court set aside the memorandum rejecting Panakkal’s resignation and the disciplinary notice, the Bar and Bench said.
The company was further directed to formally accept the resignation and within two months, relieve the petitioner from his service and pay him the salary scales, severance pay and other terminal charges as soon as possible according to the financial situation of the company.