Employer can't reject resignation of employee citing financial crisis, amounts to bonded labour: Kerala High Court

The Kerala High Court recently held that an employer cannot force an employee to continue in service citing financial hardships, especially when there is no violation of contractual conditions. [Greevas Job Panakkal v Traco Cable Company Limited & ors].Justice N Nagaresh stated that once an employee submits resignation in accordance with the terms of employment, the employer has a duty to accept it, unless there is a failure to comply with contractual conditions.The judge explained that resignation can be refused only in certain situations, like when there is requirement of notice period or 'heat of the moment' resignations which may be withdrawn or serious pending disciplinary proceedings involving major misconduct or financial loss to the organisation.In the present case, however, the Court observed that none of these situations existed and the company's refusal to accept the resignation of its company secretary citing financial crisis was legally unsustainable. "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.Refusal to accept resignation would amount to 'bonded labour' which is prohibited under Article 23 of the Indian Constitution, the Court made it clear..The decision came in a case involving a Company, Secretary, who sought to resign from the Traco Cable Company Limited, a State Public Sector Undertaking.According to the petitioner, Greevas Job Panakkal, his salary payments had been irregular since October 2022, leaving him unable to sustain himself or care for his ailing mother who required continuous medical attention.He submitted his resignation in March 2024, requesting to be relieved from service. However, the company’s Board rejected his resignation, stating that Panakkal's role was indispensable and that the company was facing critical financial crisis.The management repeatedly directed him to resume duties and issued memos, warning him of disciplinary action.Challenging these actions, Panakkal moved the Court to quash the memos issued against him and to direct the company to accept his resignation..After going through the facts and submissions, the Court observed that, a company secretary's appointment as per the Companies Act, 2013, was registered with the Registrar of Companies and unless an employer filed the necessary statutory forms, a company secretary could not take up a similar employment elsewhere.This, the Court noted, would effectively prevent the petitioner from securing another job.The Court also observed the company had failed to pay the petitioner his salary for a prolonged period and had even initiated disciplinary proceedings against him, while accusing him of retaining a company laptop.The Court found that such actions of the company could not be legally sustained as the petitioner was being denied his right to resign without any valid reason..Thus, the Court set aside the memos rejecting Panakkal’s resignation and the disciplinary proceeding notices.It directed the company to formally accept the resignation and relive the petitioner from his service within two months and to settle his salary areas, leave surrender benefits and other terminal dues at the earliest based on the companies financial position..The petitioner was represented by advocates D Sreekanth, Aswin kumar MJ, Albin George, Jeevadas H and James Jose.Traco Cable Company Limited was represented by its standing counsel Abel Tom Benny along with advocates D Prem Kamath, Tom Thomas (Kakkuzhiyil), Aaron Zacharias Benny, Ananditha Rajeev, Clint Jude Lewis, Mathew Angelo Davis, and Tessa Rose.Senior government pleader Princy Xavier appeared for the state..[Read Judgment].Follow Bar and Bench channel on WhatsAppDownload the Bar and Bench Mobile app for instant access to the latest legal news.