, Z,

J.K. COTION SPG. AND WVG MILLS CO. LTD.,

KALPI ROAD, KANPUR v.

STATE OF U.P. AND ORS.

JULY 2TIH, 1990

[S. RANGANATHAN AND A.M. AHMADI, JJ.]

U.P. Industrial Disputes Act, 1947-Section 2(s) and 6N- Resignation voluntarily tendered by an employee--Employer accepting the same:_Services of employee terminated-Whether amounts to 'retrenchment'.

One Ram Singh was appointed by the appellant-company on 10.3.1960. On 1.11.1970, he addressed a letter of resignation to the Manager of the company saying that owing to his family circumstances, it was no longer possible for him to continue in service and that he was compelled to sever his connections with the company. He made a demand of all his dues. He wrote another letter two days later that someone should be posted in the section where he was working in order that he may learn the work re: printing of shares, pay-sheets and pay. registers etc. The appellant-company conveyed the acceptance of the resignation with effect from the 16th November, 1970 and paid all his dues on 22.12.1970. The amount of gratuity was also paid later. Ram Singh thereafter raised an industrial dispute and sought a reference under Section 4K of the U.P. Industrial Dispute Act, 1947. Initially his demand was not accepted by the State Government but later the State Government accepted his demand on 28. ll.1974 whereupon the appellant-company filed a writ petition in the High Court challenging the said reference made by the State Government but the High Court dismissed the petition. The Labour Court thereafter made an award on the reference, in favour of the employee. It came to the conclusion that the employee's resignation was not voluntary and therefore his services had been wrongly terminated and accordingly he was directed to be reinstated. The appellant challenged the validity of the said award under Article 226 of the Constitution before the High Court. The High Court c11me to the conclusion that the employee had tendered his resignation voluntarily but it held that termination of the service of the employee fell within the definition of 'retrenchment' as contained in Section 2(s) and as the appellant-company had failed to comply with the requirement of Section 6N, the termination of service was invalid. The High Court accordingly set aside the order of reinstatement passed by

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the Labour Court and remanded the matter to the Labour Court for a decision on the question whether there was infraction of the provisions of Section 6N. Being aggrieved by that order of the High Court, the _ appellant, company has filed this appeal after obtaining specfal leave.

Allowing tbe appeal, this Court,

HELD: Where a contract of service is determined on the employee . exercising his right to quit, such termination cannot be said to be at the instance of the employer to fall within the first P"rt of the definition of retrenchment in Section 2(s) of the U.P. Industrial D'.sputes Act. [531H; 532A]

. A contract of service can bC determined by either party to the contract. If it is determined at the behest of the employer it may amount to retrenchment unless it is 1'y way of punishment for proved misconduct. But if an employee takes the initiative and exercises his right to put an end to the contract or service and the employer merely assents to it, it cannot be said that the employer has terminated the employment.

D In such' cases the employer is merely acceding to the employee's request; may be even reluctantly. Here the employee's role is active while the employer's role is passive and formal. The employer cannot force an unwilling employee to work for him. (53 IE-F]

When an employee resigns hiS office, he formally relinquishes or r E withdraws from his office; It implies that he has taken a mental decision to sever his relationship with his employer and thereby put an end to the contract of service. [533E].

In the present case the employee's request contained in the letter ·, of resignation was accepted by the employer and that brought an end to 'p -the contract or service. [534B]

-,.This 'was ,; case or 'voluntary retirement' within the meaning or the first exception to section 2(s) and therefore the question or grant or compensation under section 6N did not arise. The employee is not entitled to any compensation ':'oder section 6N orthe State Act. [SJ.tF]

. The State Bank of India v. N. Sundar!l Money, (1976] 1 SCC 822; Hinaustan Steel Ltd. v. The Presiding Officer; Labour Court, Orissa ~-and Ors., (1976] 4 SCC 222; Delhi Cloth and General Mills Ltd. v.

Shambhu Nath Mukherji and others, (1977] 4 SCC 415; Santosh Gupta --v-State Bank of Patiala, (1980] 3 SCC 340; L. Robert D'Sm; za v.

H • Executive Engineer, Southern Railway and Anr., (1982] 1 SCC 645 nil

?, L ·

Corporation of Cochin v. Ja/aji and Ors., [1984] 1LW526, l'.eferred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3fY7 of 1987.

From the Judgment and Order dated 16.10.1985 of the Allahabad High Court in C.M.W. No. 3689 of 1984. a

G.B. Pai, Ms. Urmila Kapoor and S. Janani for the Appellant.

Prithivi Raj, Vishnu Mathur and Ms. S. Dikshit for the Respondents.

The Judgment of the Court was delivered by c

AHMADI, J. When the service of an employee is terminated consequent upon the employer accepting the resignation voluntarily tendered by the employee, does the termination so brought about amount to 'Retrenchment' within the meaning of Section 2(s) read D with Section 6N of the Uttar Pradesh Industrial Disputes Act, 1947, is the question which we are called upon to decide in this appeal by special leave. The facts relevant to be stated for the disposal of this appeal are as under:

Ram Singh was employed by the appellant-company on 10th E March, 1960 and was posted in the Bradma machine section of the company. His duties were to attend to the printing of shares, paysheets, registers, ESI cards etc., relating to the appellant-company.

On 1st November, 1970 he addressed a letter of resignation to the Manager of the appellant-company in the following words:

"R/Sir,

I regret to bring to your kind notice that my family circumstances do not permit me to continue my service and hence I am compelled to sever my connections with these

Mills immediately.

I, therefore, request your goodself kindly to arrange for the payment of all my dues at an early date."

Two days thereafter he wrote another letter to the Manager of the company which reads as under: H

"R/Sir,

Since I have already tendered my resignation from my services, I request you kindly to depute somebody in the Bradma Office taking charge and learning the work, so that the entrusted work may be carried on smoothly.

Thanking you so much for making early arrangement as requested.''

A copy of this letter was endorsed to the Special Executive of the appellant-company for information and necessary action. On receipt of the above letters, the Manager of the appellant-company replied as under:

"The resignation tendered by you vide your letter dated 1st instant, is hereby accepted with effect from 16th instant.

Please hand over charge of the Company's properties in your possession to Shri R.S. Mathur and collect payment in full and final settlement from the Mills Pay Office."

After the receipt of this letter the charge of the Bradma Section was handed-over by the employee to the said R.S. Mathur on 15th

~ November, 1970. The amount due to the employee by way of salary, allowances, etc., upto 16th November, 1970 was worked out but the actual payment was received by the employee on 22nd December,

1970. He was also paid his service gratuity at the end of February,

1971. It appears that the employee raised an industrial dispute and sought a reference under Section 4K of the State Act. The employee's F demand for a reference was initially rejected by the State Government on 12th November, 1973 but it came to be accepted subsequently on 28th November, 1974. The appellant-company thereupon filed a writ petition challenging the said reference made by the State Government but the High Court dismissed the petition on 7th September, 1981.

Pursuant to the reference, the Labour Court made an Award in favour G of the employee on 25th January, 1984. The Labour Court came to the conclusion that the employee's resignation was not voluntary and, therefore, his services had been wrongly terminated with effect from 15th November, 1970. He was ordered to be reinstated. Against this Award of the Labour Court the appellant approached the High Court under Article 226 of the Constitution. The High Court came to the H conclusion that the employee had tendered his resignation voluntarily

and without any threat or coercion. It also took the view that the claim

'.>· for overtime wages was an after-thought. However, considering the definition of 'retrenchment' in Section 2(s), the High Court came to the conclusion that the termination of service of the employee fell within the said definition and as the appellant company had failed to observe the requirements of section 6N, the termination of service was clearly invalid. The approach to the High Court is reflected in the following passage of ih Judgment:

"The contention raised is that there was no act of the employer in this connection and hence this may not be said to be a case of retrenchment of the respondent. To this I do not find possible to agree. There is no denial that the respondent had been in continuous service for not less than one year within the meaning of Section 6N. According to Section 2(s), retrenchment covers termination by the employer of the service of a workman for any reason whatsoever. To this there are exceptions applicable where the termination is by way of punishment inflicted as a result of a disciplinary action or voluntary retirement of the workman or retirement of the workman on attaining the age of superannuation. The provision is in pari materia with section 2( oo) of the Central Act. The case does not fall within any of these exceptions. Voluntary retirement of a workman may not stand in need of acceptance by the employer; this may be hedged in with certain conditions such as those relating to certain number of years having been put in service and the like, but resignation may be tendered at any time though it requires acceptance to be effective. There is retrenchment under law where the services of a workman stand terminated for ariy reason whatsoever. This may not be a consequence directly flowing from an act of the employer. The material factor would be whether there is determination of the relationship of employer and workman between the parties. If as a consequence this relationship has ceased or has been brought to an end, there is the resultant termination of the services of the workman."

In support of this view reliance was placed on the decisions of this Court in The State Bank of India v. N. Sundara Money, [1976] 1 SCC 822; Hindustan Steel Ltd. v. The Presiding Officer, Labour Court,

Orissa & Others, [1976] 4 SCC 222, Delhi Cloth and General Mills Ltd.

v. Shambhu Nath Mukherji and Others. (1977] 4 SCC 415; Santosh

A Gupta v. State Bank of Patiala, [1980] 3 SCC 340 and L. Robert D'Souza v. Executive Engineer, Southern Railway and Another, [1982] 1 SCC 645. Reliance was aiso placed o.n the decision of the Kerala High Court in Corporation of Cochin v. Jalaji & Others, [1984) 1 LU 526.

Proceeding further the High Court concluded as under:

" ..... the present is a case where there was act of the employer also before the termination became effective. As discussed above, the resignation tendered by the respondent could not take effect without the acceptance on the part of the employer. The acceptance was accorded on November 4, 1970, expressly in writing. This clearly is an act of the employer which put a seal to the matter and brought about cessation of the relationship of the employer and the workman. Therefore, there is no escape from the conclusion that it was a case of retrenchment. It remains to be seen on relevant material whether in fact there was compliance made of the requirement of section 6N."

However, the order of reinstatement passed by the Labour Court, Kanpur was set aside and the matter was remanded to the Labour Court for a decision on the question whether there was an infraction of section 6N. The High Court, however, made it clear that "the issue of resignation shall not be open to readjudication". In other words, the only question which the Labour Court was required to consider was whether the retrenchment was in conformity with section 6N of the State Act. Feeling aggrieved by this order the appellant-company has approached this Court under Article 136 of the Constitution.

The State Act, i.e., Uttar Pradesh Industrial Disputes Act, 1947 ; c was enacted to provide powers to prevent strikes and lock-outs, to settle industrial disputes and for other incidental matters. Section 2(s) defines the term 'Retrenchment' as under:

"2{s): 'Retrenchment' means the termination by the employer of the service of a workman for any reason whatsoever, otherwise than as punishment inflicted by way of disciplinary action, but does not include-

(i) voluntary retirement of the workmen; or -

(ii) retirement of the workmen on reaching the age of A ';>- superannuation if the contract of employment between the employer and workman concerned contains a stipulation in that behalf."

This definition is in pari materia with the definition of 'retrenchment' B found in section 2(oo) of the Central Act i.e. Industrial Disputes Act, 1947 as it stood prior to its amendment by Act LIX of 1984. Section 6N r of the State Act reads as under:

"6N. Conditions precedent to retrenchment of workman. -No workman employed in any industry who has been in c continuous service for not less than one year under an employer shall be retrenched by that employer until-

(a) the workman has been given one month's notice in writing indicating the reasons for retrenchment and the D period of notice has expired, or the workman has been paid in lieu of such notice wages for the period of the notice;

Provided that no such notice shall be necessary if the l( retrenchment is under an agreement which specifies a date for the termination of service; E

(b) the workman has been paid, at the time of retrench- ..

ment, compensation which shall be equivalent to fifteen days' average pay for every completed year of service or any part thereof in excess of six months; and F ~

(c) notice in the prescribed manner is served on the State Government.''

This section substantially reproduces section 25F of the Central Act.

G lrt the Central Act the proviso came to be omitted by Act LIX of 1984 and instead clause (bb) came to be added to section 2( oo).

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The first question which we must consider_ is whether in the background of facts stated earlier it can be said that the services of the employee were terminated by way of 'retrenchment' as understood by H

A section 2(sJ and, if yes, whether the employer was required to comply with the provisions of section 6N of the State Act. It becomes clear on ":/ a plain reading of the definition of the term 'retrenchment' that it comprises of two parts; the first part is the inclusive part which defines retrenchment whereas the second part is in the nature of an exception

.B and excludes two types of cases from the scope and ambit of the said definition. Under the first part termination of an employee's service by the employer for any reason whatsoever, otherwise than by way of punishment inflicted as a disciplinary measure, amounts to retrench- -"t ment. Under the second part cases of (i) voluntary retirement & (ii) retirement on superannuation are excluded from purview of the first part of the definition. Termination of service can be brought about in c diverse ways by an employer but every termination is not retrenchment, as for example, termination of service by way of punishment for proved misconduct. The words 'for any reason whasoever' are undoubtedly words of wide import and hence termination of service by ..... the employer will attract the definition of retrenchment unless it is

D shown to be penal in nature brought about by way of disciplinary action or as falling within one of the two exclusion clauses extracted earlier. In order to counter the employee's contention that he was retrenched from service on the employer having communicated the acceptance of his resignation, the employer has placed reliance on the first clause, namely, that the workman had voluntarily retired from

E service. The letter dated !st November, 1970 written by the employee :s._ to the Manager of the appellant-company expressing his desire to resign his job shows that it was a voluntary act on the part of the employee. This was followed by another letter of 3rd November, 1970 whereby the workman requested the company to depute someone to take charge of the Bradma office so that he gets acquainted with the • F work to ensure a smooth take over. It was on this request of the employee that the appellant-company accepted his resignation by the letter of 4th November, 1970 with effect from 16th November, 1970. ..

From this correspondence it is crystal clear that the employee desired to sever his relations with the appellant-company on account of his family circumstances. But for this request made by the employee there

G was no reason for the appellant-company to terminate the contract of service on its own. Just as an employer has a right to terminate the service of an employee, an employee too has a right to put an end to the contract of employment by informing his employer of his intention to give up the job. This right is speeifically conferred by clause 21 of ~- ·. the Standing Orders certified under Section 5 of the Industrial Empfl loyment (Standing Orders) Act, 1946. This clause reads as under:

~-. "Any permanent clerk desirous of leaving the company's A ' service shall give one month's notice in writing to the Manager unless he has a specific agreement providing for a longer or shorter notice. If any permanent clerk leaves the service of the company without giving noti:e, he shall be liable to be sued for damages."

B -r

Similar clause with reduced notice period is also to be found in the certified Standing Orders for operatives. Therefore, one of tbe ways of terminating the contract of employment is resignation. If an employee makes his intention to resign his job known to the employer and the r

latter accepts the resignation, the contract of employment comes to an end and with it stands severed the employer-employee relationship. c Under the common law the resignation is not complete until it is < - accepted by the proper authority and before such acceptance an employee can change his mind and withdraw the resignation but once the resignation is accepted the contract comes to an end and tbe relationship of master and servant stands snappe.d. Merely because the emp- D loyer is expected to accept tbe employee's resignation it cannot be said that the employer has brought about an end to the contract of employment so as to bring the case within tbe first part of the definition of retrenchment. A contract of service can be determined by either party x to the contract. If it is determined at the behest of the employer it may amount to retrenchment unless it is by way of punishment for proved E misconduct. But if an employee takes the initiative and exercises his right to put an end to the contract of service and the employer merely assents to it, it cannot be said that the employer has terminated the employment. In such cases the employer is merely acceding to tbe employee's request, may be even reluctantly. Here the employee's

role is active while the employer's role is passive and formal. The F employer cannot force an unwilling employee to work for him. Under clause 21 of the certified Standing Orders all that the employee is required to do is to give the employer a notice to quit and on the expiry of the notice period his service would come to an end. A formal acceptance of the employee's desire by the employer cannot mean that it is the employer who is putting an end to the contract of employment.

G It womd be unfair to saddle the employer with the liability to pay compensation even where the service is terminated on the specific

~- request of tbe employee. Such an intention cannot be attributed to the legislature. We are, therefore, of the opinion that where a contract of service is determined on the employee exercising his right to quite, such termination cannot be said to be at the instance of the employer H

to fall within the first part of the definition of retrench."Ilent in section 2_(s) of the State Act.

The High Court has placed reliance on , four decisions 1,; f !zu • . Court to which we may now advert. In Sundara Money's case the

- einployment was for a fixed duration of 9 days, on the expiry whereof B the service was to end. This condition was imposed unilaterally. The employment was to terminate not because the employee did not desire to serve but because of the unilateral condition imposed by the employer. The initiative for the termination, therefore, came from the employer attracting the wide terminology of section 2( oo ). In Hindustan Steel Ltd. the termination of service was by efflux of time. Placing reliance on the law laid down in Sundara Money's case and the

_,. .· C proviso to section 25F(a), this Court held that the termination of service was by way of retrenchment. In the case of Delhi Cloth Mills • the employee's name was taken as automatically removed from the rolls of the company under the Standing Orders for continued absence without pjior intimation. The striking off the name was clearly an act D of the employer resulting in termination of service amounting to retrenchment. Santosh Gupta's was a case of termination of service on ·• account of her failure to pass the prescribed test. That was the reason for terminating her service. All the same it was the employer's action which resulted in the tem1ination of her service attracting section 2(00). In the case of Robert D'souza the iermination was founded on . E the ground of unauthorised absence from duty which clearly was an act of the employer. In all the above cases on which the High Court placed

reliance_~ no question of termination of serviCe on the employee voluntarily tendering his resignation arose for consideration. These cases are, therefore, not helpful since they tum on their own special facts. ' "'-- None of them deals with a case of voluntaiy resignation tendered by an p'-employee ..

""'· .

We may now examine the question from another angle, namely, whetller an employee whose resignation has been accepted by the employer falls within the first exclusion clause to the definition of the . term 'retrenchment'. There can be no d"olibt that a resignation must be G voluntarily tendered for if it is tendered on account of duress or coer-

. cion, it ceases to be a voluntary act of the employee expressing a desire ---._to quite service. In the present case the High Court has come to the conclusion that the employee had tendered his resignation voluntarily.

Does termination of service brought about by the acceptance of resignation fall with the expression 'voluntary retirement'? The meaning' t H the term 'resign' and '.retire' in different dictionaries is as under.

TABLE

I'-· ~~~~~~~~~~~~~~~~~~~~~~~~~~

Name of the Dictionary

Black's Law Dictionary (5th Edn.)

Meaning of 'Resign'

Formal renouncement or relinquishment of an office .

Meaning of' Retire'

to terminate employment or service upon reaching retirement age. . _ ..... t: Shorter Oxford To relinquish, The act ofrefiring or withdrawing to or from a place or position.

English Dictionary (Revised Edn. of 1973)

surrender, give up or hand over (so.mething); esp., an office, position, right, claim. etc.

To give up an office or position; to retire.

The Random To give up an House Dictionoffice, position ary (College etc.; to relinquish Edn.) (right, claim, )( agreement etc.)

To withdraw from office, business or active life

From the aforesaid dictionary meanings it becomes clear that when ah employee resigns his office, he formally relinquishes or withdraws from his office. It implies that he has taken a mental decision to sever his relationship with his employer and thereby put an end to the contract of service. As pointed out earlier just as an employer can terminate the services of his employee under the contract. So also an employee can inform his employer that he does not desire to serve him any more. Albeit, the employee would have to give notice of his intention to snap the existing relationship to enable tbe employer to make alternative arrangements so that his work does not suffer. The period of notice will depend on the period prescribed by the terms of employment and if no such period is prescribed, a reasonable time must be given before the relationship is determined. If an employee is not permitted by the terms of his contract to determine the relationship of master and servant, such an employment may be branded as bonded labour. That is why in Central Inland Water Transport Corporation v. Brojonath Ganguly, [1986] 3SCC 156 at page 228 this Court observed as under:

"By entering upon a contract of employment a person does not sign a bond of slavery and a permanent employee cannot be deprived of his right to resign. A resignation by an employee would, however, normally require to be accepted by the employer in order to be effective."

In the present case the employee's request contained in the letter of resignation was accepted by the employer and that brought an end to the contract of service. The meaning of term 'resign' as found in the Shorter Oxford Dictionary includes 'retirement'. Therefore, when an employee voluntarily tenders his resignation it is an act by which he voluntarily gives up his job. We are, therefore, of the opinion that such a situation would be covered by the expression 'voluntary retirement' within the meaning of cluase (i) of Section 2(s) of the State Act.

In Santosh Gupta's case Chinnappa Reddy, J. observed as under:

"Voluntary retrenchment of a workman or the retrenchment of the workman on reaching the age of superanuation can hardly be described as termination, by the employer, of the service of a workman".

(Here the word 'retrenchment' has reference to 'retirement'.)

I The above observation clearly supports the view which commends to us. We are, therefore, of the opinion that the High Court was not right in concluding that because the employer accepted the resignation offer voluntarily made by the employee, he terminated the service of the employee and such termination, therefore, fell within the expression 'retrenchment' rendering him liable to compensate the employee under section 6N. We are also of the view that this was a case of 'voluntary retirement' within the meaning of the first exception to section 2(s) and therefore the question of grant of compensation under section 6N does not arise. We, therefore, cannot allow the view of the High Court to stand.

For the above reasons we allow this appeal, set aside the orders of the Courts below and hold that the employee is not entitled to any compensation under section 6N of the State Act. The appeal is allowed accordingly. No costs throughout. ·

Y.Lal Appeal allowed.

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