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PETITIONER: J.K. COTTON SPG. AND WVG MILLS CO. LTD.,KALPI ROAD, KANPUR

       Vs.

RESPONDENT: STATE OF U.P. AND ORS.

DATE OF JUDGMENT27/07/1990

BENCH: AHMADI, A.M. (J) BENCH: AHMADI, A.M. (J) RANGNATHAN, S.

CITATION:  1990 AIR 1808            1990 SCR  (3) 523  1990 SCC  (4)  27        JT 1990 (3)   300  1990 SCALE  (2)153

ACT:     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’.

HEADNOTE:     One Ram Singh was appointed by the appellant-company  on 10.3.1960.  On 1.11.1970, he addressed a letter of  resigna- tion 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 are: 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 there- after  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  Govern- ment  but later the State Government accepted his demand  on 28.11.1974  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 came  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  ’r- etrenchment’ as contained in Section 2(s) and as the  appel- lant-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

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passed by 524 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 special leave. Allowing the 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 fail within  the first part of the definition of retrenchment  in Section  2(s)  of the U.P. Industrial Disputes  Act.  [531H; 532A]     A contract of service can be 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 by  way of  punishment  for proved 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  acced- ing 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. [531E-F]     When an employee resigns his office, he formally  relin- quishes 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. [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 the contract of service. [534B]     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  did not arise. The employee is not entitled to any  compensation under section 6N of the State Act. [534F]     The State Bank of India v.N. Sundara Money, [1976] 1 SCC 822;  Hindustan 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’souza v., Executive  Engineer, Southern Railway and Anr., [1982] 1SCC 645 and 525 Corporation of Cochin v. Jalaji and Ors., [1984] 1 LLJ

JUDGMENT:     CIVIL  APPELLATE JURISDICTION: Civil Appeal No,  307  of 1987.     From  the  Judgment and Order dated  16.10.1985  of  the Allahabad High Court in C.M.W. No. 3689 of 1984. G.B. Pai, Ms. Urmila Kapoor and S. Janani for the Appellant.     Prithivi  Raj, Vishnu Mathut and Ms. S. Dikshit for  the Respondents. The Judgment of the Court was delivered by     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 with Section 6N of the  Uttar  Pradesh

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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 March, 1960 and was posted in the Bradma machine section  of the  company. His duties were to attend to the  printing  of shares,  pay sheets, 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-compa- ny in the following words: "R/Sir, I regret to bring to your kind notice that my family circum- stances do not permit me to continue my service and hence  I am compelled to sever my connections with these Mills  imme- diately. 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: 526 "R/Sir, Since  I have already tendered my resignation from my  serv- ices, 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  re- quested." 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 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  appel- lant-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.  Pursu- ant  to  the reference, the Labour Court made  an  Award  in favour  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 conclusion  that the employee had tendered  his  resignation voluntarily 527 and  without any threat or coercion. It also took  the  view that  the  claim for overtime wages  was  an  after-thought.

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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  ob- serve  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 its Judgment: 8"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 employ- er 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 discipli- nary_  action  or  voluntary retirement of  the  workman  or retirement of the workman on attaining the age of superannu- ation.  The provision is in pari materia with section  2(00) of  the  Central Act. The case does not fail 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  any  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  rela- tionship 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 Presid- ing  Officer,  Labour Court, Orissa & Others, [1976]  4  SCC 222,  Delhi  Cloth and General Mills LId.  v.  Shambhu  Nath Mukherji and Others, [1977] 4 SCC 415; Santosh 528 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 also placed on  the decision  of the Kerala High Court in Corporation of  Cochin v. Jalaji & Others, [1984] 1 LLJ 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  work- man. 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

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not  be open to read judication". 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 appel- lant-company has approached this Court under Article 136  of the Constitution.     The  State Act, i.e., Uttar Pradesh Industrial  Disputes Act,  1947 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 ’Retrench- ment’ 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  discipli- nary action, but does not include-- (i) voluntary retirement of the workmen; or 529 (ii) retirement of the workmen on reaching the age of super- annuation 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’  found  in section 2(00) of the  Central  Act i.e. Industrial Disputes Act, 1947 as it stood prior to  its amendment by Act LIX of 1984. Section 6N the State Act reads as under: "6N. Conditions precedent to retrenchment of workman.  ---No workman employed in any industry who has been in  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  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 retrenchment  is under an -agreement which specifies a  date for the termination of service; (b) the workman has been paid, at the time of  retrenchment, 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 (c)  notice in the prescribed manner is served on the  State Government." This  section  substantially reproduces section 25F  of  the Central  Act.  In  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(00).     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 530 section 2(s) 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 retrench- ment  whereas the second part is in the nature of an  excep- tion  and  excludes two types of cases from  the  scope  and ambit of the said definition. Under the first part  termina- tion 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 retrenchment. Under  the second part cases of (i) voluntary retirement & (ii) retire- ment  on  superannuation are excluded from  purview  of  the

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first part of the definition. Termination of service can  be brought  about  in  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 whatsoever’ are undoubtedly words  of wide import and hence termination of service by the employer will  attract  the definition of retrenchment unless  it  is shown  to be penal in nature brought about by way of  disci- plinary action or as falling within one of the two exclusion clauses  extracted earlier. In order to counter the  employ- ee’s  contention that he was retrenched from service on  the employer having communicated the acceptance of his  resigna- tion, the employer has placed reliance on the first  clause, namely, that the workman had voluntarily retired from  serv- ice.  The  letter dated 1st November, 1970  written  by  the employee 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 anoth- er letter of 3rd November, 1970 whereby the workman request- ed  the  company  to depute someone to take  charge  of  the Bradma  office so that he gets acquainted with the  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  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 fight to put an end to the contract of employment by inform- ing  his employer of his intention to give up the job.  This fight is specifically conferred by clause 21 of the Standing Orders  certified under Section 5 of the Industrial  Employ- ment  (Standing  Orders)  Act, 1946. This  clause  reads  as under: 531 "Any  permanent  clerk  desirous of  leaving  the  company’s 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 notice, he  shall  be liable to be sued for damages." Similar  clause  with reduced notice period is  also  to  be found  in  the  certified Standing  Orders  for  operatives. Therefore,  one of the ways of terminating the  contract  of employment  is resignation. If an employee makes his  inten- tion to resign his job known to the employer and the  latter accepts the resignation, the contract of employment comes to an  end  and with it stands  severed  the  employer-employee relationship.  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 accept- ed  the  contract comes to an end and  the  relationship  of master  and servant stands snapped. Merely because  the  em- ployer  is expected to accept the 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 the first part of the definition of retrenchment. A contract of  service  can be determined by either party to  the  con- tract. If it is determined at the behest of the employer  it may amount to retrenchment unless it is by way of punishment for proved misconduct. But if an employee takes the  initia-

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tive  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 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.  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  employ- ment.  It  would be unfair to saddle the employer  with  the liability  to  pay compensation even where  the  service  is terminated on the specific request of the 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 532 to fall within the first part of the definition of retrench- ment in section 2(s) of the State Act.     The High Court has placed reliance on ,four decisions of this  Court to which we may now advert. In  Sundara  Money’s case  the employment was for a fixed duration of 9 days,  on the  expiry whereof 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(00). 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 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  employ- ee’s name was taken as automatically removed from the  rolls of  the  company  under the Standing  Orders  for  continued absence without prior intimation. The striking off the  name was clearly an act 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  terminat- ing  her service. All the same it was the employer’s  action which resulted in the termination of her service  attracting section 2(00). In the case of Robert D’souza the termination was rounded on 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  ten- dering his resignation arose for consideration. These  cases are,  therefore,  not helpful since they turn on  their  own special  facts. None of them deals with a case of  voluntary resignation tendered by an employee.     We  may  now examine the question  from  another  angle, namely,  whether  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  doubt that a resignation  must  be  voluntarily tendered  for  if  it is tendered on account  of  duress  or coercion,  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

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had  tendered his resignation voluntarily. Does  termination of  service brought about by the acceptance  of  resignation fall with the expression ’voluntary retirement’? The meaning of the term ’resign’ and ’retire’ in different  dictionaries is as under: 533                            TABLE ------------------------------------------------------------ Name  of  the   Meaning of ’Resign’    Meaning  of  ’Retire’ Dictionary ------------------------------------------------------------ Black’s Law    Formal renouncement     to terminate employ- Dictionary     or relinquishment       ment or service upon (5th Edn.)     of an office.           reaching retirement                                        age. Shorter Ox-   To relinquish,           The act of retiring ford English  surrender, give up       or withdrawing to Dictionary    or hand over (some-      or from a place or (Revised      thing); esp., an         from a place or Edn. of 1973) office, position,        position.               right, claim, etc.               To give up an office               or position; to retire. The Random    To give up an office     To withdraw from of- House Dic-    , position etc.; to      fice business or tionary       relinquish (right,       active life               claim, agreement etc.)     From the aforesaid dictionary meanings it becomes  clear that when an employee resigns his office, he formally relin- quishes 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 the 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: 534 "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 employ- ee  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  volun- tarily  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  ex- pression ’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

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the workman on reaching the age of superannuation can hardly be described as termination, by the employer, of the service of a workman". (Here    the   word   ’retrenchment’   has   reference    to ’retirement’.)     above  observation clearly supports the view which  com- mends 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  em- ployee  under section 6N. We are also of the view that  this was a case of ’volun voluntary retirement’ within the  mean- ing of the first exception to section 2(s) and therefore the question of grant of compensation under section oN 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. Lal                                    Appeal allowed. 535