Holding

An employee may withdraw a voluntary retirement application before the actual release date, as acceptance does not end the employer‑employee relationship until the employee is actually released.

Summary

The appellant, a draftsman trainee who rose to General Foreman, applied for voluntary retirement under a scheme effective 12-18 October 1995. The employer accepted the application on 30 July 1997, subject to a later release memo. Before the actual release date, the appellant sent two letters (7 August and 27 September 1997) withdrawing his request, but received no response. The employer issued a release memo on 25 September 1997 effective 26 September 1997, and the High Court upheld it. The Supreme Court held that acceptance of a voluntary retirement does not terminate the employer‑employee relationship until the employee is actually released, and that, in the absence of a contractual bar, the employee retains the right to withdraw the request (locus poenitentiae) before that date. Consequently, the Court set aside the release order, allowed the appeal, and ordered the appellant to be reinstated with full salary and benefits.

Issues considered

Whether an employee who has applied for voluntary retirement and whose application has been accepted by the employer may withdraw the application before the actual date of release from service.
Whether the acceptance of a voluntary retirement automatically terminates the employer‑employee relationship.

Subjects

voluntary retirement schemelocus poenitentiaewithdrawal of resignationemployer-employee relationshipservice laweffective dateacceptance of retirement

Judgment

A SHAMBHU MURARI SINHA
v. ).-

PROJECT AND DEVELOPMENT INDIA LTD. AND ANR.

MARCH 13, 2002

B [S.N. PHUKAN AND P. VENKATARAMA REDDI, JJ.]

Service Law:

Voluntary retirement scheme-Withdrawal-Permissibility of-Retirement
c application by employee-Acceptance by management with condition-
Withdrawal of option of V.R.S. before effective date which is the date ofactual
release from service-However, management issued release order-Held,
relationship ofemployer and employee continuous till the date ofactual release
ofemployee from service and not from the date ofacceptance ofthe voluntary
D retirement-Thus, since employee had locus poenitentiae to withdraw his
propcsal for voluntary retirement before relationship ofemployer and employee
comes to an end, management could not have refused to accept the withdrawal
letter of the employee. ,.L.

Appellant-employee applied for voluntary retirement under the
E Voluntary Retirement Scheme (YRS). Respondent-management accepted it
with the condition that the release memo along with details particulars will
follow. Thereafter, appellant sent two letters withdrawing his option for YRS
before he was actually released from service but there was no response from
the respondents. Later the respondents issued a inemo releasing appellant ~·
from service. Aggrieved, appellant filed petition challenginfJ, the release order.
F Both the Single Judge and Division Bench of the High Court upheld the release
order.

In appeal before this Court appellant contended that in view of Gopal
Chandra Mishra 's case*, the appellant was within his right to withdraw his
G option for voluntary retirement even after its acceptance but before the actual
date of release from the employment

Respondents contended that from the date of acceptance of the letter
of voluntary retirement by t.he respondent, the relationship of employer and
employee came to an end and, therefore, the appellant ceased to be an
H 396 ..-
S.M. SINHA v. PROJECT AND DEVELOPMENT INDIA LTD. 397
employee of the respondent from that date. A
Allowing the appea~ the Court

HELD: 1.1. There is no condition in the whole scheme that once an
option to voluntary retire is exercised by an employee and the same is accepted
by the employer, the employee is not entitled to withdraw from voluntary B
'· retirement. [399-FJ

1.2. Appellant was paid his salaries etc. till his date of actual release
and, therefore, the jural relationship of employee and employer between the
appellant and the respondents did not come to an end on the date of
acceptance of the voluntary retirement and the said relationship continued C
till the date of actual release of the employee. The appellant admittedly sent
two letters withdrawing his voluntary retirement before his actual date of
release from service. Therefore, in view of the settled position of the law and
the terms of the letter of acceptance, the appellant had locus poenitentiae to
withdraw his proposal for voluntary retirement before the relationship of
employer and employee came to an end. Therefore, the respondent could not D
have refused to accept the withdrawal letter of the appellant as it was sent
before the jural relationship of employee and employer came to an end.
[402-E-G]

*Union of India and Ors. v. Gopal Chandra Mishra and Ors., [1978] 2
sec 301, followed. E
Bairam Gupta v. Union of India and Anr., [1987] Supp. SCC 228 and JN.
Srivastava v. Union of India, (1998) 9 sec 559, relied on.

Nand Keshwar Prasad v. Indian Farmers Fertilizers Cooperative Ltd and
Ors., [1998) 5 SCC 461; Raj Kumarv. Union of India, (1968) 3 SCR 857; Power F
Finance Corporation Ltd v. Pramod Kumar Bhatia, [1997) 4 SCC 280 and
Shambhu Murari Sinha v. Project and Development India and Anr., [2000] 5 SCC
621, referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2639 of
2000. CJ
From the Judgment and Order dated 21.6.99 of the Patna High Court
in L.P.A. No. 57 of 1999 (R).

S.B. Upadhyay, Pawan Upadhyay, Sujit Kr. Singh and Santosh Mishra
for the Appellant. H
398 SUPREME COURT REPORTS [2002] 2 S.C.R.

A Deba Prasad Mukherjee and Ms. Nandini Gore for the Respondents.

The Judgment of the Court was delivered by

PHUKAN, J. In this appeal by special leave the appellant has assailed
the judgment dated 21-06-1999 passed by the Patna High Court in LPA No. . .
B 57 of 1999 (R). By the impugned judgment the Division Bench affirmed the
judgment of the learned Single Judge dated 03-02-1999 passed in CWJC No. )
2970 of 1997 (R).

The appellant joined the respondent-company as a Draftsman Trainee
in the year 1964 and was promoted to the post of General Foreman (Electrical).
C On October 12, 1995, the respondent-company issued an improved Voluntary
Retirement Scheme (for short 'VRS') giving more benefits to the employees,
which was effective from 12th October, 1995 to 18th October, 1995. The
appellant applied for voluntary retirement on 18th October, 1995 under the
scheme, which was accepted by the Management on 30th July, 1997 with the
condition that 'the release memo along with details particulars will follow'.
D On August 07, 1997, the appellant sent a letter withdrawing his option from
the VRS by registered post but no response was received by him from the
re'spondents. Again on September 27, 1997 another letter was sent by the
appellant withdrawing his option from the scheme. This letter was received
on 25th September, 1997 but there was no reply from the respondent. The
E respondent-company issued a memorandum on 25th September, 1997 releasing
the appellant from the service of the company w.e.f. 26th September, 1997
(afternoon). The appellant filed a petition under Article 226 of the Constitution
before the High Court challenging the said release order, which was dismissed
by the learned Single Judge and it was upheld by the impugned judgment.
That is how the matter is before us.
F
This appeal came up for final hearing before a Division Bench of this
Court and by order dated April 13, 2000, the appeal was allowed on the
reasoning that the appellant was not relieved from service and was allowed
to continue in service till 26-09-1997, which, for all practical purposes would
G be the "effective date" as it was on this date that he was relieved from
service. As the appellant had already withdrawn the offer from VRS on 07-
08-1997, the resignation in spite of its acceptance could be withdrawn before
the said "effective date" and, therefore, such withdrawal was valid in law
(See Shambhu Murari Sinha v. Project & Development India and Anr. [2000]
5 SCC 621. The Division Bench relied on the following decisions of this
H Court namely, Bairam Gupta v. Union of India. [1987] Supp. SCC 228, J.N.
S.M. SINHA v. PROJECT AND DEVELOPMENT INDIA LTD [PHUKAN, l.l 399

Srivastava v. Union of India, [1998] 9 sec 559 and Power Finance Corpn. A
~ ltd., v. Pramod Kumar Bhatia, [1997] 4 SCC 280.

A Review Petition was filed by the respondents which was allowed by
another Division Bench of this Court and the order is extracted below:-

"Delay condoned. B
Heard counsel for the parties.

We find that the scheme providing for voluntary retirement of
employees, prima facie, discloses that once an option to voluntary
retire is exercised by an employee and the same is accepted by the C
employer, the employee is not entitled to withdraw the voluntary
retirement. The said scheme _which has bearing on the case was not
adverted to while deciding this appeal. Further, the decision of this
Court in Bairam Gupta v. Union of India and Anr., [1987] (Supp.)
SCC 228, Raj Kumar v. Union of India, [1968] 3 SCR 857 and Union
of India v. Gopal Chandra Mishra, [197.S] 2 SCC 301 which are D
applicable to this case were not considered while deciding the appeal.
Moreover, the decision under review is likely to affect a large number
of employees. We are, therefore, of the opinion that the judgment
under review deserves to be reviewed. We, therefore, set aside the
judgment dated 13.4.2000 and restore the appeal to its original number. E
The Review Petition is thus allowed. Let this appeal be posted for
hearing.

In view of the decision on Review Petition, the Contempt Petition is
rejected."

We have perused the whole scheme and we do not find any condition F
that once an option to voluntary retire is exercised by an employee and the
same is accepted by the employer, the employee is not entitled to withdraw
from voluntary retirement. This position is accepted at the Bar. While allowing
the appeal, the Division Bench of High Court in fact considered the ratio laid
down in Bairam. Gupta's case (supra). G
The short question to be decided is what was the effective date in the
case in hand, before which the appellant could have withdrawn his offer of
the voluntary retirement under the scheme.

The only contention raised before us by the learned counsel for the H
400 SUPREME COURT REPORTS [2002] 2 S.C.R.

A appellant is that in view of the law laid down by this Court since 1978, the
appellant was within his right to withdraw his option for voluntary retirement >--
even after its acceptance but before the actual date of release from the
,;. employment. In support of this contention learned counsel has placed before
us various decisions of this Court.

B Per contra, the learned counsel for the respondent has contended that
from the date of acceptance of the letter of voluntary retirement by the
respondent, the relationship of employer and employee came to an end and,
therefore, the appellant ceased to be an employee of the respondent w.e.f.
30th July, 1997. Learned counsel also sought to raise the question of financial
C burden on the respondent-company, which we need not consider while deciding
the legal issue involved in the present appeal.

A Constitution Bench of this Cotirt in Union ofIndia and Ors. v. Gopal
Chandra Misra and Ors., [ 1978] 2 SCC 301 in paragraph 50 held that the
general principle is that in the absence of a legal, contractual or constitutional
D bar, a 'prospective' resign_ation can be withdrawn at any time before it becomes
effective, and 'it becomes effective when it operates to terminate the
employment or the _office-tenure of the resignor.' (emphasis ours) As stated
above in the present case in the VRS, there was no indication regarding ~-
effective date of voluntary resignation and there is also no condition that
once it was accepted it could not be withdrawn.
E In Bairam Gupta v. Union of India and Anr., [1987] Supp. SCC 228]
the principle laid down in Gopal Chandra Misra (supra) was summarised as
follows:-

"A complete and effective act of resigning office is one which severs
the link of the resignor with his office and terminates his tenure."
F
In Bairam Gupta's case, the appellant-employee offered to voluntary
retire from service w.e.f.31 st March, 1981 and accordingly sent a letter within
the notice period. However, he changed his mind and sent a letter on
31.01.198 l seeking to withdraw his notice of voluntary retirement but the
G request was disallowed by the concerned authority on the ground that the
withdrawal of notice could only be with the specific approval of the authority.
This Court held that the dissolution of the contract of employment would be
brought about only on the date indicated i.e. 31.03.1981 and upto that date
the appellant continued as Government employee. He is at liberty to withdraw
his notice of voluntary retirement and for this purpose, prior approval is not
H required.
S.M. :;JNHA •. PROJECT AND DEVELOPMENTINDIA LTD. [PHU KAN, J.] 40]

_, The decision in J.N. Srivastava v. Union of India, [1998] 9 SCC 559] A
_ .. is also to the same effect. This Court held as follows:

"It is now well settled that even if the voluntary retirement notice is
moved by an employee and gets accepted by the authority within the
time fixed, before the date of retirement is reached, the employee has
locus poenitentiae to withdraw the proposal for voluntary retirement. B
The said view has been taken by a Bench of this Court in the case
of Bairam Gupta versus Union of India."

In Nand Keshwar Prasad v. Indian Farmers Fertilizers Cooperative
Ltd. and Ors., [1998] 5 SCC 461, in paragraph 11, this Court reiterated that
T it is open to the employee concerned to withdraw letter of resignation before c
the date indicated in the notice of voluntary retirement. It was also observed
therein:

• " .......... .it appears to us that the law is well settled by this Court in
a number of decisions that unless controlled by condition of service
or the statutory provisions, the retirement mentioned in the letter of D
resignation must take effect from the date mentioned therein and such
date cannot be advanced by accepting the resignation from an earlier
date when the employee concerned did not intend to retire from such
earlier date."
E
In Raj Kumar v. Union of India, [1968] 3 SCR 857 the normal rule has
been stated as follows:-

"When a public servant invited by a letter of his resignation
..- determination of his employment, his service normally stands
terminated from the date on which the letter of resignation is accepted F
by the appropriate authority and in the absence of any law or rule
governing the conditions of his service to the contrary it will not be
open to the public servant to withdraw his resignation after it is
accepted by the appropriate authority in consonance with the rules
governing the acceptance, the public servant concerned has locus
poenitentiae but not thereafter." G
"-
The abo~e cases may not have direct application to the facts of the
,
present case, however, the principles laid down therein deserve notice.

In Power Finance Corporation ltd. v. Pramod Kumar Bhatia, [1997]
4 SCC 280 this Court went a step further and observed thus:- H
402 SUPREME COURT REPORTS [2002] 2 S.C.R.

A "It is now settled legal position that unless the employee is relieved
of the duty, after acceptance of the offer of voluntary retirement or
resignation, jural relationship of the employee and the employer does
not come to an end."

It was pointed out in that case that the ac<'.eptance of voluntary
B retirement was not unconditional and before the conditions could be complied
with, the employee could withdraw from the scheme. On those facts, the
above observations were made. It is not necessary to consider whether in all
cases, actual relief becomes the crucial date. However, the ratio of decision
in Bairam Gupta's case coupled with the observations of the Constitution
C Bench in Gopal Chandra Misra's case (underlined above) could usefully
applied to the present case.

Coming to the case .in hand the letter of acceptance was a conditional
one inasmuch as though option of the appellant for the voluntary retirement
under the scheme was accepted but it was stated that the 'release memo along
D with detailed particulars would follow'. Before the appellant was actually
released from the service, he withdrew his option for voluntary retirement by /
sending two letters dated August 07, J997 and September 24, 1997, but there
was no response from the respondent. By office memorandum dated 25th
September, 1997, the appellant was released from the service and that too
E from the next day. It is not disputed that the appellant was paid his salaries
etc. till his date of actual release i.e. 26 September, 1997, and, therefore, the
jural relationship of employee and employer between the appellant and the
respondents did not come to an end on the date of acceptance of the voluntary
retirement and said relationship continued till 26th of September, 1997. The
appellant admittedly sent two letters withdrawing his voluntary retirement
F before his actual date of release from service. Therefore, in view of the
settled position of the law and the terms of the letter of acceptance, the
appellant had locus poenitentiae to withdraw his proposal for voluntary
retirement before the relationship of employer and employee came to an end.

G We, therefore, hold that the respondent could not have refused to accept
the withdrawal letter of the appellant as it was sent before the jural relationship
of employee and employer came to an end. Consequently,· the impugned
judgment ~s liable to be set aside, which we hereby do. The appellant shall
be entitled to rejoin his duty and he shall be paid all his salaries and other -"
benefits during the period he was out from the service. The learned
H counsel for the respondent has stated that by this time the appellant might
S.M. SINHA v. PROJECT AND DEVELOPMENT INDIA LTD. [PHUKAN, J.] 403

have retired from service on attaining the age of superannuation, if that be A
....._ so, he shall be paid full salary and allowances for the entire period he was
out of service till the date of his retirement and thereafter, he shall be entitled
to get all retiral benefits counting the above period as if he was in service.

We, therefore, allow the appeal by setting aside the impugned judgment.
We leave the parties to bear their own cost. B
N.J. Appeal allowed.

-.

'