India – Withdrawal Of Resignation Valid, Until Effected – Delhi High Court Rules.

The High Court of Delhi (“Delhi HC”) in its recent judgment in the case of Arjun Ahluwalia and Ors v Air India Limited[1] (“Arjun v Air India”) gave a ruling in favour of Air India’s pilots, who were seeking withdrawal of resignations and reinstatement of terminated employees. The Delhi HC passed a common judgment (“Judgment”) in the distinct writ petitions filed by pilots who are permanent employees (“PE”) and pilots working as full-time equivalent (“FTEs”)  under fixed term contracts  (collectively, “Employees” or “Petitioners”) as their petitions dealt with several common issues. The Judgment distils the principles applicable to resignations under service law and opines on the validity of financial constraint as a ground for termination of employees in State operated companies.
 

Facts of the case
 

All employees of Air India are governed by the Air India Employees’ Service Regulations (“AIESR”); additionally, employment of pilots is subject to the Civil Aviation Requirement (“CAR”) issued by the Directorate General of Civil Aviation. The Employees tendered their resignations but withdrew it before the expiry of the stipulated notice period of six months (in accordance with clauses 3.3 and 3.4 of the CAR), and prior to the acceptance of the resignation by Air India (“Air India” or “Respondent”). Air India responded to these applications for withdrawal of resignation in the following manner:
 

1. For certain employees (not parties to the case), Air India issued communications accepting their applications for withdrawal of resignation, and reinstating them.

2. For other employees (Petitioners in the case), while Air India issued communications accepting their applications for withdrawal of resignation, it later issued an acceptance of the resignations.

3. For applications of the rest of the employees (Petitioners), Air India just did not respond.
    

During the notice period, including after the withdrawal of resignations, Employees continued to fly in accordance with the roster allotted to them and operated flights in the Vande Bharat Mission of Air India for evacuation/repatriation flights amidst Covid – 19.
 

The dispute in Arjun v Air India arose when Air India accepted the withdrawn resignations of the Employees and terminated their employment/contracts. Additionally, Air India encashed the bank guarantees (“BGs”) contractually agreed to by FTEs in order to recover the amounts spent towards the training costs of FTEs. The Employees approached the Delhi HC under Article 226 of the Constitution of India (“Constitution”) with prayers for reinstatement, wage arrears, and recovery of excess BGs encashed by Air India.
 

Principal arguments
 

The Employees argued that their resignations were withdrawn during the notice period and prior to their acceptance by Air India, thus, the resignation applications were non est and the employees were entitled to continue in their services. They argued that the right to continue their employment was a fundamental right under Article 21 of the Constitution and could not be taken away except in accordance with law.[2]
 

Air India, on the other hand, stated that they were forced to terminate the Employees due to financial distress caused by the decline of the aviation markets on account of Covid-19. Air India primarily relied on the case of Air India Express Limited & Ors. v Capt. Gurdarshan Kaur Sandu[3] (“Gurdarshan Kaur Case”), in which the Supreme Court of India (“SC”) rejected an ex-employee’s prayer for reinstatement stating that the notice period for pilots may be curtailed by issuance of a no-objection certificate (“NOC”) by the employer prior to the expiry of the notice period in accordance with the CAR. Additionally, the SC had observed that the six-month notice period for pilots was in public interest to prevent cancellation of flights and allow time for training replacements and not per se for the benefit of pilots. Air India also argued that the termination of employees is a purely commercial decision and the courts cannot interfere except on the ground of malafides, unreasonableness, and arbitrariness.
 

Analysis by the Delhi HC
 

The Hon’ble Court delved into the jurisprudence around resignations and notice periods under service law and opined that there are two kinds of resignations based on the nature of the office and the conditions governing it – unilateral resignations and bilateral resignations. Unilateral resignations come into effect once the intention to relinquish employment has been indicated by the employee (such as in the case of Judges of the High Court as there is no action required to be taken for their resignations to become effective). However, bilateral resignations require some action done pursuant to the tendering of resignation for the same to become effective.
 

Interpretation of the CAR
 

As per the CAR, pilots are required to: (i) give a notice period of at least six months (unless a reduced period is approved by the employer); and (ii) the employer must mandatorily issue an NOC to the pilot on the expiry of the notice period, failing which the employer shall be liable to penal action. Thus, the Delhi HC has viewed the issue of NOC as an integral part of effective resignation of the employee.
 

With regard to the issue of whether the Employees could withdraw their resignations during the notice period, the Delhi HC cited several judgments[4], which established that resignations can be withdrawn at any time during the notice period prior to the acceptance by the employer. The main principles culled out from these cases were:
 

1. Resignations submitted by employees are offers that, depending on the rules/schemes governing them, can be accepted or rejected by the employers. Therefore, unless otherwise specified, the resignations do not become effective immediately.[5]

2. In absence of a legal, contractual or constitutional bar, a resignation for a future date (usually after completion of notice period) can in actuality be withdrawn at any point of time before it becomes operative or effective.[6]

3. In case of government servants, if they cannot resign unilaterally, the resignation becomes effective or the office/tenure is terminated only when the resignation is accepted by the competent authority.[7]
    

Importantly, the Judgment notes that the CAR does not prohibit the withdrawal of resignation. As the resignation submitted by the Employees was prospective in nature (i.e. after completion of the 6-month notice period), it was not resignation in presenti and would become effective only after completion of the said notice period. Therefore, relying on the aforementioned principles, the Delhi HC observed that till the resignation is accepted, the Employees have locus poenitentiae to withdraw the resignation.[8]
 

The Gurdarshan Kaur Case was distinguished on the fact that the ex-employee had applied for reinstatement and withdrawal of resignation post the notice period and after the employer had issued the NOC and hired a replacement for the post. On the other hand, in the present case  withdrawal of resignation was made during the notice period and the Employees were still working as pilots for Air India at the time of the initial writ petitions and no replacement has been hired or trained for their posts till date.
 

As the actions of the Employees were in accordance with the CAR, their resignation was valid. The moment the resignations were withdrawn validly, the resignation became non est and non-existent in the eyes of the law. As a corollary, the acceptance of the resignation by Air India, post its withdrawal was incorrect.
 

Termination citing financial distress
 

Air India also argued that clause 3.3 of the CAR speaks of the legislative intent, wherein the law surrounding resignations by pilots dealt with public interest (which includes Air India’s financial distress) and not the interest of the Employees. The Delhi HC categorically observed that there was nothing to indicate that ‘public interest’ as used in the Gurdarshan Kaur Case and under CAR includes financial distress. Accordingly, this parameter could not be added in the CAR by the Delhi HC in the case at hand as the courts cannot rewrite rules and policies framed by the Government. Additionally, the Delhi HC observed that the State has a fiduciary duty to perform to secure the livelihood of citizens under Article 19(1)(g) and Article 21 of the Constitution. Therefore, as Air India is an instrument of the State, the Respondent could not terminate the Employees’ employment on account of losses due to Covid-19.
 

FTE Contracts
 

With regard to the issue of whether FTEs can enforce their employment contracts or seek an extension/renewal under Article 226 of the Constitution, the Delhi HC opined that it is settled law that if the State or an instrument of the State is a party to a contact, then it has an obligation in law to act “fairly, justly and reasonably” as required under Article 14 of the Constitution.[9] Furthermore, the Delhi HC observed that while public authorities have the discretion to make commercial and policy decisions, it could not be unfettered discretion and decisions must not be unreasonable or arbitrary.
 

As Air India allowed several employees to withdraw their resignation and only accepted the resignation of the Petitioners, the Delhi HC held such decision as arbitrary and directed that the Employees be reinstated. The Court further held that the FTEs must be allowed to complete their remaining service period and be considered for renewal based on their performance. Additionally, the Court held that the excess BGs encashed be returned to the FTEs, and also granted back wages to the Employees. Air India was further directed to pay the arrears in salary and other emoluments.
 

Conclusion
 

The Judgment in Arjun v Air India provides a welcome respite to government employees as it practically secures their employment amid claims of economic hardship faced by employers due to Covid-19.
 

Further, under paragraph 30 of the Judgment, the Delhi HC, following a plethora of precedents, has observed that as there are no provisions governing the acceptance of resignation or barring withdrawal of resignation under the AIESR[10] or CAR, the resignations were prospective in nature and employees can withdraw the resignation at any point during the notice period unilaterally, prior to the acceptance of the resignation by Air India. Such a regime certainly leads to a situation where government bodies are obligated to reinstate employees who have submitted their resignations. This goes against the commercial and administrative setup of the organisations where they arrange prospective hires to be inducted at the end of the notice period or make fiscal decisions taking into account that a certain number of employees will have left the organisation at the end of their notice period.
 

In light of the Delhi HC decision and position of law, it would be prudent that employers, especially state agencies, send acknowledgements accepting or rejecting resignations at the earliest in order to bind the severance of the employer – employee jural relationship and prevent any abrupt or unwanted withdrawals.
 

 

For further information, please contact:

 

Radhika Dubey, Partner, Cyril Amarchand Mangaldas

radhika.dubey@cyrilshroff.com
 

 

[1] W.P.(C) 4203/2020 along with connected petitions before the Hon’ble High Court of Delhi

[2] Bank of India v O.P. Swarnakar, (2003) 2 SCC 721.

[3] (2019) 17 SCC 129.

[4] The Delhi HC dealt with identical facts in the case of Prem Prakash v Air India Corporation, 1996 SCC OnLine Del 529 in which Delhi HC held that acceptance of a validly withdrawn resignation was violative of the Regulation 49 of the earlier AIESR.

[5] Bank of India v O.P. Swarnakar (2003) 2 SCC 721, paragraph 61.

[6] P. Chattopadhyay v The Institute of Cost and Works Accountants of India & Ors, MANU/WB/0230/1986, paragraph 51.

[7] Union of India & Ors. v Gopal Chandra Misra & Ors, (1978) 2 SCC 301, paragraph 50.

[8] Reliance was placed on Raj Kumar v Union of India AIR 1969 SC 180.

[9] (2011) 2 SCC 439.

[10] Chapter IV titled ‘Retirement, Resignation and Termination of Service’ under the AIESR, Regulation 18 governs the process of resignation.