Employees Can Opt Out Of Vrs Before Acceptance

An employee who chooses to accept the voluntary retirement scheme (VRS) can opt out of it before it is accepted, the Supreme Court ruled last week.

In this case, involving an employee of Project & Development India Ltd, the court asked the company to pay the full salary and allowance for the entire period when he was out of service because of the rejection of his plea to remain in the job.

The Supreme Court set aside the judgment of the Patna High Court which had held otherwise.

The employee had applied for the VRS on October 18, 1995, which was accepted by the management on July 30, 1997 with the condition that the release memo with details would follow.

On August 7, 1997, the employee sent a letter withdrawing his option from the VRS by registered post, but the company did not reply. Two reminders were sent, but the company again did not respond.

After some time, the company released him with effect from September 26, 1997. He moved the high court against the release order, which was dismissed.

Allowing his appeal, the Bench, comprising Justice S N Phukan and Justice P Venkatarama Reddi, explained that the letter of acceptance was a conditional one inasmuch as though the option for the VRS was accepted, it was stated that the release memo would be issued later.

Before he was actually released from service, he had withdrawn his option by sending two letters, but there was no response. He was paid his salary till the date of actual release on September 26.

Therefore, the legal relationship of the employee and the employer between them did not end on the date of acceptance of the voluntary retirement and the relationship continued till September 26.

Therefore, the company could not have refused to accept the resignation because it was sent before the legal relationship between them came to an end.

The judgment cited an earlier decision of the Supreme Court in the Power Finance Corporation Ltd vs Pramod Kumar case (1997), in which it was held 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 acceptance of voluntary retirement was not unconditional. Before the conditions could be complied with, the employee could withdraw from the scheme. The present judgment further emphasised that a prospective resignation could be withdrawn at any time before it became effective.