Ruling quashes resignees’ right to a pension

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In the judgment of BSES Yamuna Power Ltd v Ghanshyam Chand Sharma, the Supreme Court held that a resignation has the effect of termination, an employee who has resigned cannot claim a pension, and it entails consequences different from that of voluntary retirement.

The respondent, Sharma, was an employee of the appellant BSES and had tendered his resignation. Subsequently, Sharma was denied pension benefits by BSES, primarily on the grounds that he had forfeited his past services by resigning.

The issue came before a single judge of Delhi High Court, who directed BSES to pay pensionary benefits to Sharma on the grounds that he had completed 20 years of service and had “voluntarily retired” and not “resigned” from service. The decision was upheld by the division bench of Delhi High Court.

The question before the Supreme Court was whether by resigning Sharma forfeited his past service, and whether the resignation would amount to “voluntary retirement”.

The Supreme Court held that where an employee has resigned from service, there arises no question of whether he has in fact “voluntarily retired” or “resigned”. The decision to resign is materially distinct from a decision to seek voluntary retirement. The decision to resign results in the legal consequences that flow from a resignation under the applicable provisions. These consequences are distinct from the consequences flowing from voluntary retirement, and the two may not be substituted for each other based on the length of an employee’s tenure.

The court held that Sharma, by resigning, submitted himself to the legal consequences that flow from a resignation under the provisions applicable to his service. Rule 26 of the CCS Pension Rules, 1972, states that an employee forfeits past service upon resignation.

Irrespective of whether Sharma had completed the requisite years of service to apply for voluntary retirement, his was a decision to resign and not a decision to seek voluntary retirement. The court further held that if this court were to re-classify his resignation as a case of voluntary retirement, it would obfuscate the distinction between the concepts of resignation and voluntary retirement, and render the operation of rule 26 nugatory.

The dispute digest is compiled by Bhasin & Co, a corporate law firm based in New Delhi. The authors can be contacted at lbhasin@gmail.com. Readers should not act on the basis of this information without seeking professional legal advice.