Resignation Accepted, Offer Revoked: Delhi High Court's Ruling—Worry Not

The Delhi High Court has recently ruled that if an employee has already been relieved by their previous employer, a new employer cannot deny their appointment, as long as the employee has successfully passed the selection process. 

The ruling delivered by a single-judge bench of Justice Jyoti Singh could make the entire process of resigning and transferring to a new organisation smoother, per the experts.

This ruling makes it clear that once an employee’s previous employer has officially accepted their resignation, the onus should not fall on the employee when joining a new company, as per PV Ramana Murthy, partner at Economic Laws Practice. 

For employers, it highlights the need to clearly manage exit procedures to prevent legal issues and ensure smoother transitions for employees, he said.

The case pertains to a finance professional who was offered the position of general manager (finance) at Brahmaputra Valley Fertilizer Corp. (BVFCL). He had joined the company on April 28, 2023. Thereafter, in January 2024, he applied for and was selected for a new role as Vice President (Finance) with another company.

He received an offer for the position and was asked to report to duty by July 5, 2024.

Upon receiving the offer on June 7, 2024, he submitted his resignation to BVFCL, requesting to be relieved within 15 days, as he was still on probation and not required to serve any notice. 

However, instead of accepting the resignation, BVFCL issued a memorandum on June 15, 2024, confirming the petitioner's service retroactively from April 28, 2024. This action led to a series of communications back and forth, with the employee seeking to resolve the issue by offering to serve a one-month notice period or adjust the balance against leave entitlements.

In the meantime, he joined the new company on July 8, 2024, with the understanding that he would submit his relieving letter from BVFCL within 30 days. However, the new company issued a show-cause notice on July 12, 2024, accusing him of joining without proper clearance from his previous employer. 

This led him to approach the Gauhati High Court, which issued a temporary order on July 18, 2024, staying any further action against him.

The case took a turn when BVFCL finally accepted his resignation on Oct. 3, 2024, after he had filed a writ petition before the Delhi High Court. The primary issue was whether the failure to provide the relieving letter from BVFCL justified his revocation from joining the new company.

Justice Jyoti Singh noted that the only reason the new company had for revoking the appointment was the failure to submit the relieving letter from BVFCL. However, since BVFCL had now formally relieved the employee, the reason for revoking the appointment no longer applied.

The judge ruled that there was no legal restriction to the petitioner from joining his new employer, especially since he had successfully passed the selection process.

Paperwork delays shouldn’t hold up an employee’s career if they’ve completed their notice period and handover, highlighted Sanket Jain, partner at Pioneer Legal. 

The Delhi High Court quashed the new company's order of Aug. 19, 2024, which had revoked the joining. The court directed that the petitioner be allowed to resume his role as Vice President (Finance) within a week, with all consequential benefits.

This decision encourages employers to establish and follow consistent, unambiguous protocols around notice periods, resignations, and the issuance of relieving letters, as per Ketan Mukhija, partner at Burgeon Law.

While there is a blend of flexibility and rigidity, the process of changing jobs often involves some degree of ambiguity, as per Preetha S., partner at JSA Advocates & Solicitors. However, she mentioned that, for commercial establishments, the state-specific shop and establishment acts typically specify a notice period.

Under the Punjab Shops and Commercial Establishments Act, 1958 (which applies in both Punjab and Haryana), an employee who has worked for at least three months cannot leave their job without giving the employer a seven-day notice or paying the employer an amount equal to seven days’ salary instead of the notice. 

Similarly, under the Delhi Shops and Establishments Act, 1954 (which applies in Delhi), if an employee has worked for three continuous months, they must give their employer at least one month's written notice before quitting. If the employee fails to provide the full notice, they must pay the employer an amount equal to one month's salary in lieu of the notice.

Additionally, as per Vinay Joy, partner at Khaitan & Co., integrating contractual clauses that allow flexibility—such as buyouts of the notice period or adjustments against leave balances—can help prevent stalemates and expedite the process.

The growing trend of job-hopping among employees has also led employers to implement policies that safeguard rapid turnover, as per Preetha.