Forcing Company Secretary To Continue In Service After Resignation Is 'Bonded Labour': Kerala High Court

The Kerala High Court has recently observed that financial issues or financial emergency cannot be a reason to force a Company Secretary to work for an incorporated Company against his will and without his consent.

The court further observed that if the employer refuses to accept resignation of an employee, it would amount to bonded labour prohibited under Article 23 of the Constitution of India.

Justice N Nagaresh allowed writ petitions filed by Greevas Job Panakkal, Company Secretary of Traco Cable Company Limited, a State Public Sector Undertaking.

The court observed that resignation can be refused only in limited circumstances, such as where contractual conditions are violated or where disciplinary proceedings are contemplated against the employee for grave misconduct or for causing monetary loss to the establishment. It then held:

“In any other event, if the employer refuses to accept resignation of an employee, it would amount to bonded labour prohibited under Article 23 of the Constitution of India.”

The Court directed both the company, Traco Cable Company Limited, and its managing director to accept his resignation and relieve him from service within a period of two months. It further directed that he be paid arrears of salary, leave surrender benefits and terminal benefits to which he is legally entitled. The payment was made subject to the financial position of the Company.

Greevas had joined the Company as Company Secretary on May 7, 2012. From October 2022 onwards there was default in his salary. He submitted his resignation on March 18, 2024. He also requested to be relieved from service.

The Board of Directors rejected the resignation. It stated that the Company was in a critical financial position. The Board further stated that the petitioner's role as a key advisor to the Managing Director was unavoidable. It was contended that no other qualified Company Secretary personnel was available. According to the respondents, his presence was essential to address queries and concerns within the Department.

While the petitioner's first writ petition challenging the rejection of his resignation and the memos directing him to resume duty was pending, the Company issued a show cause notice. The notice alleged that he had unauthorisedly retained the Company-issued laptop. It was further alleged that he had emptied the data in it, rendering its contents inaccessible.

The company contended that in view of its financial crisis and the employee's alleged misconduct, the resignation could not be accepted.

After examining the relevant law, the court observed,

“When an employee submits his resignation, the employer has a duty to accept the same and relieve the employee from his duties.”

The Court clarified that this duty is subject only to conditions stipulated in the contract of employment, including any stipulation regarding notice period. It further observed:

“A resignation can be rejected if resignation does not follow procedure if any, outlined in the employment contract. In case of 'Heat of the moment' resignations, the employer may be justified in delaying its acceptance, giving the employee a chance to rescind it.”

The court also stated:

“Another instance where the employer can refuse to accept resignation, is when disciplinary proceedings are contemplated against the employee for grave misconduct or for causing monetary loss to the establishment.”

In any other event, the Court observed that if the employer refuses to accept resignation of an employee, it would amount to bonded labour prohibited under Article 23 of the Constitution of India.

The court noted that Company Secretaryship is a statutory position under the Companies Act. It observed that as a Key Managerial Personnel, the engagement has to be registered with the Registrar of Companies.

Unless the employer sends statutory request and forwards the necessary Form DIR-12 to the Registrar of Companies, the name of the Company Secretary will remain linked to the employer-Company. This may cause difficulty in seeking appointments elsewhere as Company Secretary.

Rejecting the respondents' reliance on the Company's financial crisis, the Court held:

“Financial issues or financial emergency cannot be a reason to force a Company Secretary to work for an incorporated Company against his will and without his consent.”

The Court found that the disciplinary proceedings contemplated against the petitioner in the circumstances can only be seen as an attempt by the respondents to violate the right of the petitioner to resign from service.

Accordingly, the court set aside the Board note rejecting his resignation, the disciplinary memo dated April 25, 2024, and the memo dated October 4, 2024 directing him to report for duty, as well as the show cause notice dated March 17, 2025 alleging unauthorised retention of the Company-issued laptop.

It directed the company to accept the resignation and relieve the petitioner from service within two months. It also directed payment of arrears of salary, leave surrender benefits, and terminal benefits, subject to the financial position of the company.

For Petitioner: Advocates D Sreekanth, Aswin Kumar MJ, Albin George, Jeevadas H and James Jose

For Respondents: Advocates Abel Tom Benny, D Prem Komath, Tom Thomas (Kakkuzhiyil), Aaron Zacharias Benny, Alan J Yogyaveedu, Client Jude Lewis, Mathew Angelo Davis, Jyothika Krishna and Princy Xavier