Kerala High Court Strikes Down 'Financial Emergency' Excuse: Rejecting Resignation is Bonded Labour

In a pivotal ruling for employee rights ( Greevas Job Panakkal v. TRACO Cable Company Limited , WP(C) Nos. 5132 & 33223 of 2025; the Kerala High Court has declared that no employer—public or private—can force an employee to stay on citing financial woes. Justice N. Nagaresh quashed memos rejecting the resignation of TRACO Cable Company Limited's Company Secretary and ordered his immediate relief from duties, along with payment of dues. This decision underscores that such refusals violate Article 23 of the Constitution, prohibiting bonded labour.

Salary Stagnation Sparks Resignation Saga

Greevas Job Panakkal, aged 46, joined the state-owned TRACO Cable Company Limited—a Kerala PSU struggling with ₹257 crore liabilities—as Company Secretary on May 7, 2012. His unblemished 13-year tenure hit turbulence from October 2022, when salary payments halted amid the company's financial meltdown. A revival plan involving land sales was floated, but employees bore the brunt.

Panakkal's personal crisis compounded matters: his father died in 2020, leaving his stroke-afflicted mother needing constant neuro-psychiatric care (evidenced by hospital prescriptions). With no income, he tendered resignation on March 18, 2024, seeking new opportunities. Instead, the Managing Director's note (Ext.P4) cited a board resolution rejecting it—the 322nd meeting deemed him "irreplaceable" for revival efforts, lacking a qualified substitute.

Memos followed: one threatening disciplinary action (Exts.P5, P7), another during writ proceedings alleging unauthorized laptop retention (Ext.P9). Panakkal filed two writ petitions challenging these, arguing coercion amid unpaid salaries.

Board's Stand: 'Stay and Save Us' vs. Petitioner's Freedom Call

TRACO countered that Panakkal's pivotal role as Key Managerial Personnel under the Companies Act, 2013—ensuring statutory compliance—was indispensable. No notice period violation was alleged, but the board insisted his expertise was vital for departmental queries and revival. They accused him of misconduct: emptying company laptop data and flouting duty resumption orders.

Panakkal retorted that prolonged salary defaults (over 20 months by judgment date) and family needs left no choice. Critically, his Company Secretary registration with the Registrar of Companies ties him to TRACO via Form DIR-12; without forwarding cessation forms, he couldn't join elsewhere—effectively trapping him.

Decoding the Legal Chains: Duty to Accept, Not Enslave

Justice Nagaresh dissected employment norms: employers must accept resignations absent contract breaches like notice shortfalls or "heat of the moment" impulses. Grave misconduct or losses might justify refusal, but not here. Financial distress? No ground to compel service.

The court invoked Article 23, equating refusal with bonded labour — "if the employer refuses to accept resignation of an employee, it would amount to bonded labour prohibited under Article 23." Company Secretaries' statutory tether amplifies this: delayed DIR-12 blocks mobility. Disciplinary memos post-writ filing smacked of interference, lacking specifics.

No precedents were directly cited, but the ruling aligns with principles barring forced labour, even in PSUs facing crises.

Key Observations from the Bench

"When an employee submits his resignation, the employer has a duty to accept the same and relieve the employee from his duties. This duty of the employer is subject only to any conditions that may be stipulated in the contract of employment."

"In the absence of violation of any notice conditions or conditions in the contract of employment, an employer cannot desist from accepting a resignation."

"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."

These quotes capture the judgment's essence, blending corporate governance realities with constitutional safeguards.

Relief Granted: Resignation Accepted, Dues to Follow

The writs succeeded: memos (Exts.P4, P5, P7, P9) set aside. TRACO must accept the March 2024 resignation and relieve Panakkal within two months, forwarding DIR-12. Arrears, leave surrender, and terminal benefits follow "as expeditiously as possible subject to the financial position of the Company."

This precedent empowers employees everywhere: financial hardship doesn't license retention. For PSUs and firms in distress, it mandates succession planning over coercion—potentially reshaping resignation disputes amid India's economic churn.