After going through the entire thread, I have understood that, whatever XXX could have done on fair basis, they have infact done already. There were few short-comings from your side. I still am wondering to find the reason why you haven't resigned the moment you got an admission in xIM and atleast when u got admitted to IIMx. Both are prestigious and you could easily get into top Organization directly from these institutes; however you have chosen to continue your employment with XXX (they would have happily accepted you if you wanted to join them again post completion of ur PGDM). Secondly, you could have informed your prospective employer about whatever happened before their offer; or even you could have simply negated your previous employment details. (being too honest sometimes lands you in trouble - professionally & personally too).
Anyway, this was all past and can't be rewritten. So, bother not and persuade the new employer to buy your concern (coz, be it a termination or dismissal or even a proper resignation, the new employer needn't to worry anything as long as your employment file with XXX is closed). The only reason for companies to put such policies is, it is utmost illegal/unethical/noncompliance to work parallely with 2 different registered Companies and it may lead to many legal issues to both Companies.
The new tag for your employment with XXX, "Stopped Attending Services" is going to be worrisome for you more now as it clearly means, you still are employed with XXX (your employment agreement still hold good); however, you have abandoned them. Which means your employment file is still open. The previous tag of 'Dismissal' was much helpful in this regard. Plz talk to XXX people directly (a face-face discussion is very much helpful) and may be you can take the help of your Manager who approved your Long-Leave (boss who Managed you directly during your stint with XXX).
All the very best and hope all your probs get sorted out.
Regards,
Kishore Mavuri