Job Offer Revoked After Resignation: Can I Seek Compensation or Legal Action?

Hello ALL, I accepted an offer with an MNC (acknowledged my acceptance through email, signed, scanned, mentioned my joining date, and sent the offer letter back to them) and resigned from my existing company. After 3 weeks, the HR calls me to apologize, saying the position has been frozen, and I take back my resignation from my current company. I clearly refused to do so because my resignation had been accepted in my current company, and I didn't want to go back on it. I requested a meeting with the concerned authorities (the interviewer who would have been my reporting boss and the HR head) but didn't hear from her for a week. After 2 weeks, the HR head calls me to apologize once again and says they can do nothing about it, and that the HR personnel from their company who was coordinating with me has been sacked for the goof-up. I fail to understand what kind of goof-up this would be after taking approvals from the US. However, he said they are trying to compensate me by giving a 2-month salary. After two weeks, when I again followed up with the HR head, I got the same reply that they are working on a way to compensate me.

My Question Is on Two Counts

1) Can I ask for compensation/salary until I find another job?

2) Is there any other legal recourse?

Thank you

Regards, RV

From what you have mentioned, it is a clear breach of contract.

Civil remedies exist for such breaches.

As pointed out by Mr. Nathrao, civil remedies exist for such breaches. I have already given the following view in one of the earlier threads. The new company, having offered you the job, and after you have communicated acceptance thereof to the employer, cannot revoke that offer under Section 5 of the Contract Act. You can seek damages in civil court against the company for revoking the contract.

Since it is settled that general principles of contract are applicable to master and servant relations (vide Shriram Piston and Rings vs. TS Mogha case) decided by Delhi HC in 2012, extracted below, the breach of contract committed by the employer by not allowing the prospective employee to join renders him liable for damages under Sections 73 and 74 of the Contract Act.

Delhi High Court

Shriram Pistons & Rings Ltd. & Anr. vs. Shri T.S. Mokha on 25 January 2012

21. ...observation made by Justice Bhagwati (as his Lordship then was) in the concurring judgment in Executive Committee of Vaish Degree College, Shamli Vs. Lakshmi Narain (Supra) in para 31, which is extracted below:

"31. ............... The law in such a case, therefore, adopts a more realistic posture and holds that the repudiation effectively terminates the contract and the employee can only claim damages for wrongful breach of the contract."

If the agreement was for a specific period, one can recover damages of salary for that period (SS Shetty case decided by the Apex court) or it depends upon relevant statutory enactment e.g., Industrial Disputes Act or Shops and Establishment Act of a specific State and terms and conditions of appointment.

Extracts of Relevant Judgments

In SS Shetty’s case, the Supreme Court held that if the contract of employment was for a specific term, the servant would in that event be entitled to damages, the amount of which would be measured prima facie and subject to the rule of mitigation in the salary of which the master had deprived him, and that servant would then be entitled to the whole of the salary benefits, etc., which he would have earned had he continued in the employment of the master for the full term of the contract, subject of course to mitigation of damages by way of seeking alternative employment. It was held that the position as it obtained in the ordinary law of master and servant was quite clear and that the master, who wrongfully dismissed his servant, was bound to pay him such damages as would compensate him for the wrong that he had sustained.

a) Delhi High Court

S.M. Murray vs. Fenner (India) Ltd. on 27 February 1986: AIR 1986 Delhi 427

"(21) In S.S. Shetty v. Bharat Nidhi Ltd., the Supreme Court held that if the contract of employment was for a specific term, the servant would in that event be entitled to damages, the amount of which would be measured prima facie and subject to the rule of mitigation in the salary of which the master had deprived him, and that servant would then be entitled to the whole of the salary benefits, etc., which he would have earned had he continued in the employment of the master for the full term of the contract, subject of course to mitigation of damages by way of seeking alternative employment. It was held that the position as it obtained in the ordinary law of master and servant was quite clear and that the master, who wrongfully dismissed his servant, was bound to pay him such damages as would compensate him for the wrong that he had sustained. The Supreme Court referred, with approval, to Chitty on Contracts, 21st Edition, Vol. (2), p. 559, para 1040, and to Collier v. Sunday Referee Publishing Co. Ltd., (1940-4 All. E.R. 234 at p. 237(A))."

(28) In the present case before me, the term of the service agreement was to expire on 16-2-1986. The plaintiff stated that he did not take up any alternative employment though he had been making attempts and no suitable employment was being offered to him. In these circumstances, I am of the view that the plaintiff is entitled to damages calculated in terms of his salary and other perquisites for the whole of the period of his employment from the date of wrongful termination of the service agreement, i.e., 21-4-1984, till it was to expire in its normal course, i.e., 16-2-1986. This comes to Rs. 2,56,776.64."

In public employment, the appellant was paid a lump sum amount of Rs. 2 lac by the respondent-ISM towards the cost of litigation as well as to secure the ends of justice as admittedly the appellant was wrongly denied appointment as Registrar, ISM:

b) Delhi High Court

Dr. Samarendra Mohan Mukherjee vs. Indian School Of Mines on 20 December 2007

15. In view of the above, we feel that the appellant should be paid a lump sum amount of Rs. 2 lac by the respondent-ISM towards the cost of litigation as well as to secure the ends of justice as admittedly the appellant was wrongly denied appointment as Registrar, ISM. This will be also in accord with the Order dated 17th April 1995 passed by the learned Single Judge that in the interest of justice the appellant would be compensated and granted necessary relief in case he was to succeed in the writ petition. Restricting relief to the difference in pay scales for a period of one year would be unfair and unjust to the appellant. Even if it is presumed that the appellant would have been on probation for a period of two years, it does not necessarily follow that he would not have been confirmed and appointed regularly after the expiry of the probation period. The impugned order passed by the learned Single Judge is accordingly modified and respondent-ISM is directed to pay compensation of Rs. 2 lacs to the appellant. The aforesaid amount will be paid to the appellant within a period of 2 months, failing which the respondent shall be liable to interest @ 10% per annum from the date of this order.

c) The Right Under Section 5 of the Contract Act

Section 5 in The Indian Contract Act, 1872

5. Revocation of Proposals and acceptance. — A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards. — A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards." An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards..."

According to the apex court, the statutory right under Section 5 of the Contract Act is conferred. Section 5 says a proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer.

d) Supreme Court of India

State Of Haryana & Ors vs. M/S Malik Traders on 17 August 2011

10... It is true that as per Section 5 of the Indian Contract Act, 1872 (hereinafter referred to as "the Act"), a proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer. It is also true that before receipt of the letter of acceptance dated 26.11.2008, the respondent had sent a letter dated 15.11.2008 withdrawing its offer. However, admittedly, in paragraph 8 of the written offer/bid, the respondent had agreed to keep the bid open for acceptance up to 90 days after the last date of receipt of bid. The respondent had also agreed that it shall be bound by the communication of acceptance of the bid dispatched within the aforesaid period of 90 days. Hence, the respondent could not have withdrawn the bid before the expiry of the period of 90 days. It is not disputed that the acceptance of the respondent's bid was communicated to the respondent within the said period of 90 days. Therefore, the respondent was bound by the said acceptance of the bid, despite its withdrawal by the respondent in the meanwhile...

Under the cover of the provisions contained in Section 5 of the Act, the respondent cannot escape from the obligations and liabilities under the agreements contained in its offer/bid. The right to withdraw an offer before its acceptance cannot nullify the agreement to suffer any penalty for the withdrawal of the offer against the terms of the agreement. A person may have a right to withdraw his offer, but if he has made his offer on a condition that the Bid Security amount can be forfeited in case he withdraws the offer during the period of bid validity, he has no right to claim that the Bid Security should not be forfeited and it should be returned to him. Forfeiture of such Bid Security amount does not, in any way, affect any statutory right under Section 5 of the Act. The Bid Security was given by the respondent and taken by the appellants to ensure that the offer is not withdrawn during the bid validity period of 90 days and a contract comes into existence. Such conditions are included to ensure that only genuine parties make the bids. In the absence of such conditions, persons who do not have the capacity or have no intention of entering into the contract will make bids. The very purpose of such a condition in the offer/bid will be defeated if forfeiture is not permitted when the offer is withdrawn in violation of the agreement.

e) Supreme Court of India

The Union Of India vs. Kishorilal Gupta And Bros on 21 May 1959: 1959 AIR 1362

"...though such repudiation ends the liability of the parties to perform the contract, it does not put an end to their liability to pay damages for any breach of the contract. The contract is still in existence for certain purposes."

As far as query (1), it may be argued on the basis of the following Apex Court decision that salary for three years on account of damages may be paid by the company. Rest the decision of the court depends upon various other factors:

Supreme Court of India

Kayastha Pathshala, Allahabad ... vs. Rajendra Prasad And Anr on 8 December 1989

Equivalent citations: 1990 AIR 415, 1989 SCR Supl. (2) 450

"In the light of all these facts and circumstances and the authorities to which we have called attention, it seems to us that it would be sufficient if the respondent is given salary for three years on account of damages."

Thanks

Sushil

Understanding Civil Remedies in Employment Contracts

Civil remedies do exist depending on how your employment contract was worded. However, the fact is that the company does not have a suitable position for you. Taking up a new job is the start of a relationship: you get a salary and learning from it, and the company gets its work done through you. If one party is not ready for the relationship, you know it is fairly pointless to press on.

Also, the company is being reasonable—they have apologized, fired the concerned HR, and are giving you two months' salary. I'd suggest you take it and then dust this incident off like a bad memory. Bad things happen. The best thing is not to lose your head and definitely not to miss the bigger picture.

"Civil remedies do exist depending on how your employment contract was worded."

Here it is a case of an offer being made for a job by an MNC and being accepted by the offeree. The whole concept of offer and acceptance is complete, and any breach can lead to civil litigation. If the MNC was not ready for a relationship, then why start the quest, and that too with such disastrous results - where the other party leaves their existing job and becomes the loser of both jobs? No MNC will offer any position without much care and cross-checks. There has been an element of negligence, and offering just two months' pay is an attempt to escape liability at the least cost, relying on the fact that 99% of us would not go to court knowing how tortuous the whole process is. I would still agree with your suggestion to take the compensation and move on by looking for another job.

Regards

MNC's Responsibility in Employment Commitments

An MNC cannot decline the joining of an employee so lightly by merely offering one or two months' salary as compensation. Consider the perspective of the employee who might have had the right to remain in their previous job until retirement, which they left based on the false promise of the new company. I would argue that this amounts to mischief by causing wrongful loss to the employee.

Section 425 in The Indian Penal Code

425. Mischief.—Whoever, with intent to cause, or knowing that they are likely to cause, wrongful loss or damage to the public or to any person, causes the destruction of any property, or any such change in any property or in the situation thereof as destroys or diminishes its value or utility, or affects it injuriously, commits “mischief.”

Explanation 1.—It is not essential to the offense of mischief that the offender should intend to cause loss or damage to the owner of the property injured or destroyed. It is sufficient if they intend to cause, or know that they are likely to cause, wrongful loss or damage to any person by injuring any property, whether it belongs to that person or not.

Explanation 2.—Mischief may be committed by an act affecting property belonging to the person who commits the act, or to that person and others jointly.

Illustrations

- (a) A voluntarily burns a valuable security belonging to Z, intending to cause wrongful loss to Z. A has committed mischief.
- (b) A introduces water into an ice-house belonging to Z and thus causes the ice to melt, intending wrongful loss to Z. A has committed mischief.
- (c) A voluntarily throws into a river a ring belonging to Z, with the intention of thereby causing wrongful loss to Z. A has committed mischief.
- (d) A, knowing that his effects are about to be taken in execution in order to satisfy a debt due from him to Z, destroys those effects, with the intention of thereby preventing Z from obtaining satisfaction of the debt, and thus causing damage to Z. A has committed mischief.
- (e) A, having insured a ship, voluntarily causes the same to be cast away, with the intention of causing damage to the underwriters. A has committed mischief.
- (f) A causes a ship to be cast away, intending thereby to cause damage to Z, who has lent money on bottomry on the ship. A has committed mischief.
- (g) A, having joint property with Z in a horse, shoots the horse, intending thereby to cause wrongful loss to Z. A has committed mischief.
- (h) A causes cattle to enter upon a field belonging to Z, intending to cause and knowing that he is likely to cause damage to Z’s crop. A has committed mischief.

MNCs have numerous openings for positions where they could have adjusted the person they had selected and, in due course, transferred them to the desired post. However, individuals are not receiving multiple offers, not even a single one.

You must have read the recent threads where individuals were terminated illegally, putting their families in difficult situations. It is not just one person but the whole family that suffers, apart from the incalculable mental torture they undergo.

Thanks

Sushil

For example, if the agreement says that the company has the right to withdraw the offer, then no legal remedy would stand.

No doubt the impact is huge, but the question is what is the best way to move ahead.

Sec 425 sounds thrilling, but perhaps not that practical; I'd be amazed if someone is able to file a Sec 425 FIR against the company in such a case.

The Act of MNC and Its Consequences

The act of the MNC is akin to mischief under Section 425 of the IPC. The person has lost a job, which can be a major calamity for many people.

Practical Steps Forward

The best way to move ahead in practical terms is to accept compensation, negotiate it upward, and move on. However, this compromise is a practical one because our legal system is slow, and an effective remedy may take time and money, both of which the person may not have.

Company's Responsibility and HR's Role

So the company gets away with mischief and the firing of some HR person. The HR person may be only an instrument of the company, and the person who originated the requisition for the unnecessary vacancy may well get away.

Anyway, the person needs to decide for himself—the pros and cons have been indicated.

My Bodhisutra,

"If the agreement says that the company has the right to withdraw the offer, then no legal remedy would stand."

But an offer cannot be withdrawn after it has been accepted. From whatever has been written by the original poster, the MNC is caught on the wrong footing. Adequate remedy has to come from their side.

"The company has the right to withdraw the offer without assigning any reasons anytime until the candidate joins."

Point being, we cannot claim a breach of contract until we know the exact terms of the contract. Most employment contracts typically include a notice period of 1 or 2 months, which implies that the company can terminate someone's employment while providing a salary for the notice period.

Obviously, we all have our own perspectives, and it is up to Rvbugged to decide what to do. I rest my case.

As stated earlier, the right under Section 5 of the Contract Act, as extracted below, is a statutory right:

Section 5 in The Indian Contract Act, 1872

5. Revocation of Proposals and Acceptance. — A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards. An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards.

According to the apex court, the statutory right under Section 5 of the Contract Act is conferred. Section 5 states that a proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer.

Thus, the company cannot say contrary to the statute that "The company has the right to withdraw the offer without assigning any reasons anytime till the candidate joins."

The criterion here is not the notice period of 1 or 2 months. Instead, if the employee falls within the purview of "workman" of the ID Act, then after 240 days, these notice periods of 1 or 2 months carry no meaning. Similarly, there are other statutory rights conferred with the passage of time.

Thanks

Sushil