Dear Prasanth,
By your own admission, presently the employee is not on the active duties. He has resigned from his job and he needs to attend to his daughter's medical problem. In support of her medical condition, he has submitted the documents also. Then what is the problem in the early release? Let that person be released when needs to be with the family.
If you release him early, it will show that the administration of your company is empathetic or shows clemency when needed. It will be a signal to all other employees that the rules are not followed dogmatically.
However, the early release should not be a trend and it should be communicated to all other employees, although informally that the decisions on the early release are taken on the case to case basis and there cannot be a particular trend.
Thanks,
Dinesh Divekar