Hi Vachana,
I got in a little late, however, I saw and must appreciate the views expressed - both for and against, and it is heartening to note there are more.
I'll add my penny to this thread :
Awards are for Character and Competence, awards are for Performances.
You may have people with Character but not Competence, and vice versa too people with Competence without Character, however both can be good performers, and some my be both Competent and good Characters too.
Now taking this case is which of the Award and Resignation.
Let me link this to Character - the company should have and maintain its Character and reward the employee who has proven his Competence. It is for something the company derived when he/she was there. It's an honor and once bestowed it's not honorable to go back, so the award should be given, if you can do it with more dignity than normal. It'll earn more respect from the one leaving the company and will serve as a booster to the others that "fairness" prevails. Any good will earned is a "bonus" so you must go ahead..