Wakefield College chief retires at 46
Mr Muskett, aged 46, began his sick leave half-way through giving evidence at an industrial tribunal in Leeds.
Three test cases were being brought by sacked lecturers who claimed they had been unfairly dismissed. They were among more than 50 staff made redundant in August 1997 in a cost-cutting exercise.
The three staff won their case but the college has lodged an appeal, which will be heard in October.
Mr Muskett - principal since 1993 - oversaw the transition of the college from local authority control, to independent status.
Peter Claydon, chair of the board of governors said: "John Muskett enabled the college to receive an outstanding inspection report which placed us in the top 10 per cent of all UK colleges. At the same time he has successfully seen the college through a challenging period of swingeing government cuts to funding. "
Heather MacDonald will continue as acting principal, a job she has undertaken since February. The college anticipates that a new principal will be in post in the New Year.