VRRP can't sense ATM subinterface is down as long as the pysical interface is up.you can check the Attached diagram for the network.
Two Routers connecting through subinterface atm , and the subinterface is always up even when you shutdown the other subinterface as long as it's physically up.
The Active router don't switch to be slave after pvc is down.
Under the atm sub interface for both R1 and R2 add the command
under the pvc view
add :- oam frequency 1 up 1 down 1 retry-frequency 1
and use static map ip,
by doing this the interface can sense if the pvc is up or down and can switch to other VRRP.
The problem that R1 can't sense the PVC ATM link down as long as the cable is plugged in,
and always see the link is up that's why can't switch to R3.
It's only can switch to R3 if you shutdown the ATM interface.
In this case you need to check also the PVC status using OAM paramters under the subinterface to check the status of the PVC.
Use the above commands and the problem will be solved.