I am working for an R&D based organization in Bangalore. In this company, freshers are asked to execute 2 yrs bond at the time of joining. The bond is signed by 1.the employee 2. his/her parents or relatives along with 2 witnesses, in a 100Rs bond paper.


One such employee has given his resignation letter. He wants to go for higher studies, which is a full time M.Tech program. He has just completed 1 yr in our organization and will complete his bond period in August 2010. As per the agreement, he has to pay 1yr CTC as compensation to the company, in case of breach of contract.


1. Since bond is not valid in India, would company be able to recover the money?

2. If the employee moves legally, is there any chance by which company can win the can in court?



From India, Bangalore
Soical Compliance Auditing
Consultant Hr And Legal
Hr Executive(generalist)
Gm (hr)
+4 Others

Hi Indulekha,
I read your query with great interest. Kindly clarify for what reason the bond is not valid in India (especially when the employee is working in India (Banglore) and cause of action has arisen at place of work (i.e. at Banglore). In my considerate view in case the Company for which you are working is MNC/having registered office abroad/as per the Bond might have stated that the guilty person shall be proceeded as per the law of that particular country - still there is a possibility that the decree could be executed in Indian Courts. Last but not least what's about the policy matter of the Company in case your employee could be spared for the further studies that would be value addition. It would be better if the salient feature of the Bond could be elaborated that would be better for proper comments.

From India, Delhi
Hi Indulekha,
There is one small clarification pertaining to the salient feature what I really meant was that as a standard practice the place of jurisdiction and Indemnity clause have to be incorporated. Further in case there is any guarantor you can also proceed against him (by asking him to furnish bank guarantee etc.)

From India, Delhi
Dear Sir,
Thanks for your guidance. I was told that bond is not valid as per the labour laws in India. Morethan that, its a common perception that, if the case is taken to court, employee has the maximum chances to win and the employer wont get much benefit.
1.Our comapny is registered in Bangalore and we have kept the place of jurisdiction as Bangalore itself.
2. Agreement details are as follows:
a) In the bond paper, the document is drafted with 4 different sections i) company and employment details ii) emplyee agrees part ii) guarantor agrees part iv) breach of contract and jurisdiction part
b) 2yrs employment is agreed
c) In case of breach of contract, 1yr ctc has to be given to the company as compensation.
3. We do have provision for employees to go for higher studies, full time/partime, once they complete 2 years of service.

From India, Bangalore
Dear Indulekha,
1) In India Bonded Lobour System is abolished by the Act so it is unethical to engage someone under the contract/agreement.
2) But most of these agreements are Pro-training expenses so if the employee can prove before appropriate government that no training cost was incurred for the training of the employee with valid documentation then not a singlr penny can be rececovered from the employee.
3) But in above case if company could prove that there were some training expenses incurred by the company for enhancing skill/knowldge of the employee then the company can recover to the extent of expenses incurred by the company.
In case of any query please call.

From India, Pune
Dear Prashant,
Please let me know the act by which such agreements are made invalid. Does the gerenal perception "labor laws will give protection to the employee only and no money can be recovered as comensation, execpt for the pro - training expenses", holds good?
My suggestion was, terminate his services & allow him to go for higher studies. To keep the morale up for other employees who are affected by the same contract, his relieveing letter and pf withdrawl sanction can be given by Aug 2010, instead of recovering the compensation. His training records will fetch a very small sum on recovery. Definitely we will take the acceptance for employee, in writing for this action.

From India, Bangalore
Dear Indulekha,
Your contract itself explainatory about legal violation,you can asked to the employee furnished the below information:
1)Your experience certificate would not be issued as internal contract not comply.
2)As per employee information,he is going for higher study ,if they found working anywhere then company can calimed all expenses on training.
3)re-joining offer letter after completion of higher strudy,but the terms & conditions would decided later on.
Nothing to be claimed from the employee as per your agreement between employee.
Best Regards
Sajid Ansari-Delhi

From India, Delhi
whether he goes for heigher studies or work somewhere else,does not make any difference.these contract does not stand in court of law because
1.they are one sided contract means if you leave the organisation you will pay this much to company but if company remove you than-----
2.secondly as per contract act any contract which restraint you to to any trade ,business or profession is void.
so in my view this contract will not stand in court of law.
js malik

From India, Delhi
I agree with Mr. Malik. Such contract are just the moral bindings and not legal as it is one sided agreement. Company can not take such contract . I do remember there was a judjment by Spreme Court on this issue in favour of the employee.
To maintain the company immage ( brand) in the market you should settle it mutuly. It will help to maintain the moral of the other employees.
The contract is one of the tool to retain people. But there are some other good tools to retain people. Once employee lost his interest then there is no point to retain him just by contract.
For the higher study you can sanction leave without pay and keep option open for both ( employer & employee) for the probabale good assetin future.
Ulhas Chandratre
Senior HR Professional, Pune

From India, Pune
I found this intresting article on the same issue i.e. bond / contract in the employment. - Ulhas Chandratre
From India, Pune

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