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Thread Started by #falgunikumar

Hi All
I have seen cases where companies are taking bond from freshers, experience persons and onsite perons..
What I Know about the market
1) Freshers: Companies are talking bond from the freshers for a period of 2 to 3 years.
2) Experience Person: Bond for a period of 1 year to 2 years.
3) Onsite Employees: Bond for a period of 6 months to 2 years.
Is it legal to take bond from an employee.. In this was are the companies are not blocking their career growth.
Please share some views on these....
15th June 2007 From India, Hyderabad
Hello friends
There are no replies on this ????? Please help me out if any one has some idea on this..
I am drafting one policy and it is one thing which can be one of hte issue in it...
16th June 2007 From India, Hyderabad
some courts in india have held bonds to be illegal since it restricts the employees freedom to work freely/practise his profession - however this is usually when the 'bond period' is open ended.
for specific time period of 1-2 years - it may be allowed by courts since companies use time/resources to train employees - who then run off to other greener pastures.
i guess one wont know till one goes to court - but in the other course- companies like infosys, wipro, tcs - have all been having bonds
so you can safely assume that it will not be challenged.
29th June 2007
i was working with an automotive company since july 2007... i signed a bond which said that i was on training for one year and then after one year i'll be made permanent or may be my training will be increased depending upon their choice....it was completely one sided bond and it said that even if company removes me then also i'll have to pay 2 lakhs....there was not a single point written which was for my benefit....in short, a one sided bond.....now when i have stopped going after resigning i fear that they might take me to court....and ya, i didnt sign d bond...they forced me to sign it and blackmailed me....i have left because i am going for higher studies.....somebody plz help me what should i do....??????
29th August 2008 From India, Delhi
Dear friends,
Courts in India in several cases have held that service Bonds signed by employees are against the provisions of Section 27 of Indian Contract Act and hence not binding. I am attaching a copy of a recent Article written by advocate of Supreme Court for your ready reference.
31st August 2008 From India, Malappuram

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File Type: pdf Negative Covenant in Contract of Employment.pdf (108.5 KB, 10893 views)

Bonds are supposed to be mutual agreements.
there have many cases of bonds being violated and the companies taking the 'errant' employee to the court and the honourable court...deciding in favour of the either parties on the basis of the specifics of the case.
my advice would be go in to reading the specific cases and then formulating your policies accordingly. a lawyer or a qualified person HAS to frame the language.
Courts are not to be feared but used to avail Justice. so, when wronged---prepare and fight.
1st September 2008 From India, Bharat
My anme is amit kumar. I have joined STC Technologies in 2008(Feb - June). Suddenly i was sufring from illness as they have taken 13 hour in day. My shift timing was 7:30 morning to 8:30 evening.I have signed Bond of 50 K for 1.5year and also submitted my original certificates. But they have shutted down their delhi brance and taken away my certificates last year and whenever i am trying to contact his Chennai (head brance).No one is responded me . i want my certificates back. So please suggest me the right path to get back my certificates.
2nd September 2009 From India, Mumbai
Please help.
I have signed a bond for a period of 2 years of Rs 150000.
The part of the bod is as follows-
If the employee fails to serve the employer for a period of two full academic years after the implementation of the Ib Programme or two years after the completion of the latest level of the training programme which ever is later, he shall refund an amount of Rs 1,50,000 to the Academy to cover all the expenses incurred on training the said employee.
If the employee's services is terminated by the employer during the said period, the employee is still required to refund to the employer Rs 40,000 if level 1 is completed, 75,000 if level 1 and 2 are completed and 1,00,000 if level 1, 2 and 3 are completed.
There is no benifit to me as such.
can i get a quick response as i have to move for better prospects.
16th January 2010 From India
I have signed an agreement / bond for 5 years on Rs. 10 court paper and a post dated checque (Rs 5 Lacs) regarding trainning or skill enhancement. This agreement include everymonth deduction of 20 % of my salary + 5 Lacs checque. If I will break this bond, they will charge from me Rs 9 Lacs + Rs 5 Lacs.
I have been USA and Europe for business trips but not for trainning. I have all inivatitaion letter from USA and Europe which i used to get visa. Its clearly states that inivattaion for business trip.
I have completed 4 months and dont want no continue. This bond is single sided. Still, i am in probation period. Please let me know, if i will leave this company, will company recover from me such huge amount.
28th January 2010 From India, Delhi
Hi Friends,
Can anyone help me with a copy of a bond. My organization is planning to sign a bond with the freshers.. new hires as Trainee for a very critical technology. We want to execute a bond with them for 18 months.
If anyone of you have any documented copy so that I can use it as reference for the bond execution. Also let me know what is the procedure for executing the bond.
7th February 2010 From India, New Delhi
Hi Premsahu, The benefit for you is in the higher market value after you complete the training. If you’re unwilling to continue for 2 yrs, its better to pay the bond amount. Sree
9th February 2010 From India, Madras
Kanika, It is better to decide the terms and conditions (period of bond, amount payable, factors to be considered for waiver) and get the actual bond drafted by a legal consultant. Sree
9th February 2010 From India, Madras
I was working in one of the IT companies Newway IT company as a software developer. They forced me to sign a service bond for 2 years. After 3-4 months bcoz of unhealthy working condition's.. Also they have not given me copy of bond. In appointment letter also it was written in am in probation period of 6 months. Now they are sending legal Notice and harassing me since i have broken bond i have to pay them Rs 2,00,000. They have not given me any training since I was experienced. Also I have given my resignation and done the handover also. After leaving that company I have not joined any other company. I am still unemployed.
Do they really can go to court as there was no overseas training nothing only induction was there for few hours that too not related to my work profile I have also sent resignation mail and done the handover ?
please help
29th March 2010 From India, Mumbai
My organization is also planning to sign a bond with the freshers as Trainee. We want to execute a bond with them for 12 months. Can anyone help me with a copy of a bond.
Please send me any documented copy so that I can use it as reference for the bond execution.
9th April 2010
please help I have signed a bond of one year and I am in probation period for 6 months . so please tell whether this bond is legal or not.
18th July 2010 From India, Ahmadabad
Hi All,
I am tense b`coz one of my very close friend was working some where and she singed a bond with that company for a period of one year. But after 5 months she left that company. Now after 4 month of leaving the job, she got a notice from that organization. So please help me out what can be done in this sitution. The organization is not a listed company, it's only a sole Proprietorship firm.
9th November 2010 From India, Pune
Dear All

We find lot of posts on Bond Breaking.Bonds are legal and enforceable .

It is not as easy as one thinks of breaking bond .There are serious consequences which will happen without the Employees knowledge.

Having done certain research on the case law of Bond Breaking we find that it is favoring the Employer .This is because of the legal route adopted by the Employers for enforcement of the Bond ,Employers go through the process of Arbitration and get an award very many times exparte i.e in the employees absence .The advantage for Employers is because the Employees are reluctant to part with their address and the Employer goes for service of notice on the old address and gets the verdict from the Arbitrator in their favor.The scope of the appellate process against such awards is very limited and the award by the Arbitrator is confirmed.The instances of Employees resisting such claims is minimal.Once the Employer gets the verdict the time for enforcement is 12 years.

Therefore it is better to plead to your employer to relieve you from the obligations of the Bond by sending an “escalation letter “to the Higher up than your HR Head say if it is an MNC to the HQ.It may sometimes work.In case this also does not work out you can send a “frustration Letter” for the record.In case there is legal case this letter may help.For getting the letters you need to take legal help on your specific facts.

The other option exposed by case law on enforcement on negative covenants is where the Employer is forced to terminate the Employee instead of the employee resigning . This option needs to be exercised and dealt with great care as you might have other issues cropping up. .If there is termination then the Bond cannot be enforced.

Also creating an Employees Forum in CITE HR with an All India Network to provide Legal Assistance at nominal cost to defend Bond cases on the Employees side can be a solution.This can match the legal strength of the Employers.

With Regards

Advocates & Notaries & Legal Consultants[HR]

E-mail : rajanassociates@eth,net,

9th November 2010 From India, Bangalore
Dear Members

Fresher or even employees with experience have to sign Bond. They are forced to sign it and have no other go.We find lot of posts on implications of Bond. It is better to take preventive steps and not repent and be in a fix later .

Before signing a Bond the following precaution needs to be taken:-

In case the Bond is to cover Training Expenses i.e. Training Bond.

i) Check on the amount of the Bond;

ii) Check up the cost of Training and whether the Employee will actually spend the amount.;

iii) See whether the liability to pay arises after the Company incurs the cost of training which shall be notified by the Employer separately;

iv) Request for proportionate reduction of the Bond amount dependent on the period of service.

In case the Bond is to cover service with the Employer for a particular period i.e. Service Bond.

i) Check the amount of the Bond. It must be reasonable and not an unreasonable amount and also the period has to be checked. This is also to be reasonable.

ii) It should also mention that it is for voluntary resignation and not for termination or forced termination by the Employer.

iii) Request for proportionate reduction of the Bond amount dependant upon the period of service.

With Regards

E-mail :

16th November 2010 From India, Bangalore
The Employemnet Bonds or Agreement for a acertain duration are only valid if it can be proved by the company that special training has been imparted to the employee at a cost ,otherwise the agreement shall be deemed to be null and void ,but ofcourse the judiciary will take it own time to give its verdict which can be painful process for the employee.
In the recent past,only positive thing that has been happening is courts are not allowing injections ie.hold on taking new assigments during dispute.
Nitin Deshpande
16th November 2010 From India, Jalgaon
i have completed my M.TECH & have signed a bond for 5yrs with compensation amount of 3lakhs.i have also provided my certificate with this bond. Iam frustated with the culture of this company. They are treating me as a slave with incridible & unhearable words. Also they r making me to work atleast 13 to 14 hours. They doesnt give my casual leave even if am ill. I have also asked them to terminate me which doesnt work out. I realy want to quit the job. How can i do this.? Is there any way without paying the compensation to get out of this. Plz help me.
2nd December 2010 From India, Madras
dear all
Bond is not illegal.
Suppose X company hires you and gives training and your are placed in any of there branch or you have been sent for project and bond is already signed by you. If you break the any conditions of bond you are liable to pay the entire traing cost and loss arised to the company for your act.
3rd December 2010 From India, Coimbatore
Hi Sir,

I used to work with a BPO company in Delhi since December 2010. In

July 2012, the company sent me along with some other people to

Australia for 6 days on our client's site to gain the process

(business) knowledge so that I can perform the same work at our Delhi

based office.

Before sending me to Australia they made me sign a service bond for 6

months with a value of Rs. 1 Lacs.The terms of the bond is that I will

have to continue to serve the company for 6 months after I return from

Australia. I had already completed one month of this bond period. The

only bond period left was just 5 months. The bond was signed on the

letter head of the company and not on any stamp paper. Further please

note that the work which I used to do in Delhi is now being performed

by some other employee who was given the handover by me. He was

independently handling the job and the business was also running

smoothly at the time when I got myself transferred. Hence my manager

in Delhi did not agree to release me.

In this meanwhile I got a very good opportunity in some other company

offering me day shifts and I accepted to join them. Before joining I

also told them regarding my bond issue but they accepted a copy of my

resignation e-mail as a proof of resigning from my previous company.

Accordingly I resigned from my previous company after serving few days

of notice period and willing to clear my notice period due wit the

organization and had requested my manager to waive the bond amount but

the HR told me that they will not waive the amount which amounts to

Rs. 1 Lac. Now they have sent me a letter that since they have not

accepted my resignation so asked me to join back within 24-48 hrs else

they would terminate me from my services. What can happen if the

company files a legal case against me? Please advise whether I am in a

position where I can defend any legal case which the company can file

against me?"
3rd September 2012 From India, Delhi
Hello Sir/Madam,
I have just resigned from my company and already i pursued onsite at INTEL INDIA before 8months.At that time according to my company policy in case I am at onsite then I cannt join INTEL for 6months from the date of returning from client company(INTEL).
After I given resignation they asking me to sign a bond which states "Employee can't join the client company for 3yrs from the day of reliving " .In case I join my client company I have to pay 10Lacs to my company as per the new policy and they mentioned in case i wont sign the bond they wont dispatch releaving letter.
I came to know about this new policy during my notice period.Is it valid bond.
Kindly give suggeton regarding the above problem.
Thanks & Regards,
7th May 2013 From India, Chennai
7th May 2013

Article by Krishnakant Balasubramani


The present era is experiencing phenomenal changes in the economy and industrial processes, which has resulted in greater business competition. To cope up with competition, the employers incur huge expenditure in imparting training to their employees for improving the quality of goods and services of the company. However, sometimes the employees leave their employment after honing the skills & improving the knowledge of the industry for better salary and incentives. The increasing rate of attrition subjects the employers not only to financial losses but also delays in completing the ongoing projects thereby directly impacting their goodwill & reputation in the market. Therefore, in order to safeguard their interest, employers have of late started to obtain an employment bond from their employees who are found suitable for training or skill development. Such employment bonds are agreements between the employer and employee wherein among other terms & conditions of the employment, an additional clause is incorporated which requires the employee to serve the employer compulsorily for a specific time period else refund the amount specified as bond value.

The question that arises here is whether such a method to retain employees is effective, acceptable and enforceable under the law. This article discusses the enforceability of employment bond and the rights available to the employers and employees under the agreement in light of various court decisions.

1. Employment bond: need and enforceability?

Generally before selecting employees for providing training or skill enhancement program, employers take necessary safeguard of conducting interviews, take assurances that employee will stick to complete the projects for which he is being trained and shall also train the other co-employees so that an effective and efficient work environment is created. However, employees still tend to leave for greener pastures and, therefore, it is increasingly becoming necessary for the employers to enter into an employment bond to safeguard their interests. If employee leaves the employment without serving the company for agreed time period, the employer is expected to suffer due to the undue delay in completing the work undertaken, which can ultimately affect its reputation/creditability in the market. To prevent such situations, the employer can compensate the loss incurred if a valid employment bond has been executed. Such bonds also deter the employees from committing any breach of the agreed terms and conditions.

Now, the most pertinent question that arises here is whether the employment agreement with negative covenant is enforceable under Indian laws? The simple answer is yes. Such employment agreements with the negative covenant is valid and legally enforceable if the parties agree with their free consent i.e. without force, coercion, undue influence, misrepresentation and mistake. The courts in India have held in its various judgments that in the event of breach of contract by the employee, the employer shall be entitled to recover damages only if a considerable amount of money was spent on providing training or incurred other expenses for the employee. Further, the courts have been reluctant to restrain the employee from joining a competitor/other employer. The employment bond will not be enforceable if it is either one sided, unconscionable or unreasonable. Therefore, it is pertinent to be cautious while drafting the employment bond because it is mandatory that the conditions mentioned in the employment bond, including the compulsory employment period and amount of penalty are reasonable in order to be valid under the Indian law. The term "reasonable" is not defined under the legislation and, therefore, the meaning has to be determined on a case by case basis depending upon the issues involved and circumstances of the case. In general, the conditions stipulated in the contract should justify that it is necessary to safeguard the interest of the employer and to compensate the loss in the event of breach of contract. Further, the penalty or compulsory employment period stipulated in the contract should not be exorbitant to be considered as valid and to be regarded as reasonable.

2. Challenging the enforceability of employment bond

The validity/enforceability of the employment bond can be challenged on the ground that it restrains the lawful exercise of trade profession or trade or business. As per section 27 of the Contract Act, 1872, any agreement in restraint of trade or profession is void. Therefore, any terms and conditions of the agreement which directly or indirectly either compels the employee to serve the employer or restrict them from joining competitor or other employer is not valid under the law. The employee, by signing a contract of employment, does not sign a bond of slavery and, therefore, the employee always has the right to resign the employment even if he has agreed to serve the employer for specific time period.1 However, the restraints or negative covenants in the agreement or contract may be valid if they are reasonable. For a restraint clause in an agreement to be valid under law, it has to be proved that it is necessary for the purpose of freedom of trade. For instance, if the employer is able to prove that the employee is joining the competitor to divulge its trade secrets then the court may issue an injunction order restricting the employment of the employee to protect the interests of the employer. Whenever an agreement is challenged on the ground of it being in restraint of trade, the onus is upon the party supporting the contract to show that the restraint is reasonably necessary to protect his interests.2

In order to execute a valid employment bond, the parties have to ensure that the following requisites have been complied: (i) the agreement has to be signed by the parties with free consent; (ii) the conditions stipulated must be reasonable; and (iii) the conditions imposed on the employee must be proved to be necessary to safeguard the interests of the employer. Further, the employment bond stipulating conditions such as to serve the employer compulsorily for a specific time period or penalty for incurring the expenses is in the nature of the indemnity bond and, therefore, such kind of employment bond has to be executed on a stamp paper of appropriate value in order to be valid and enforceable.3

3. Remedies available to employer and employee

In the event of breach of employment bond, the employer might incur a loss and, therefore, may be entitled for compensation.4 However, the compensation awarded should be reasonable to compensate the loss incurred and should not exceed the penalty, if any, stipulated in the contract.5 Usually, the court determines the reasonable compensation amount by computing the actual loss incurred by the employer having regard to all circumstances of the case. Even if the bond stipulates payment of any penalty amount in the event of breach, it does not mean that the employer shall be entitled to receive the stipulated amount in full as compensation on the occurrence of such default; rather the employer shall be entitled only for reasonable compensation as determined by the court. While exploring alternate remedies available to the employer in the event of default by the employee, it would be interesting and worthwhile to discuss whether the employers are entitled to seek for reinstatement of their employee or obtain restraining order against the employee from joining any competitor/alternate employer because many such similar reliefs have been sought by the employers in various suits. The apex court, while dealing with similar query, has held that the specific performance action cannot be sought for breach of contract of personal service or bond6 and, therefore, the employer shall not be entitled to seek for reinstatement of their employees as relief in the event of breach of bond. In another matter, the apex court has held that it is not bound to grant an injunction in every case and an injunction to enforce a negative covenant would be refused if it would indirectly compel the employee to idleness or to serve the employer7 and, therefore, the courts are also reluctant to grant injunction against the employees restricting their employment with other employer unless it is necessary for the protection proprietary interests or trade secrets of the employer.

As mentioned, the conditions stipulated in the employment bond should be reasonable in order to be valid and, therefore, even if unreasonable condition/clauses are stipulated in the contract such as imposing exorbitant duration of compulsory employment period or huge penalty upon the employee, the court shall award compensation only if it determines that the employer has incurred loss by such breach of contract. The court normally considers the actual expenses incurred by the employer, the period of service by the employee, conditions stipulated in the contract to determine the loss incurred by the employer to arrive at the reasonable compensation amount. For instance, in the case of Sicpa India Limited v Shri Manas Pratim Deb,8 the plaintiff had incurred expenses of INR 67,595 towards imparting training to the defendant for which an employment bond was executed under which the defendant had agreed to serve the plaintiff company for a period of three years or to make a payment of INR 200,000. The employee left the employment within a period of two years. To enforce the agreement the employer went to the court, which awarded a sum of INR 22,532 as compensation for breach of contract by the employee. It is crucial to note that though the bond stipulates a payment of INR 200,000 as compensation for breach of contract, the judge had considered the total expenses incurred by the employer and the employee's period of service while deciding the compensation amount. Since the defendant had already completed two years of service out of the agreed three year period, the judge divided the total expenses of INR 67,595 incurred by the plaintiff into three equal parts for three years period and awarded a sum of INR 22,532 as reasonable compensation for leaving the employment a year before the agreed time period. Similarly, the High Court of Andhra Pradesh in the case of Satyam Computers v Leela Ravichander,9had also reduced the compensation amount considering the period of service of the employee.


In view of the aforesaid discussions and various court decisions, the employment bond is considered to be reasonable as it is necessary to protect the interests of the employer. However, the restrains stipulated upon the employee in the said contract should be "reasonable" and "necessary" to safeguard the interests of the employer or else the validity of the bond may be questioned. The employees are always free to decide their employment and they cannot be compelled to work for any employer by enforcing the employment bond. The court can; however, issue order restricting the employment of the employee only if the said action is deemed necessary to safeguard the trade secrets/proprietary interest of the employer. In the event of breach of contract by the employee, the only remedy available to the employer is to obtain a reasonable compensation amount. The compensation amount awarded shall be based upon the actual loss incurred by the employer by such breach.


1 Central Inland Water Transport Corporation v Brojonath Ganguly, (1986)IILLJ171SC

2 Niranjan Shankar Golikari v The Century Spinning and Manufacturing Company Ltd, AIR 1967 SC 1098

3 IBS Software Services Group v Leo Thomas, 2009 (4)KLT 797

4 Section 73 of the Contract Act, 1872

5 Section 74 of the Contract Act, 1872

6 Nandganj Sihori Sugar Company Ltd v Badrinath Dixit, & Ors, AIR1991 SC 1525

7 Gujarat Bottling Co Ltd v Coca Cola Company, AIR 1995 SC 2372

8 MANU/DE/6554/2011

9 MANU/AP/0416/2011

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Specific Questions relating to this article should be addressed directly to the author.


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9th May 2013 From India, Malappuram
Hello Sir/Madam,
I have just resigned from my company and already i pursued onsite at INTEL INDIA before 8months.At that time according to my company policy in case I am at onsite then I cannt join INTEL for 6months from the date of returning from client company(INTEL).
After I given resignation they asking me to sign a bond which states "Employee can't join the client company for 3yrs from the day of reliving " .In case I join my client company I have to pay 10Lacs to my company as per the new policy and they mentioned in case i wont sign the bond they wont dispatch releaving letter.
I came to know about this new policy during my notice period.Is it valid bond???
Kindly give suggeton regarding the above problem.
Thanks & Regards,
10th May 2013 From India, Chennai
hi sir,
Please help me
I was working with a company since April 2011. I had signed 3 years 3,00,000 rupees bond (one sided). After 2 years complete 2013, this company will sacked some employee(30) randomly. In this situation I am resign this company.Also they are not provided any special training.
Now this company will demand 1,00,00 rupees, they will send advocate’s latter. Also they are appointed a arbitrator.
This situation what can I do, please suggested me. If they prove wrong way,that they provided me any training, then what is happening? Then what can I do, please suggested me.
Thanks & regards
9th October 2013 From India, Kolkata
i came to know that bonds are not valid if the employee works in notification period. but if we break the bond its hard to get the experience certificate.even though the joining letter and last 3 month salary slip will do the experience letter
14th November 2013 From India, Ahmedabad
I have bond with one IT company and recently I break this bond. I paid breakage amount as per bond but still company is holding my documents with some reasons like handover and pending work of existing project on which I am working. Can I get these documents with help of any Act?
They take sign on some paper under pressure. As i need relieving letter for joining new company I signed this paper with lot of pressure. Now they are asking for completion of existing work. But my luck is that i have not signed any Scope document of that project.
Please help.
19th February 2015 From India, Mumbai
Dear Friend

Generally employer used to take freshers as Trainees by getting an assurance from them whom he selected to get the work done in his company as regular employees in due course. As such, he may take freshers as trainees by asking them to sign service agreement / bond thereby he will get continuous services from these candidates after completion of their training period for fixed period . One thing we should keep in mind about the genuineness of the service agreement.

1. To train fresher enabling him to acquire job skill as required by the specific position may take for a minimum period of six months / one year.

2. During this period, the trainee will not be in a position to serve the company as in case regular employee

3. During the training period, employer needs to incur expenses such as stipend, medical expenses, subsidized canteen food, accommodation and any other expenses as per the policy of company.

4. Total expenditure which is to be incurred by an employer may be different from employer to employer basing the requirement of skill that is be performed by individual in his allotted position.

5. By doing all these, employer may expect that individual whom is taken and trained him to become a qualified person to perform particular job should be stayed with his company for a minimum period i.e Trainee for one year, Probation for another year and Regular employee for one more year.

6. So by taking an assurance from individual by employer for getting an assurance to service his company for minimum period by way of service agreement cannot said to be an unfair / void or null as it is to be construed as general agreement but not as bond.

7. However, compensation to be fixed by employer in case of breach of the agreement by candidates should be reasonable and it should not be disproportionate with actual expenses which he incurred by way of imparting training to freshers.

8. Without imparting any training and employing a experienced person to perform a particular job functions by getting service agreement by an employer may not be considered as genuine and these type of cases may not stand in the legal forms as the judges may see genuineness of the agreement

19th February 2015 From India, Hyderabad
I don't think being extra vigilant on the points mentioned above would help since there is no negotiation power for the employees to seek modifications to the bond. It is either take it with the bond or leave scenarios.
5th May 2015 From United States,
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