Dear All,

Whether particular contract is valid or not is totally depends upon the terms and conditions contained therein, the manner in which it is drafted subject to various provisions of law.

Suppose if an agreement of training contained a provision that employee has to serve the company for 2 year after completeion of training abroad and in case if he leave before said period he is liable to pay damages to the employer say equal to 6 months salary not illegal/void.

In various judicial reveiw court held that such restriction are not treated as 'restrain in trade' hence not violative section 23/27 of contract act nor fundamental right u/a 19.
But drafting must be done carefully and restriction must not for post-employement period and it must be genuine to receover cost of training.

Employee is free to leave but they have to compensate the company,,,in my opinion such employee can not be allow to take laddu in both hands..means taking fruits of training, joining competitor and levaing it old employer in the mid of business set is totaly immoral and unethical/non professional attitude.

Ya if they want to leave they can leave but pay cost of training.

Please check the attached article and judicial prouncement, for more cl;arity.

aMIT kishore singh

From India, Delhi

Attached Files (Download Requires Membership)
File Type: pdf High Court Judgement on Breach of Bond and Quantum of Compensation.PDF (3.51 MB, 578 views)
File Type: pdf Article on validity of restraint clause.pdf (116.9 KB, 344 views)


A Simple Explanation

Section 73 & 74 of the Contract Act are the main Statutes that will come into place:

Section 73

When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.

Section 74

When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for.

For eg:

If an employee joins a company.

Signs a Bond - Work for 2 years or else pay 3 lakhs before leaving

The Person is fully aware of what he is getting into

So the Contract will be stand good in court of law

As the Company will not be forcing the Employee to work, the Company just wants the Money and the damages caused thereby back

If the Company files a case, on the imposition of the Person to work under any circumstances then it will amount to Forced Labor and the Article 23 (1) of the Indian Constitution will come into play.


CASE FILED FOR BREACH OF CONTRACT FOR MONEY - holds good in the court of law - Sec 73 & 74 for Indian Contract Act, 1872

CASE FILED FOR BREACH OF CONTRACT AND IMPOSING THE RESOURCE TO STAY BACK - Fundamental Right Breached and hence Sec 73 & 74 Null & VOid

From India, Bangalore
HI ,
Before 3 months i join one pvt co . in offer later co does not mension any bond but if in appinment leter co mension that there is bond of 2 year so this is legal. can emloyer force to sign any bond

From India, Mumbai

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