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Svsrana
Hr Head With Pmi
Welcomeumesh
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Prasad164
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Nishabinner
Hr Professional Working With Corporate
Niyas
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Human Resource Executive
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Thread Started by #svsrana

Hi everybody,

i have noticed plenty of articles on legal enforcement of bonds. well i dont want to play spoilsport to many self acclaimed lawyers opinions, let me give you the other/ real side of enforcement.

Section 27 of Indian contract Act 1872 provides that aggrements restrining a person from exercising a lawful business, trade or profession are to that extent , VOID.

any clause which prohibits employees from working with competiotors after cessation of current employemnt has been struck down by Courts repeatedly.

restrictive clauses during the term of employment have been upheld in few cases. (in ISO 27001, one of the 127 controls, asks people to desist from discussing company matters on trhe cellphone in a public place :

guess why: not bercause of lackj of freedom of speech and expression but safeguarding company/ client information)

last but not the least, it is simply NOT ALLOWED in any of the standards like Social Accountability SA8000 which is growing in popularity in ITES too, Worldwide responsible apparel production WRAP, ETI, any of the ILO conventions etc.

regards,

suryavrat
10th July 2007 From India, Delhi
Hi Suryavrat,
Its really great to see your post contents, but it opens lots of curious thoughts in ones mind.
What is the legality of the employment bonds which the employees sign with the employers against some training programs or international assignments?
Understanding the legal language is difficult for any layman like me
Nisha Binner
HR Manager
10th July 2007
Hi,
I like to know that, getting any bond from employee is legally enforceable or not?.. because my company do lot of investment for their training so we r planning to get bonds signed from employees..
i need ur valuable suggestion in this....
10th July 2007 From India, Madras
Hi to all my collegues,

I had the good fortune of learning PF/ ESI/ CLRA etc from "H L Kumar" the industry veteran and writer of all aspects of IR . He is presently editor of "Labour Law Reporter" and you may send an email and get free advice too.

I have worked with various industry majors like HCL, Paras, VSNL etc and presently compliance manager for a US retail chain.

In HCL too i never came across a single litigation in support of bond though the company maintains lawyers.

But lawyers are there for a different reason, since we operate around the globe, we have to ensure compliance to Telemarketing sales rule, distance selling directive, fair debt collection practices act, data protection act etc.

In my experience if an employee/ worker has a grievance against the management, rather than approaching labour deptt/ trade union, it makes more sense to consult a good lawyer. A top ranking lawyer charges approx 5k.

yet employees prefer to wallow in the dark.

Giving a loan to an employee in excess of his paying capacity is also a form of "Bonded Labour". my collegues who have experience of SA 8000/ WRAP etc would agree to the same.

warm regards

suryavrat
10th July 2007 From India, Delhi
Hi

Bond is an agreement between the employee/trainee and the company whereby certain burden either monetary or otherwise is casted upon the employee.

The companies are investing a huge amount of money on training the employees, and having some experience if the concerned employee absconds, it costs great loss to the company.

The cases where the company is investing money on training of the employees, it is advisable to get signed a bond with the concerned employee but at the same time that should not be for longer period of time.

Though Section 27, of Indian Contract Act, 1872 provides that any agreement in restraint of trade is void. But at the same time constitution of India guarantees that the every man is entitled to exercise any lawful trade as and when he chooses.

While preparing a bond agreement, a negative covenant may be incorporated which may motivate the employee to continue with the company. For example, if an employee continues for a particular period of time, company will reward him with x amount, in the event of failure on the part of the employee to serve for the particular period of time, the company may recover the same from the employee.

Regards

prasad
13th July 2007 From India, Mumbai
Getting a bond from an employee who is deputed for an overseas training is surely the only hold for the company on the employee.
13th July 2007 From India, Delhi
Dear All,

Sometime back I read a case on Supreme Court website www.judis.nic.in, where a lady was sent abroad by AMEX and she returned her hands were full of better offers..finally she forgot about the bond and joined a new assignment..further she was handed a notice from court for submitting a few lakh rupees as compensation for breach of service bond..she went to labour court and finally...in a few years in Supreme Court where the Court held it Void...

I just came across a few interesting queries and answers related to service bonds in India, you guys might benefit from it..

One more thing, it's for sure, if one breaks the service bond..he/she will be going through a lot of mental tension as well as spending a huge some of amount in dealing court related matters.

warm regards,

Umesh Chaudhary

(welcomeumesh@yahoo.com)

=============================================

A company has offered me a job assignment but they also want me to sign a service bond for at least a year. I fear I may lose out on better options that may come my way. Were I to breach the bond, can they, through the court, compel me to carry on with the assignment? Were I to join, does this bond secure my job with the company for at least a year?

Manoj, Delhi

A contract of service is not capable of specific enforcement and hence, need not be specifically performed. Normally, in a bond of this kind, there is also a compensation clause. In case you breach the contract, you may have to pay the specified amount. The apex court has held that a contract of personal service cannot ordinarily be enforced by or against an employer and a court normally would not give a declaration that the contract subsists. The rationale is unwillingness of courts to compel persons who are not desirous of maintaining continuous personal relations with one another to continue those relations. The grant of specific performance is a purely discretionary relief and can be refused when not warranted by the ends of justice.

There are certain exceptions to this rule such as in the case of a public servant who was dismissed from service in contravention of Article 311 of the Constitution, reinstatement of a dismissed worker under industrial law, a statutory body acting in breach of statutory obligations and the like. But these do not seem to appear in your case. The remedy in a cases like yours is to sue for damages. Such relief can be granted only on sound legal principles.

As regards your query on the issue of your security of the job for at least a year, if the employer rightfully ends the contract, there can be no complaint, but if the employer wrongfully terminates the contract, then you can pursue a claim for damages.

=============================================

Dear Sir,

One of my friend had signed on a 3years bond with a software company at chennai in march 2004 and for that the company had got an undated cheque for in the case the bond is broken.

My friend didnt get any proper training as well he realised that he is not paid properly (though they were according to the service agreement).

Hence he left the company breaking the bond after serving it for 1.5 years.

The company had sent a letter addressing him and his father to join the

company failing which he had listed four conditions on which he will be

taking a legal action.

My friend left it as such and didnt respond.

Now almost after 1year the company has now sent his father a court summon saying the cheque of 2lakhs given by his father is bouncing and hence he need to appear in the court for the same.

My friend has currently joined a singapore concern and also previous to this he had worked in more cmpany for an year. My friend is worried as to how to deal this issue .

I would like to know whether such bonds are valid. How do we counter act to resolve this issue. Kindly suggest us the best possible solution.

Thanks in advance

------>> Answer

Dear ?,

Any contract signed without duress, undue influence and coercion with free will and consent is enforceable at the option of the other. Here the contract was signed and your friend agreed to serve the company for 3 years and after 1 1/2 year left the company and joined another company. Your friend should have taken a bit interest in the issue not to leave the undated cheque and settled it before leaving for Singapore.

As I understand that your friend's father got a notice which was ignored and now there are summons from the court. This would mean that the company has filed either for recovery of the amount covered in the bond or have initiated criminal action under the negotiable instruments act for the dishonor of the cheque.

The only course and option open for you is to defend the case on attending on the date mentioned in the summon before the designated court that has issued the summon and to retain and appoint a good lawyer to defend the case.

The matter which is now in the court may be on any ground or issue relating to payment of the amount under the bond and it is only when such case papers are perused by a lawyer will he be able to guide and advise your friend's father on the course to be adopted.

I suggest your friend's father should not delay the matter any further and immediately consult a lawyer and brief him on the facts of the case to defend in the court.

I hope your query is answered.

Regards,

=============================================

Question

-------------------------

Followup To

Question -

hai,

from last one and half year i am working in a company and 8 months before company send me to france for 1 month training purpose. that time company asked me to sign a bond which contains agreement to work for 3 years from the time of return. the bond states that if i want to leave before the contract period ends or the company terminate my service because of inefficiency i have to pay a sum of 10 lakhs. the bond does not contain any salary increment or any benifits

which comapny suppose to give me during the contract period. the contract is made on a stamp paper and i signed on the attached sheet(not in stamp paper). Now i got a good offer from another company so i want to leave my present company. if i break the bond without a settlement (dont want to pay the amount in contract) whtether the company can file a case against me. whether this type of contract between employee and employer is valid or not. please give me an advice on this matter

regards

----> Answer -

Dear ?,

Thanks for choosing me to answer your question.

The signing of the Bond is the committment with your employer for a specified period. At the time of your employment when you deserved the job with a particular employer, you were glad to sign the bond to serve for

the specified period, owing to other better oppurtunities, perhaps you are inclined to breach the terms of the bond.

There are many questions that arise for consideration. I have no idea of your committment in the bond you have executed and in which State the bond is executed. The Stamp duty applicable on bond differs from State to State. Your initial appointment with the company, your pay after return from France, whether the same appointment is continuing or you were given another appointment.

In the event the company terminates you, then there is no cause for the company to claim the amount mentioned in the bond for the reason that there is no breach of the bond and you would still serve the company. On the contrary, if you choose to leave the company, then in that situation the committment has to be honoured.

In so far as filing of any case in the court of law is concerned, you may have agreed in principle to be sued by your employer, this if the company views seriously, it can hold you responsible for payment of the amount agreed in the bond.

Regards,

---

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You are here: Experts > Cultures > Indian Culture > Indian Law > employment contract

Topic: Indian Law

--------------------------------------------------------------------------------

Expert: Javed Razack

Date: 6/9/2004

Subject: employment contract

Question

-------------------------

Followup To

Question -

hai,

from last one and half year i am working in a company and 8 months before company send me to france for 1 month training purpose. that time company asked me to sign a bond which contains agreement to work for 3 years from the time of return. the bond states that if i want to leave before the contract period ends or the company terminate my service because of inefficiency i have to pay a sum of 10 lakhs. the bond does not contain any salary increment or any benifits

which comapny suppose to give me during the contract period. the contract is made on a stamp paper and i signed on the attached sheet(not in stamp paper). Now i got a good offer from another company so i want to leave my present company. if i break the bond without a settlement (dont want to pay the amount in contract) whtether the company can file a case against me. whether this type of contract between employee and employer is valid or not. please give me an advice on this matter

regards

saji

Answer -

Dear Saji,

Thanks for choosing me to answer your question.

The signing of the Bond is the committment with your employer for a specified period. At the time of your employment when you deserved the job with a particular employer, you were glad to sign the bond to serve for

the specified period, owing to other better oppurtunities, perhaps you are inclined to breach the terms of the bond.

There are many questions that arise for consideration. I have no idea of your committment in the bond you have executed and in which State the bond is executed. The Stamp duty applicable on bond differs from State to State. Your initial appointment with the company, your pay after return from France, whether the same appointment is continuing or you were given another appointment.

In the event the company terminates you, then there is no cause for the company to claim the amount mentioned in the bond for the reason that there is no breach of the bond and you would still serve the company. On the contrary, if you choose to leave the company, then in that situation the committment has to be honoured.

In so far as filing of any case in the court of law is concerned, you may have agreed in principle to be sued by your employer, this if the company views seriously, it can hold you responsible for payment of the amount agreed in the bond.

Regards,

Javed Razack

Hai,

Thank you very much for your early reply. i would like to give u some more informations regading this contract. the bond is executed in pune(Maharashtra state) on Rs20 stamp paper.I would like to highlight that signature is not in stamp paper, its on attached sheet of the contract. As per the bond all the expenses during my forign travel was covered by company. And the training in france was not effective, infact there we worked for the benifits of company. I have not given any salary increments(even the compulsary annuel increments) after the return from france. The appointment which is given in the bigining of my service is still continuing.

because of some health problems if i am not medically fit for a short term (for one year) to deliver my service to the company what will be the future of bond. whether i have to compensate this period of non working to complete the contract period. I expect that you will be reading this informations with my first set of questions. i request your consideration and advice in this matter.

->Answer

understand your anxiety to leave your present employment for reasons.

In the general parlance if the document is signed on the last page which is a continuing sheet of the earlier pages it holds good, and the condition of payment of the breach amount may not be on the first page!

In so far as the Stamp duty is concerned, perhaps, Maharastra State has notified /- for Bond and even assuming that it is insufficiently stamped, the courts can take it as collateral evidence.

As for your grievances, you can write to the company pointing out the last increment in the salary and the benefits that are to be given to you be paid to you as you are entitled to the increment under the appointment letter. Once your are on deputation, then its the prerogrative of the company to take your services in the manner they choose.

Health ground can be one possibility for your relieve or alternatively your company should terminate you. On termination they may not give you the certificate and testimonial, relieving letter, conduct certificate and harrass you.

Think wisely before you take any decision. Consult a Service Lawyer who may guide you in this matter.

Regards,
15th July 2007 From India, Delhi
Dear All,
Giving below a link where you may get legal advise for service bond and other labour law/civil law aspects..it's good..but I have not tried..I just went through some answers...great advices
http://en.allexperts.com/q/Indian-Law-1798/
warm regards,
Umesh Chaudhary
(welcomeumesh@yahoo.com)
15th July 2007 From India, Delhi
Hi, I am working with a pvt firm in West Bengal. I had singed a bond with the company 2yrs ago which said that company will sponsor me for a post graduation course and i have to work with the company 2 yrs after completing the course. As per the bond the company promises me to offer salary as per the preent mkt trand. But now after completing the course the company offer me half the salary that they offer to the management trnees who complete the same course as me from the same institute & do not have any experience...After asking for the reason of such pay scale they told me that it is so because they invest money behind me.The bond is singed on a stamp paper but only the 1st page is a stamp paper.Now if i want to quit the company what step they can take against me???
31st August 2008 From India, Calcutta
Dear friends,
Pl see recent article written by an advocate of Supreme Court on the issue attached by me in reply to the following post:
https://www.citehr.com/30808-bond-legal-india.html
Courts have held that service bonds are in contravention of provisions of Section 27 of Indian Contract Act and hence not enforceable.
Regards
31st August 2008 From India, Malappuram
DEAR ALL,
I WANT TO KNOW THAT WHAT WILL HAPPEN IF ANYBODY NOT IN A POSITION TO CONTINUE BANKING SERVICE (IN NATIONALIZED BANK.), AS PER THE APPOINTMENT LETTER IF ONE FAILS TO SERVE THE BANK FOR THREE YEARS, ACCORDING TO THE BOND THE CANDIDATE HAS TO PAY I LAC RUPEES TO THE BANK. Now as per Dept of Public Enterprises guideline the bond is transferable but the Bank says they are not covered by the guideline. In a case where one has been selected in a Govt Company / Govt orgn through proper procedure what is the remedy?
9th November 2009
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