Madhu.T.K
Industrial Relations And Labour Laws
Saswatabanerjee
Partner - Risk Management

Thread Started by #Anonymous

Hi team,

I have Signed an Employment Bond with company according to which I have to serve the company at lest for 18 months as they have spend money on my training.

I left the job last month after serving 2.5 months (which include 2 months training) now I got a notice (not a legal one but a hard copy + mail)from they asking me for the penalty of breaking bond + penalty for not serving the notice period of 3 months.

Now my question is ,Is the employment bond is legal?

Do I have to pay my 3 months salary for notice period .

The points about the bond

1.It was not on stamp paper was under companies letter head.

2. None of the victim have signed it.

3. For notice period it is mentioned as

"If you wish to resign from the services of the Company, you shall provide the Company notice of 90 (ninety) days or such other period stated in the Company’s policy prevailing at the time of such resignation. You are expected to serve the full notice period in order to complete the transition of your duties to an employee identified by the Company. Failure to provide such notice or to serve the entire notice period shall make you liable to pay the Company liquidated damages equivalent to the basic salary for the shortfall in such notice period".

which state that I have to pay 3 months salary If I need some experience letter from them I don't need any.

And the Bond is as follows

Whereas I, _________________________________ <Name>, son/daughter/wife of _____________________________________ having permanent residence at __________________________________________________ ____________________________, have been appointed as ________________________ <Designation> by XYZ Software Solutions Ltd., a company incorporated under the Companies Act, 1956 having its registered office at XXXX (herein after referred to as “the Company”);

Whereas the Company will invest considerable amount of time and money to provide extensive specialized technical, professional and other trainings and experience in certain software applications and methodologies and may disclose trade secrets and the Company’s proprietary information to me in order to make me a productive employee of the Company;

Capitalized terms not otherwise defined herein have the meaning given to them in the Employment Letter dated <date of Employment Letter>.

Now therefore in consideration of the Company investing time and money to provide the aforesaid trainings and experience to me:

1. I acknowledge and agree that the Company and /or its subsidiaries will invest considerable amount of time and money to provide specialized training to me in order to provide better services to the Company’s clients.

2. I acknowledge and agree that the said specialized training would substantially enhance my professional skills and ability and that my non-availability in providing services to the Company pursuant to such specialized training would adversely affect the Company’s operations and result in a loss of its investment.

3. I further acknowledge and agree that the Company has to recover and earn a return on its investment in such specialized training and that such recovery and earnings are directly dependent on me fulfilling my obligations under this Undertaking.

4. I hereby agree to receive and complete such specialized training and further undertake to remain in the employment of the Company for a period of not less than 18 months (excluding the notice period) from the date of joining (herein after referred to as “Stipulated Period”).

5. I understand and agree that in the event I breach Clause 4 i.e. I voluntarily leave the employment of the Company or the Company terminates my employment with Cause before the expiry of the Stipulated Period, it will cause the Company to suffer damages, (“Liquidated Damages”), which is mentioned in Clause 6 below.

6. Myself and the Company have mutually discussed and I agree that the estimated amount of Liquidated Damages will be INR 100,000/-(Rupees One Lakh Only).

7. I understand and agree to pay the Company the amount of Liquidated Damages stated in Clause 6 above in the event I breach the terms of this Undertaking. I shall pay such Liquidated Damages to the Company before the last day of my employment with the Company. I agree that the Company is entitled to recover all or part of Liquidated Damages from any amounts payable by Company to me.

10

8. I further undertake not to dispute the amount, and I shall pay the amount within the time mentioned in Clause 7 above and at the same time Company has full right to initiate appropriate legal proceeding against me.

9. The validity, construction, and interpretation of this Agreement and the rights and duties of the parties shall be governed by and construed in accordance with the laws of Republic of India, excluding its conflicts of laws provisions and the courts of Mumbai shall have exclusive jurisdiction in matters related hereto.

10. In the event of any dispute of difference arising between the parties hereto over the interpretation or construction of any of the terms or provisions hereof and/or the implementation or enforcement thereof or of any right hereunder or any remedy relating thereto, the same shall be referred for arbitration to the sole independent arbitrator to be nominated by the Company whose award shall be final and binding on the parties hereto. Every such reference shall be deemed to be a submission to arbitration under the Arbitration and Conciliation Act, 1996, or any modification or re-enactment thereof. The venue of such arbitration shall be Mumbai. Subject hereto, the courts in Mumbai alone shall have exclusive jurisdiction to the exclusion of other courts.

11. Should any provision of this Undertaking be or become ineffective, or be held to be invalid, this shall not affect the validity of the remaining provisions hereof. Any invalid provision or any gap or uncertainty of any provision in the Undertaking that becomes apparent when performing the Undertaking shall be replaced, interpreted or supplemented as the case may be in such a manner that the intended economic purpose of the Undertaking will be achieved.

12. And it is further agreed that all communications between the parties hereto shall be deemed to have been effectively served if addressed to the party at the registered office address of the Company and my address as set above (unless another address has been specified in writing by the party to which the notice is given) in writing by hand delivery or by postal delivery.

13. I have independently consulted my legal counsel before executing this Undertaking

please Help me,

What should I do

1.Pay the amount

2.Wait for legal notice

3.Go to court
19th November 2014 From India, Hyderabad
The bond will be maintainable to the extend of training given to you. If you have been given specific training in the project, the cost of training can be recovered from you by the company especially when you are posted in an Executive position. At the same time, if no training has been given to you, you can forget about the bond or legal notice which may follow.
Now, this bond seems to be genuine because the stipulated period is not unreasonable, it is just 18 months.
The bond is enforceable even if it is on a plain paper and the employer can very well put the signature of witnesses even now and you cannot prove it otherwise.
Since you have already had a discussion with your Lawyer before you signed the bond, I would advise, you should take his counsel and take it forward.
Regards,
Madhu.T.K
21st November 2014 From India, Kannur
Madhu's contention is right.
Over the years, the consensus reaches is that amount actually paid for training is what determines the validity of the bond and the amount payable. Your post is not clear whether they was formal paid training or whether it was In-house training by managers, etc. if it only the later, the bond is not enforseable.
21st November 2014 From India, Mumbai
#Anonymous
Thanks Madhu sir and Saswata Sir Response and suggetion ,
The training was provided by some expert in a classroom And I didn't work on any project .
and about notice period they are asking salary of 3 months (not basic its 1 lack for 3 month)
Should I have to pay full amount 2 lack or there is any chance of negotiation ?
and I do have copy of Agreement which doesn't have any signature of witness .
Thanks
21st November 2014 From India, Hyderabad
Signature of witness is immaterial to validity of the bond.
It comes into question only if you or they dispute the signature or that some clause was modified later.
If there was a classroom training by external faculty, the bond will be valid to the extent of training cost.
If your bond States you have to pay basic, the their asking for payment of full salary is invalid
21st November 2014 From India, Mumbai
And also, you need not negotiate on this. If you are sure that you did not receive any training, the amount of damages claimed by the employer can be disputed and in such scenario it is always advisable to fix it before a mediator. Therefore, let the employer proceed further.
Madhu.T.K
21st November 2014 From India, Kannur
#Anonymous
Thanks a lot Madhu sir and saswata Banerjee for advice .
One last question the agreement have following term regarding bond -
"If you wish to resign from the services of the Company, you shall provide the Company notice of 90 (ninety) days or such other period stated in the Company’s policy prevailing at the time of such resignation. You are expected to serve the full notice period in order to complete the transition of your duties to an employee identified by the Company. Failure to provide such notice or to serve the entire notice period shall make you liable to pay the Company liquidated damages equivalent to the basic salary for the shortfall in such notice period"
Does it mean that I have to pay notice period amount if I need any releasing letter or experience letter from my previous employer .
In that case I don't need any such letter from them .
And Is the best option will be waiting for legal notice or to Negotiate
Thanks
21st November 2014 From India, Hyderabad
Generally, such notices are just scare tactics. They know how expensive it is for them also to pursue the case. But they may do that Just to demonstrate to everyone else what happens if someone violates the bond and notice period. In any case they can afford cost of litigation while you can't.
The matter of interest etc is more scare tactics. However, in the end it's a question of how skilful your lawyer is. If the court believes you were unfair and deliberately caused loss, yes, they can order interest and also ask you to pay cost of the case. Mostly they don't, but they can.
I am afraid this is the best answer I can give (or anyone including your lawyer can honestly give). You need to weigh the pro and cons of the case and the surrounding facts and decide whether you should negotiate or show them the middle finger. Lawyers always claim they will win the case for you but ask them to prove it by fighting free till the case is over, they will refuse .......
22nd November 2014 From India, Mumbai
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