Can My Friend Be Sued for Breaking an Unwritten Employment Bond After MBA Sponsorship?

Dear all,

My friend worked with a company for 4 years and then was sent to do an MBA sponsored by the company. There was no bond signed during that period or before joining the college. Only email exchanges took place about the program and a three-year employment bond after the completion of the MBA. Now he wants to leave the company as he feels he is being exploited on the grounds of the bond. Remember, he has never signed any paper of such nature physically.

Can he be sued by the company as the company is now asking him to pay two years' salary and the full fees paid by the company as compensation?

Please help with legal facts and not personal advice.

DK

Hi,

Now email is also admissible as evidence in court. If you were to go to court, the company would use this email. If the company has outlined all the terms and conditions in that email and your friend responded to the email in a positive manner, then yes, your friend will be obligated to pay the specified amount.

Thanks,
Aakanksha

Thank you for your reply, but can an email be considered the contract if the details were not mentioned in the email? Additionally, the monetary value was never specified in the email. I was informed that in India, no employer can enforce continued employment.

Agreed with you, but if the company has mentioned that "if you will go with MBA, then you have to serve the company for 4 years," that means your friend was aware of it; otherwise, no one can force you to pay that fee.

Aakanksha

Dear Akanksha,

Thank you for your valuable input. Now, how could a company decide the monetary value to be recovered from an employee if nothing is mentioned in the mail? Also, remember that he has served the company for one year, so should that not be taken into account? The entire exchange of emails has taken place on the company's own website, which is controlled by the company itself. What could be the validity of these emails?

Thanks again,
DK

Dear DK,

The email transactions of documents have legal sanctity. In the IT Act 2000, it is categorically mentioned that email-transmitted messages fall under the term "document" and have legal sanctity.

If your friend has sent the acknowledgment or acceptance of the same, then he is liable and accountable for fulfilling the bond conditions.

The bond itself must have a clause specifying the bond period, bond amount, and the conditions for the breach of the bond.

Your friend cannot escape or break the employment rules. He can be sued by the company.

NOTE: In case your friend feels that (1) he is entrusted with responsibilities that do not fall under the purview of his profile, (2) made to work beyond acceptable working hours, etc., then he also has counseling and legal recourse for his problem.

Hema

Thank you for the information provided. It was very useful. Additionally, my friend is relieved as the email did not mention anything about a breach of bond, the amount of compensation, etc. It only stated that three years of work were expected from him, which is what was mentioned in the email.

Can anyone tell me what could be the intensity of penalty in this kind of cases? Is a jail term possible in this case?

It's not a criminal offence. He cannot be put into jail. All a company can do is to file a civil case for the recovery of the amount spent on his MBA course.

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I have corrected the spelling and grammar errors in the text and ensured proper paragraph formatting with a single line break between paragraphs. The meaning and tone of the message have been preserved.

Dear dkraitafe/All,

Please note my experience on the issue. Even when there is a bond duly executed, the company will be asked to prove the loss that occurred due to the resignation of the employee. Also, all these kinds of bonds are just meant to create pressure at the "back of the mind" of the trainee. Any and all such negative covenants are not easily accepted by the court of law and require proper trials, evidence, and cross-examinations.

It is not a criminal offense to change jobs unless your friend has bad intentions of divulging any secrets or trade-related information to another company or competitors. Everyone has the fundamental right to work and livelihood. Moreover, just relax and read the Indian Contract Act 1872, section 27, which states that agreements in restraint of trade are void.

Addressing your major question: the quantum of damages that can be granted by the court of law will depend on the prayers made by the company and the arguments of the lawyers. At most, only the fees paid for the course (MBA) can be granted.

Let me know the jurisdiction, and I will advise you on the best lawyer as well as provide citations to rely upon.

Best wishes to your friend for his next assignment.

Marine lawyer

Posting Section 27 of the Indian Contract Act for quick reference. The term "JOB" is included in the word "Trade."

Agreement in restraint of trade void. Every agreement by which anyone is restrained from exercising a lawful profession, trade, or business of any kind is void to that extent.

Saving of agreement not to carry on the business of which goodwill is sold. Exception 1: One who sells the goodwill of a business may agree with the buyer to refrain from carrying on a similar business within specified local limits. This agreement holds as long as the buyer or any person deriving title to the goodwill from him carries on a like business therein. Such limits should appear reasonable to the Court, considering the nature of the business.

Thank you, Mr. R.S. Sharma and Marine Lawyer. I'll definitely call you when in need. Can my friend exert pressure on the company to obtain a relieving letter? He will need it for his next employment as his resignation remains unaccepted so far. How can we ensure its acceptance and acquire the relieving letter?

Your friend needs to adhere to the terms and conditions outlined in his/her appointment letter. Please ensure compliance with the one-month notice period by serving the notice in person. Additionally, provide a scanned copy of your personal email ID.

If there is no response, consider sending a polite reminder, stating that you have already committed to your next assignment. Therefore, no due certificate and relieving are required.

Remember, please avoid being aggressive and maintain self-belief. All living beings have the right to prioritize themselves. Changing jobs is not a crime.

Dear DK,

Are the terms and conditions of the bond mentioned in the email to your friend? Please specify whether your friend has replied with acceptance to the email or not.

Subbu

Dear change agents,

The reply given by Marinelawyer and subsequent inputs by him for the query are appreciable. We, people with no knowledge in law, should seek suggestions from legal experts on legal matters. I personally appreciate Mr. Marinelawyer for his motivation and the clarification provided in his response to the query. Keep sending, keep sharing, keep learning.

As change agents, we should not be afraid of anything when it comes to bringing change in the minds of both employees and management. Be brave.

Yours,
Achari

I think the best solution is to pay the company and quit. Definitely, if the company has sponsored him for the course, he needs to show his loyalty. No company works for a charity; if the same can be done with mutual understanding, it is better. Once the matter goes to court, definitely, the employee will win, but his career growth will be affected. The other companies hiring him would not trust him for this deed.

Anup

The best solution is to dissolve this matter with mutual understanding. Even though the employee will win the case, his career growth will be affected. Other companies would think twice before hiring him. If the company has spent a considerable amount on his degree, they deserve his service. He should have thought about this before accepting the offer.

Anup

The person had replied positively to the mails, but bond conditions, amount, etc., were not mentioned. Secondly, to Mr. Anup, the person is not getting what he deserves, and when the company is not agreeing to pay him accordingly, what could be done? To what extent should moral obligations be carried? Moreover, the company knows his situation; this is why they are threatening legal action.

Saikatdhar,

This is your opinion or is there some legal ground? How can it be a criminal case? Let us know.

It is possible only in the cases where the employee intends to divulge or disclose confidential information or business secrets of the ex-employer. CBT, i.e., Criminal Breach of Trust, can be invoked with or without bond if and only if the person resigning has wrongful intentions.

Marine lawyer

All those who have any legal-related questions, please post here or directly to my ID, but do mention CiteHR in the subject. Thanks

I think the best solution is to pay the company and quit. Definitely, if the company has sponsored him for the course, he needs to show his loyalty. No company works for a charity. If the same can be done with mutual understanding, it is better. Once the matter goes to court, definitely the employee will win, but his career growth will be affected. The other companies hiring him would not trust him for this deed.

Anup

I think the basic thing that one looks for while employing someone is competence. Loyalty will take a back seat even for you if you are offered double the salary by some reputed company. Let us make the facts right and think from positive aspects. Our growth is in our hands. Work hard and be loyal until the time you have not put in your papers.

With no hard feelings,

Marine

All the company can do is file a case against the person.

I personally am not aware of a single such case which any company has won in a court of law in India, even where the employee has 'breached' the so-called 'bond' which is on stamp paper... and here it's a case of emails...

I would say: Relax.

Peace,
Brandon

Dear friend,

Who is exploiting whom here? The company offers to sponsor your friend, and your friend agrees. If they had not offered, he might not have joined. The company will spend money on your friend's education and, in return, will ask for continuous employment for four years, which is very much legal in India. You were misguided on the legality of this issue. Your friend can resign but definitely has to repay the entire cost of the program.

As for the payment of compensation of two years' salary, it is questionable. But definitely, some compensation is payable. If the company engages a good advocate, they may get close to two months' salary.

Siva

Hi,

As per my knowledge, the contract can be treated as void, or it can be considered to have no value. I hope your friend did not sign anything on the contract and send the same through any fax or scanned copy to the employer. So, where is the valid point that the company can sue your friend for the damages or expenses? Moreover, if they go to court with that copy of the email, as per your information, where are the terms and conditions that the contract has? Did he mention that "hereby I agree to all the terms and conditions of the company"? So, I hope there is no chance that your friend can be sued for breach of contract, which is not there on the legal contract or any stamp papers.

Hi,

As per my knowledge, the contract can be treated as void, or which has no value. I hope your friend did not sign anything on the contract and send the same through any fax or scanned copy to the employer. So where is the valid point that the company can sue your friend for the damages or expenses? Moreover, if they go to court with that copy of email, as per your information, where are the terms and conditions that the contract has?

So, I hope there is no chance that your friend can be sued for breach of contract, which is not there on the legal contract or any stamp papers.

Hi,

How was the MBA program fee paid? You can use the payment details as proof in court, in addition to the exchange of emails.

Furthermore, the silver lining for you in this case is that staff who do not have loyalty to the company are no longer on your payroll.

Dear all,

In my case, my last company used to get a 'service agreement' (franking done from the bank, making it legal) signed by employees stating that after leaving the company, they will have to take a 'no objection certificate' from the director of the company before joining any other company engaged in a similar business, valid for six months.

My query:

1) Is it legally correct?

2) If yes, what if the Director does not issue an NOC to any particular employee?

Please clarify.

Dear,

The difference between a bond and a contract is obvious. Whereas the former is a negotiable instrument, the latter is not one. The former is to be stamped as per the Indian Stamp Act. Consequently, your presumptions on email contracts may not strictly apply to a bond. The opinion will be case-specific rather than generic. In the instant case, the court may take a sympathetic view.

With Regards,
V. Sounder Rajan
Email: rajanassociateslawfirm@yahoo.com, rajanassociates@eth.net, rajanassociateslawfrm@gmail.com
Off: 044-42620864, 044-65874684

Dear Friend,

In this case, as described by you, no case is made out that your friend has executed any bond with the company. The email in question cannot be presumed or taken as a legally executed bond between the company and your friend. The email you are referring to will not be justiciable in the court of law.

Regards,
Mohan.

Hi,

I agree with Mr. Sivasankaran. The employer has the right to recover the cost of training imparted to the employee. Costs include the training/course fees, traveling expenses, accommodation expenses incurred by the employees towards attending the course, salary paid to the employee for on-duty days, etc. If the company has proof of the above expenses, they can recover them from the employee. The amount mentioned in the bond should have some proof as mentioned above. Merely mentioning Rs. 200,000 or Rs. 500,000 without any basis will go against the employer. If your friend wants a smooth exit, you can advise him to negotiate and settle the issue amicably.

Thanks & Regards,
Kalyan R

Hi Dipak,

There is no legal requirement; however, most offer letters mention that you cannot work for another company or start your own company while employed. I would suggest starting your placement firm with someone else managing the operations of the company. It would be best to keep your business a secret until it becomes stable.

Dear All,

Can someone help me in explaining the difference between a Service Agreement, Bond, and Contract?

Preeti

Dear friends,

Someone has asked for the difference between a contract, service agreement, and bond. Let me try to explain.

Contract

It is an agreement between two or more parties to do or not to do an act for consideration.

In India, we are governed by the Indian Contract Act.

The most important aspect of the contract is the term consideration.

To examine the legality of any contract, one of the most important points to be examined is whether the consideration agreed is permissible under the law and whether it is executable by the concerned party.

For example, if I enter into a contract to sell my house for a consideration of, say, Rs. 5 lakhs with a person whose age is above 18, it is a valid contract. Suppose the consideration is that the person shall get her daughter married to my son, then the consideration is not valid. The person who signs this agreement cannot execute this consideration; hence, it is void. We can provide more examples.

Employment terms, service agreements, etc., all fall under the definition of a contract and are guided by this law.

Service Agreement

Any agreement between two parties for providing service for consideration is a service agreement. Here, in this context, an employee agrees to serve a company for, say, three years, and the consideration is that the expenses for higher education will be borne by the company. This is a service agreement.

A fresher signs a service agreement for three years for a consideration of the company imparting him training for one year, which is a service agreement.

A company asking for a service agreement from an employee for training a person abroad is also a service agreement.

In these cases explained to me, they are contracts under the Indian Contract Act or under the Contract Acts of respective countries.

Generally, contracts are written documents. Oral contracts are also permissible. The only difficulty in an oral contract is that it may be challenging to prove in the court of law if there is a dispute.

Bond

I am not very sure about the origin of this word "bond." Bonds are usually referred to as guarantees given by third parties in case of failures. In the money market, bonds are commonly used. The Reserve Bank issues bonds. When the Reserve Bank issues bonds, it guarantees repayment. Since these service contracts were signed on stamped paper and guarantee some payment, they were probably referred to as bonds. I am not very clear about it. "Bond" as we use it is sort of slang for a service agreement and not equivalent to bonds used in the money market.

Siva

Dear DK,

If your friend is not ready to pay the amount fixed by the company, then based on the company's version presented in court, the court may order payment of a penalty, and imprisonment could be imposed. This situation can be considered a breach of contract.

Regards,
Vasu

Well, friends, I believe he should do what is ethical. Life is a boomerang - what goes around comes around. No company has the time to sue individual candidates unless he is in a top-notch position. However, if your friend has agreed upon the 3-year bond, he should ethically abide by it. In case he is facing any issues with the company, he should consult the HR and sort out the issue.

Dear Deepak,

I slightly differ from the opinions of other members. There is a provision in the standing orders of the Industrial Employment Act that prohibits engaging in activities such as working for another company that may negatively affect the primary employer.

There is a strong legal stance against this, with certain cases being held in court where employees have faced adverse situations. For more details, please refer to the standing orders in the Industrial Employment Act.

Regards,
Ranjeet

Dear Deepak,

I am slightly different from the opinions of other members. There is a provision in the standing orders of the Industrial Employment Act that prohibits activities such as working in another company that may adversely affect the first employer. There is a strong legal stance against this, and certain cases have been held in court where employees have faced adverse situations. For more details, please refer to the standing orders in the Industrial Employment Act.

Regards,
Ranjeet

Hi Deepak,

Even though you plan to start a different venture than where you are currently employed, the HR has a fundamental point. It is quite right as well, that you won't be able to concentrate on your current job. A full-time employee for a company virtually accounts for an entire day, including your off-work hours. Most companies would rightly fear you giving less than 100% at work, reducing productivity. It is better you do not mention your business to anyone. At most, you can mention that your friend or relative is opening up a consultancy and you put in your inputs. Provided you put in your work hours, I doubt if your current company can have any objection.

Hi,

There is no legal obligation for the job you have mentioned. If your friend is forced into the job, he should have physically signed a bond on a stamp paper for it to be possible to pursue legal action. If he leaves the company, he may receive a legal notice. This is considered a breach of contract and is essentially a form of bonded labor. The purpose of the bond is to create pressure on the employee and prevent losses that would typically occur when there is a long-term vacancy.

Dear Sivaa,

Thank you for your valuable information about 'Service Agreement, Contracts, and Bonds'.

In my last organization, as per management's order to safeguard company interests, an employee has to sign a 'service agreement' that includes clauses as follows:

1) Safety of company assets and confidentiality of data
2) Exit Clause: Upon leaving the organization, the employee shall not be able to join any organization engaged in similar or related business without an NOC from the director of the company. This restriction is for 6 months from the date of leaving. Breach of this clause can lead to legal proceedings.

In this case, the first clause is acceptable, but I am unsure about the second clause, except for the potential legal implications it holds.

Moreover, this agreement seems one-sided, with commitments only from the employee's side and none from the employer. Can we still term it as an 'agreement'?

Please provide your comments on this matter.

Preeti

Preeti,

Legally, it is not acceptable unless it is proved that the company has put in efforts to train the person. Normal clauses in the appointment letter or an agreement that you would not join a competitor are not acceptable.

Siva

Dear Siva,

I also thought the same... but legally, can the company sue an employee? These days, generally all companies mention this kind of clause in the appointment letter. In my last organization, a proper service agreement is signed. This document is franked by the bank. Also, when an employee left, the names of the companies which he cannot join were mentioned in his relieving letter.

Please send your email ID; I will mail you a copy of that.

Preeti

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