How Should I Handle a Court Summons for Breaking a Training Agreement While Abroad?

Dear Friends, I need your sincere help and advice regarding breaking a training agreement. I left my former company in May 2010 with a proper resignation, but the company didn't accept my resignation because I had executed a training bond. I have to work for 3 years after finishing my onsite period. I have given up all my gratuity, leaves, and last month's salary to the company for compensation of ₹6,00,000, but they are asking for a huge amount of ₹32,00,000. After one month, the company sent me a legal notice from a lawyer, and I have also replied to their notice through my lawyer. After seven months, in February 2011, I received a summons from the court, stating that I have to attend this case. Now, I am not in India, and my parents are a little worried about this summons. Please advise me on how to proceed with this case. Should I discuss it with the company again? I look forward to your valuable replies. I am attaching my training agreement for more information. Thanking you in advance. Regards, Raj


1) The company hereby deputes the employee for training from 08.07.2007 to 08.07.2010 in Germany with the objective of enabling the employee to get training in project management and process technology, and the employee hereby agrees to undergo training.

2) The employee shall faithfully, diligently, and punctually take full advantage of the training and shall assimilate the various aspects/knowledge imparted during the training period. Thereafter, upon return, the employee shall make the best use of the knowledge gained for the benefit of the company.

3) In consideration of the company sending the employee for training abroad at the company's cost, and in consideration of the additional knowledge and experience gained, the employee shall work for the company for a minimum period of 3 years after returning from training. The employee shall not, under any circumstances, work for any competitor of the company during this period.

4) In the event of the employee leaving the services of the company, either during the training period or thereafter before completing 3 years of service after the training period, the employee shall be liable to pay the company as damages a sum of ₹32,00,000, which the company would spend on deputing the employee for training. The breakup of ₹32,00,000 is as follows:
a. Airfare to Germany and from Germany to Bangalore - ₹1,00,000
b. Expenses towards obtaining a visa - ₹5,000
c. Accommodation, boarding, traveling, and incidental expenses - ₹12,00,000
d. Special allowances paid during the stay abroad for training - ₹16,00,000
e. Medical insurance - ₹2,95,000
Total: ₹32,00,000

5) In the event of the employee indulging in any act of indiscipline or misconduct, or abandoning training and/or employment, or giving health reasons for not coming to duty, such acts leading to termination of services by the company shall be deemed a violation of this agreement by the employee. The employee shall become liable to pay liquidated damages as stipulated in clause (4) above.

6) The employee shall keep the company's trade secrets confidential and shall not disclose or disseminate any company information to any third party.

7) The employee undertakes not to disclose any information or knowledge gained during training and employment in the company to any person, firm, or company. Any procedure, process, system, or other improvements developed by the employee during the period of service shall become the property of the company.

8) The employee shall not, at any time, either directly or indirectly disclose or disseminate to any person, firm, or company any information concerning matters affecting or relating to the company's products, stocks, shares, stock options of the employees, company services, etc.

9) Without being exhaustive, disclosure or passing of information of any of the following nature shall be deemed a violation of this agreement:
a. Parting with any information pertaining to the secrets of the company's trade and confidential information to any competitor, outsider, etc.
b. Handing over designs, drawings, software, or any other materials connected with the company to any competitor, firm, or company.

10) It is clearly agreed that in the event of the employee violating any stipulations or terms contained in this agreement, the employee shall be liable to pay liquidated damages as stated in clause (4) above, in addition to becoming liable to pay any other sum or amount that the company may suffer due to such violation, including unliquidated damages that the company may claim against the employee for such violation.

11) The surety has undertaken to ensure that the employee fully complies with the terms of this agreement. Further, the surety has undertaken to compensate the company for any breach of the terms of this agreement by the employee. The surety shall be liable to pay the company any amount that the employee may become liable to pay due to a breach of any terms of this agreement by the employee.

12) Any difference or dispute between the parties arising out of this agreement shall be subject to the jurisdiction of the courts at Bangalore only, to the exclusion of any other court that may have jurisdiction in the matter.

In witness whereof, the parties to this agreement have signed and executed this agreement on the above-said date, month, and year in the presence of: Signature of Company, Employee, and Surety

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Contents of Plaint in Summons

The company has filed a case against me with the following points:

Company is Asking for Judgment and Decree

- a) For a sum of Rs. 32,00,000/- against the defendant as liquidated damages along with interest thereon at 6% per annum from the date of filing of the suit till realization in full.

- b) To restrain the defendant from joining the services of any other organization engaged in the same field as the company/competitor and/or setting up a competing business for the remaining period of the non-leaving agreement until the end of June 2013.

- c) To restrain the defendant from divulging or misusing any confidential information in his possession with regard to the activities, whether manufacturing or otherwise, of the company.

- d) Enquiry into unlimited damages suffered by the company and decree for the same, as found due upon such inquiry.

- e) Award costs of the suit.

- f) Such other order(s)/relief(s) as this Hon'ble court may deem fit, in the interest of equity and justice and in the circumstances of the case.

Our lawyer prepared a reply for this court summons. This forum can help me to come out of this situation. Thank you in advance.

Regards,
Raj

Dear Mr. Raj, after going through your employment contract, it's very clear that you have to pay Rs. 32,00,000/- to your ex-employer. It's a well-drafted employment contract, very clearly expressed on all points and not vague to give a chance to the court to interpret the words in another way. I would advise you to settle the issue out of court (directly with your ex-employer). Talk to them, request them to settle the matter for some lesser amount. If you fight the matter in court, the possibility is that at the end of the day (maybe after 5 years), you would lose the case, and at that time, your ex-employer may ask for interest on Rs. 32,00,000/- as well.

A summons is not a final verdict. Let the case be heard. It is not necessary that the court will accept the agreement as it is because there are some points like restraining you from joining a competitor and recovering an amount spent on your training on which the court may disagree. I don't think that a cost estimated well in advance would be taken as the real cost incurred by the company. Let the court decide what was the actual cost to the company by way of giving you training. If you have the actual figure, you can counter the arguments of the company. Therefore, I suggest you appear.

Regards,
Madhu.T.K

Thank you for your valuable suggestion from Kamal & Madhu. I would like to give more information about my situation. The company has deputed me to its headquarters in the name of training and promised that after my delegation, they will promote me to a Project Manager once I return to India.

I joined this company in 2003, and after 4 years of working in India, the company deputed me to the headquarters to execute normal work. I have attended a few in-house training programs with headquarters employees, but all the training was conducted in German, which I cannot understand. It seems like these training programs are just for namesake.

The training expenditure is only estimated during the preparation of the agreement, not the actual cost. I found information in this forum stating that the allowance will be considered a part of wages and will not come under training expenses.

The company has assigned me to a real project on-site to work below my designation so that they can receive money from the headquarters. The Indian company has not paid any money for my training at the headquarters.

As per the agreement, I have to work at the headquarters for 3 years, but the Indian company has called me back to India for 8 months to work on local projects.

My question is, if the company has not broken the agreement, will the court not ask? My lawyer told me that the court will demand strict proof of the expenditure spent on training to recover damages.

Dear Mr. Raj,

If your overseas training was full-time training and not on-the-job training, then the allowances paid to you would be treated as training expenses and not as wages.

Regarding training in the German language and not in English, it will certainly not be an excuse for you. You should have pointed out this problem to the employer at that time, not after the completion of training and now using it as an excuse to change jobs.

A strong point in your case is that the company assigned you to a lower rank and cadre while on the on-site project. This action by the employer will certainly work in your favor.

Your lawyer is correct that the court will require strict proof of expenditure spent on training to recover damages.

A few years back, the Shipping Corporation of India also filed a damage case against one of its employees as per the bond signed between the two parties, and the court ruled in favor of SCI.

It would always be wise for you to consider an out-of-court settlement with your ex-employer by offering them a reasonable sum of money, certainly not what they are claiming, as there is no end to judicial litigation—from lower court to high court, then the supreme court—keeping you in stress for 10 to 15 years.

If you calculate the lawyer fees alone from start to finish (lower court to high court, then supreme court), you will be shocked.

Regards,
Kamal

Dear Kamal,

Thank you for your valuable suggestion. Actually, it is not a full-time training; it's clearly an on-the-job training mentioned in their court summons. I also have a complete timesheet that clearly states on which projects I have worked during this period.

The company has received payment for my work from the headquarters, but they are hiding this information. If I am in a training program, then the Indian company has to pay the headquarters, but here it is the opposite way around.

I have already given my final settlement amount of approximately 6 lakhs to the company, but now they are threatening to recover more. The company wants to cause trouble and show what will happen if you break the agreement.

Currently, HR is using the agreement as a tool to retain people and now wants to show how they will cause trouble if you break the agreement to the rest of the employees.

I have requested the company for 3 months to promote what they have promised; unfortunately, I have received a very bad answer from the department head. The company has taken me for granted and clearly stated that I have to work 3 more years to get that position.

The company is not interested in discussing further with me. After giving up 6 lakhs of hard-earned money, now I am paying lawyer fees.

You are right, the fees are really expensive, and besides, the company has been harassing me for the last year, but there is no other way to come out of this situation.

I was working as a Team Leader, but the headquarters made me work as a Draftsman (a position I had 7 years ago when I joined this company).

In between, they called me back to India for a period of 8 months, and it is not mentioned in the agreement.

Regards,
Raj

Dear Mr. Raj,

I can understand your mental state. There are a few strong points in your favor.

If you can prove that the company received a payment for your work from headquarters during training, it would help you significantly in court. As you mentioned, you were working as a TL, but back in India, you were posted as a Draftsman, which is certainly a demotion. This point is again in your favor. The company did not promote you as promised, which will also work in your favor.

I suggest that your lawyer file a written proposal before the court for a compromise by paying a reasonable amount (Rs. 5 lakhs) to the company. The court will ask the company's lawyer for a rejoinder. The possibility is that the compromise formula will not work out at the lower-level court, as lower courts do not have the courage to work this way.

Wait for the company's view on this, and if they refuse outright, you can file a Quashing petition before the High Court to quash the company's suit filed against you. If your Quashing petition is admitted in the High Court, then the proceedings at the lower court will be stayed, and you will get immediate short-term relief.

During the Quashing proceedings in the High Court, you can again request a compromise by paying a reasonable amount to the company, and there is a fair possibility that your compromise formula may work out here.

Regards,
Kamal

Thank you very much for your information. I will try once again with the company to compromise on a reasonable amount. If they are ready to compromise, then I would be very happy to come out of this situation. Now, my lawyer has prepared an answer to the summons received last month. Once it's done in court, I will discuss with our lawyer for a compromise with the company. I hope everything will go well.

Regards,
Raj

Thank you for your feedback. Our lawyer has submitted a written statement in response to the court summons received from the company. They have now raised an objection to our written statement and will take two months to reply.

Next Steps in Court Proceedings

What will be the next step in court? When will the argument start? When should I be present in court?

Jurisdiction Concerns

The agreement clearly states city court jurisdiction, but they have filed the case in a different district civil court. Does this impact anything?

Thank you in advance.

Regards,
Raj

Judicial Process and Court Appearance

They may buy time this way to harass you, but still, wait for 2 months. Your lawyer should have objected to this in court, as giving 2 months to file a reply is very unreasonable. Let them file the reply. You have to wait for a long time to see the arguments in court. Unfortunately, our judicial process is very slow, particularly in the lower courts. You may get an exemption from personal appearance in court.

Regards

Understanding Liquidated Damages in Employment Contracts

Liquidated damages, similar to a bond, in the event of a contract breach, are governed by the provisions of Section 74 of the Indian Contract Act. What is payable in such a breach is only reasonable compensation. The court will consider both oral and documentary evidence provided by your employer as well as the employee before making a decision.

Please consider referring the matter to mediation or Lok Adalat and aim for a settlement. Understand that the judge is an unbiased person who will comprehend your situation if you explain it well. The law always protects the weak and needy.

Rajan Law Firm

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