Passport is the property of the Government of India. As per the Passport act, it is issued to the concerned citizen to be kept in his safe custody and to be used for travel abroad. And as per the same act, the passport must not be handed over to anyone else since it could be misused by the person.
You have to ask the HR person to give a receipt for the passport, mentioning the reason as to why they have kept it. If you give it to a travel agent to get a Visa of another country, they issue a receipt with the reason. This is required as per law.
Recently, there was a case in Bangalore, wherein the HR manager of a very small IT company used to take the passport of some selective gullible employees and keep it without issuing any receipt. The passport was then given to some outsider, who changed the picture and then tried to travel abroad. Obviously these travels used to happen for illegal purpose. He was caught in the immigration. When enquired, it was this HR manager who had taken the passport without the knowledge of the management. He was also arrested.
So, please send an official email to your HR manager that under the passport act, you are not supposed to part with the passport to any individual, leave alone the company without a proper receipt and the reasons mentioned therein. So please ask for the receipt with the reasons for retaining the passport. Mark a copy to your CEO. Ask them to return the passport immediately, if they do not have a valid reason to retain it, since as per the passport act, if someone has forcefully taken the passport by either misrepresenting facts or without consent, you have to immediately file a FIR with the nearest police station. You need to protect yourself from any violation of the passport act.
You can stress the fact that you are violating the passport act by parting with the passport without obtaining the reason in the receipt. And you would not like to do that. That should get them to think and immediately get the passport back.
Yes, in the middle east, some employers do take the passport. But the moment the employee complains to the embassy, the passport is given back. And the number of employers retaining the passports have reduced substantially, on account of a splurge of complaints from Indonesian maids. This happened a couple of years back, when the Indonesian government took a strong view and banned Indonesians from taking up jobs in Saudi Arabia. Then the Saudi government issued a notification that the passports cannot be kept with the employers. That is when the ban was lifted. Despite that, some employers do keep the passports. But then, either the trust level is good or the employee is gullible.
So protect your interests and ask them for the passport back in writing by quoting the passport act. Or ask them for a receipt wherein the reasons are mentioned. Tis is required by you, so that when the passport gets misused or lost, you can protect yourself.