Is It Legal for My Company to Demand a Bond After I've Resigned? Seeking Advice!

One month ago, I submitted my resignation to my company. Now, my company is asking me to sign a bond which states: "Employee cannot join any client company for three years after working for more than 6 months from the date of leaving. If I join such a company, I will need to pay 10 lakhs to my current company."

I went onsite and returned in September 2012. At that time, the policy stated that "Employees cannot join any client company for 6 months after returning from a client company."

There was no prior notification to me or any other employee about this policy change, and they are asking me to sign this bond after I have already submitted my resignation. If I refuse to sign the bond, they are unwilling to provide me with a relieving letter.

Is it legal to request any type of bond after resignation?

Regards,
Alok
[Phone Number Removed For Privacy Reasons]

There is absolutely no legal basis for asking for such a bond after resignation. How long were you on-site? Also, what is the basis for the amount to be 10 lakhs? I suggest waiting for the legal members to respond with the course of actions available to you.

All the best.

Regards, TS

I was at the client location (Intel Bangalore) for almost 11 months. Basically, they are saying that if an employee joins the client company, then our company is not getting projects from the client.

Regards,
Alok

Please let me know about any legal action against this.

Regards,
Alok

Steps to Handle Bond Signing and Relieving Letter Issues

Firstly, try to get it in writing from them that they will not issue the relieving letter until you sign this bond. Upon receipt of the written evidence from them, send them an official email seeking a relieving order. State in the email that these new terms cannot be incorporated at their whims and fancies. Also, for a contract, the terms have to be mutually agreed upon before the start of employment and not enforced by blackmail and arm-twisting.

Mention in the email that not issuing a relieving letter by forcing you to sign a bond is blackmail, and it attracts penalties under both the IPC and Cr.PC. Therefore, you will be constrained to file a police complaint. They will fall in line.

Case Study: Successful Resolution of a Similar Issue

A similar case happened last week. An employee from a body shopping company was working at the client's place (HP). He got a job in another MNC company. He was asked for a bond or a huge compensation if he works for any client company. He asked them to give it in writing and responded by stating that since he was being blackmailed, he had no other alternative but to file a police complaint. After he received the letter from them in writing, there was tremendous pressure on him to sign the bond. He plainly told them he was getting legal opinion. Those individuals in the company bought this. On the last working day, he sent an email at 5 pm stating he had been advised to go to the Police with a complaint. Within 15 minutes, his relieving order was issued.

Hope you succeed too.

There is no provision for asking for a bond after submitting a resignation letter. You should consult legal experts to address this matter.

I will be relieved on 15th May 2013. I have initiated the process via email. Can you please suggest some legal sections that I can refer to and apply accordingly?

Regards,
Alok

You may go ahead and tell your HR team that you refuse to sign any bond at this stage after you have resigned and that you are not willing to agree to changed conditions. Depending on what the business is, you need to see which act you are covered in. Most shop and establishment acts provide for giving releasing letters/service records except in absconding cases. So you are protected by law.

In case you do not get a relieving letter, it's not such a big deal. Keep records of the mail from HR asking you to sign the bond or that they will not give a relieving letter, and all your correspondence in the matter. Show it to your future employers, and they will understand.

Incidentally, you can also sign the bond, as it has no legal validity. There are court cases declaring that a bond or agreement restricting future employment is illegal in India (search for the cases on Google). So even if you sign and then join a client, they can't do anything against you. But it's better that you do not sign the agreement.

Enforceability of Contracts and Bonds

What has not been agreed to as a contract cannot be enforced by the other party. The contract for service has been executed by you and your employer in terms of the offer of appointment, your acceptance followed by the appointment letter.

In case the details and conditions of the bond have not been included in your appointment letter, at a later date, the employer cannot enforce the same unless there has been another agreement after your training or a special assignment including a foreign trip.

In the absence of a pre-existing contract between you, the employer cannot enforce any further financial conditions unilaterally. If any employer persists with his threat, he will be liable for criminal prosecution.

Regards,
A. Irudayam
Advocate - Madras High Court
[Phone Number Removed For Privacy Reasons]

It is illegal to ask for a bond unless your employer has made special efforts, such as providing special training, at their cost, to enhance your skills. After submitting your resignation, forcing you to sign a bond is entirely unethical on the employer's part. Your appointment letter serves as your employment contract with your employer, and its terms and conditions are binding on you. Even if you decide to join a competitor of your current employer after resigning, your current employer cannot impose any restrictions unless it aligns with what was mentioned in point No. 1 above. If you face any legal threats from your employer, they will be seen as akin to bonded labor, which is prohibited in India, rendering such legal threats null and void in a court of law.

Now, you can confidently proceed with your decision to leave the company and join a new employer. However, you may need to persuade your new employer if they request your relieving and service letters.

Regards, Suresh

The provision you are looking for is section 27 of the Indian Contract Act. I am reproducing the same below.

Agreement in Restraint of Trade Void

27. 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, to that extent, void. 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, as long as the buyer or any person deriving title to the goodwill from him carries on a like business therein, provided that such limits appear to the Court reasonable, having regard to the nature of the business.

Your situation clearly falls under the said section. These kinds of agreements are void in the eyes of the law. They are not enforceable even if you sign them. Do not worry; you may contact the police even if they try to force you to sign the agreement.

Regards

Understanding the Bond Issue

I am really very thankful to you all. I have tried to get a written statement from the HR team saying, "They will not give me a relieving letter until I sign this bond." However, the HR team is only communicating this verbally. Tomorrow is my last day, and I will follow the advice suggested by the members. I am copying the entire email chain I had with my HR manager. Note that she hasn't replied yet.

-========

Hi Suhasini Mam,

I went to Intel in December 2011. At that time, AMI INDIA's policy was that an employee couldn't join any client company until six months after returning from the client company. I have already completed my six months after returning from onsite. Later, this policy was changed, and I was neither informed nor asked to sign it beforehand.

For a contract, the terms have to be mutually agreed upon before the start of employment, not after resignation. I submitted my resignation on April 9, 2013, and I was informed about this bond policy just two days before my relieving date (May 15, 2013).

I have already completed my six months after returning from onsite, so I believe I am not the right employee to be asked to sign this bond. I am not ready to sign it. Please let me know if I can get my relieving letter without signing this bond.

Regards,

Alok

From: Alok Kumar Agarwal
Sent: Tuesday, May 14, 2013, 11:52 AM
To: Rajesh S; Suhasini Ramakrishnan
Cc: Ramesh Raju; Vinod Kumar Mishra; 'alokal.123@gmail.com'; 'alok_electronics@yahoomail.com'
Subject: RE: Letter of Resignation

Hi Suhasini Mam/Rajesh,

As my last day of relieving is May 15, 2013, please provide some comments on the questions below as soon as possible.

Regards,

Alok

From: Alok Kumar Agarwal
Sent: Monday, May 13, 2013, 5:09 PM
To: Rajesh S
Cc: Suhasini Ramakrishnan; Ramesh Raju; Vinod Kumar Mishra; Alok Kumar Agarwal; [Email Removed For Privacy Reasons]; 'alok_electronics@yahoomail.com'
Subject: RE: Letter of Resignation

Hi Rajesh,

Meanwhile, I have some questions:

a) When I went onsite, AMI INDIA's policy was that we couldn't join any client company until six months after returning from onsite. On what exact date did this bond come into the picture?

b) Is this indemnity bond shared by AMI-INDIA with the employees anywhere on EPMS? Please share the link with me as well.

c) As I got the format of the indemnity bond, it looks like an onsite bond. In normal cases, any company can ask for this type of bond before sending an employee onsite. So why was this bond not asked to be signed before sending me onsite?

d) Why was there no official intimation to me before my resignation?

e) Is it legal to ask for any kind of bond after resignation?

At the time (December 11, 2011), I went onsite, and AMI-INDIA didn't have this policy, so I think I should not come under this bond. Please let me know your comments here.

Regards,

Alok

From: Alok Kumar Agarwal
Sent: Monday, May 13, 2013, 3:03 PM
To: Rajesh S
Cc: Suhasini Ramakrishnan; Ramesh Raju; Vinod Kumar Mishra
Subject: RE: Letter of Resignation

Hi Rajesh,

Can you please let me know what an indemnity bond is? Can you please share a soft copy with me for this bond?

Regards,

Alok

From: Rajesh S
Sent: Monday, May 13, 2013, 2:56 PM
To: Alok Kumar Agarwal
Subject: Letter of Resignation

Dear Alok (8809),

Greetings!

It is unfortunate that you have decided to end your employment with us. Since you have decided to carry on, we would like to familiarize you with the AMI separation policy in brief.

1. AMI requires all employees to serve the notice period applicable to your band. You are required to serve 45 days starting from April 9, 2013. Your last working day would be May 23, 2013. This notice period is not negotiable, and we request you not to ask for a waiver. However, your unit's Head approved an earlier date, so your last working day in AMI is May 15, 2013.

2. During the notice period, you are not eligible for CL or EL. Should you fall sick, you need to submit a doctor's certificate for your absence.

3. Should you have any financial dealings such as a bond or salary, please check with finance or HR and close it before your last working day.

4. HR will record your resignation in Adrenalin one week from the last working day. Please work with the respective team members to ensure all your dues are closed at least one day in advance. Once we record your last date in Adrenalin, it cannot be changed.

5. Please submit your proof of investments to finance one week before the last working day, and you have to pay the bond amount of 75,000 before relieving, and you have to sign the indemnity bond.

For more clarity, please refer to the Employee Handbook for more details.

Should you have any doubts, please feel free to contact me or Senthil from the HR team.

Thanks & regards,

S. Rajesh

===========

Regards,

Alok

Follow what Anonymous shared. Send your employer a registered letter stating the resignation and its acceptance details. Address the exit formalities and offer to pay for any notice period that you wouldn't serve. Put a date and a time within which if they do not respond, it would naturally stand as a closed case. Include the information that KamalKant shared in the letter, mentioning how the claim for the bond stands as valid. Have a lawyer proofread your letter before you mail it.

Remain as determined as you are now. When joining your new employer, mention that you were required to sign a bond after the resignation, which you denied as it is illegal. This will take care of your background verification. Show them this registered letter in case you receive no experience certificate. No further comments from your ex-employer would then have any impact.

Wish you all the best!

Signing a Bond After Resignation: Legal Implications

Requesting or forcing an employee to sign a bond after tendering resignation will never stand. This is just a desperate attempt to stop your movement.

In case the company is not giving a relieving letter, meet a lawyer and proceed further as per his advice.

I want to remove comment 15 from this site. Please let me know the process.

Alok