Addressing Employee Retention and Legal Concerns
Further to what other members have mentioned or suggested, I find your last line a bit amusing: "Is there any legal step possible to be taken? Signing on a bond paper is legal or illegal!"
Let's assume, for the sake of argument, that a bond is legal in India (which it isn't, UNLESS it's related or linked to some specialized training).
Now what? You get the employees to sign bonds and ensure they stay (please note that there will always be those who will find ways to beat this rule too, which CAN include dragging the company to court) for 12 months or any other period.
But as HR (which I presume you are), is your job done IF they stay for a period of time OR is it done IF they are productive during their stay in the company? The choice is YOURS.
Focusing on Productivity and Workplace Environment
And how does productivity come about? Surely not by getting bonds signed. I suggest focusing, as Nathrao and others have mentioned, on making this an interesting place to work. Please note that there are ways to balance low salaries too, IF this has been a stumbling issue (as it is in most small companies).
Right now, you aren't even sure of the reason(s) for this situation (all you mentioned is that this situation exists, which frankly is surely an important step - that of recognizing that there's an issue) and you seem to be looking for solutions.
Identifying Root Causes and Solutions
Put your efforts into FIRST identifying the root cause(s) and THEN think of the most apt solutions. Actionable solutions are bound to come once you get to know the causes.
Engaging with Departing Employees for Insights
The BEST people who can give you accurate and realistic insights into the causes would be those who have left or are leaving. BUT... and this is a BIG but... you have to be seen to be transparent and fair when you are inquiring from them. The moment they 'feel' you are 'using' them, you know what they tell you.
In a nutshell, so far you have been viewing such employees as a 'part of the problem'. Now begin to view them as 'part of the solution'.
All the Best.
Regards,
TS