Is My Friend's Bank Contract Legal? Seeking Advice on Notice Period and Penalties

Contractual Obligations and Legal Validity

One of my friends works as an administrative manager at a cooperative bank. Upon joining, he received an appointment letter requiring him to agree to unspecified terms. He was informed of a one-year probation period, with potential extensions based on performance. However, during the formalities, he was compelled to sign a one-sided five-year contract. This contract stipulated that he must either forego or pay three months' salary with three months' notice and 2 lakhs if he left before the agreement period. Unfortunately, he had no choice but to sign the agreement, having already resigned from his previous company.

After a year, his contract was extended for another year, and later for two more years, totaling three years of service. Despite assurances of becoming permanent after one year, he remains under a contract agreement.

If he decides to leave, the bank now insists he must provide three months' notice without pay and pay 2 lakhs, as per the agreement terms.

Questions and Concerns

1) Is this type of agreement valid in law?
2) What are the consequences if he leaves the bank?
3) The bank is unwilling to provide a relieving or experience certificate.
4) He is unable to include this experience on his CV without a relieving or experience certificate.

Can the experts guide him on what steps he should take next?

You mentioned that your friend was issued an appointment letter and later made to sign a contract for five years with certain stringent conditions. The reply to your queries is given as follows:

Validity of the Agreement

1) Is this type of agreement valid in law? This type of agreement or contract is often signed to create psychological fear in the minds of employees. However, in practice, they are difficult to implement as they tend to be one-sided in nature.

Consequences of Leaving the Bank

2) If he leaves the bank, what will be the consequences? They will issue him a letter citing the violation of the terms and conditions of the contract. Additionally, they will not provide him with a relieving or experience certificate.

Relieving or Experience Certificate

3) They are not willing to provide a relieving or experience certificate. Certainly, as mentioned in my earlier response.

Impact on CV

4) He cannot show this experience on his CV as they are not willing to provide a relieving or experience certificate. You are correct, or he will need to explain the circumstances to the new employer to gain their confidence.

Regards, BS Kalsi