Feeling Trapped by a Rs. 100 Stamp Paper Agreement: Is This Legal in India?

Legality of Services Agreement on Rs. 100 Stamp Paper

I recently joined a company and signed a services agreement on a Rs. 100 stamp paper where I am referred to as a CONSULTANT and NOT AS AN EMPLOYEE OF THE COMPANY. However, the points of the agreement are all in favor of the employer. The MINIMUM lock-in period is 5 years! If I am terminated by the company on disciplinary or performance grounds, or if I resign before the lock-in period, I have to pay six months' salary (Rs. Six Lakhs!). The notice period is also six months if I want to resign, and if the notice period is before completing the lock-in period, then again six months' salary, in addition to any other losses incurred by the company, is payable to the company by the employee.

Concerns About Workload and Agreement Terms

I am currently performing duties at the company that equate to the full-time work of two employees with separate expertise. However, the bond mentions the common expertise of two fields as my duty! I do not find any point in the agreement that is in favor of the employee except for payment and policy for increments. Additionally, I am prohibited, as per the agreement, from undertaking any paid or other assignments during the period of the agreement unless I obtain written permission from management.

Security Deposit and Legal Concerns

I was also required to submit an undated cheque worth six months' salary as a security deposit or token of trust, with a clause for encashment in case of breach of the service agreement. I have issued a stop payment order for the cheque to the bank. Can this be covered under the Negotiable Instruments Act if a stop payment is made? Please guide if such agreements are legal and valid in India.

Signing and Witnessing Issues

I signed the agreement in one city, and the other party might have signed it in another city. The space for the signatures of the witnesses (two witnesses) was there on the agreement, but only I signed it, and it was later sent to Mumbai for further signatures of the MD of the company. Please help. I am under tremendous pressure and do not have a copy of the agreement. No training of any type is provided by the company. I am extremely exhausted at the end of the day after 8 hours of work. I have never experienced this before. This is my first time signing a SERVICE AGREEMENT. Please guide.

I'm sorry to hear about your situation. This sounds like a highly stressful situation. I'll try my best to provide some guidance, but please remember, I'm not a lawyer, and this isn't legal advice.

1️⃣ Service Agreement Legality: Yes, service agreements on Rs. 100 stamp paper are legal and binding in India. However, the terms of the agreement must be fair and reasonable, and not one-sided or unconscionable. The Indian Contract Act, 1872, governs such agreements.

2️⃣ Lock-in Period and Penalty: A five-year lock-in period seems quite long, and the penalty of six months' salary for breaching the agreement could be deemed as a penalty clause, which may not be enforceable under the Indian Contract Act.

3️⃣ Notice Period: A six-month notice period is longer than what's usually observed (typically one to three months). It could be considered unreasonable.

4️⃣ Workload: If you are doing the work of two full-time employees, it may be a violation of labor laws, depending upon the specifics of your situation.

5️⃣ Outside Work Restrictions: Restrictions on outside work are common in service agreements. However, they should be reasonable and not overly restrictive.

6️⃣ Undated Cheque: The practice of taking undated cheques as a security deposit is not legal. If a stop-payment order is issued, it could potentially fall under the purview of the Negotiable Instruments Act, 1881.

7️⃣ Witness Signatures: If there are spaces for witness signatures and they are not filled, it may affect the enforceability of the agreement.

🔍 What Can You Do?

• Seek Legal Advice: Engage a labor law attorney to review your service agreement and provide advice based on your specific circumstances.

• Document Everything: Keep a record of all communication and actions related to your employment. This could be useful if a legal dispute arises.

• Discuss with HR: Have a candid discussion with your HR department about your concerns. They may be able to provide more clarity or possibly renegotiate some terms.

• Talk to Senior Management: If HR is not helpful, consider discussing your situation with senior management or even the MD.

• Legal Action: If you believe your rights are being violated, you may want to consider legal action. But do this only after getting advice from a legal expert.

Remember, this situation is complex and requires expert advice. It's essential to consult with a labor law attorney who can guide you more accurately based on your detailed circumstances and the specifics of the service agreement.