Signed an Offer on Stamp Paper but Now I Don't Want to Join—Can They Take Legal Action?

Hi sir, I have given the interview and I have been selected. The company offered me a position, and I signed the offer letter on the date 22/05/24, on a Rs. 100 stamp paper affidavit. In the content, it was written, "If you do not join the company, then you would have to pay half of the CTC offered by the company." I do not want to join the company, so what should I do? If I do not join, can the company take legal action, or is this type of offer on an affidavit not valid?

Liability for Compensation Before Joining a Company

If you have not joined the company, how can you become liable for any compensation? First, no company can make such an agreement that restricts the rights of a citizen. Second, an agreement signed on a non-judicial paper of Rs 100 is just like something written on a regular paper. Therefore, if you do not wish to join, send a communication stating that you are not interested. They cannot take any legal action. They may send some notices, but if you do not pay the amount, how will they recover it? Can they approach the District Collector and ask him to collect the amount through the revenue recovery process? NO.

Dear Madhu T K Sir,

Thank you for your excellent reply as always. I have a query in the same line; please do share your view.

Non-Joining Penalty

Some companies include a clause (under the Contract Act, 1872) in the offer letter stating that if you don't join, you have to pay X days' CTC as mentioned above. Does acceptance of the offer constitute "acceptance of the contract" and become binding under the Contract Act, 1872?

Legality of Stamp Paper/Notary/Franking of Appointment Letter of Org

I came across a case where the company used franking for the appointment letter, and the employee needed to sign it.

a. What is the difference between a normal appointment letter and a franked one?

b. What are the advantages and disadvantages of franking the appointment letter?

Thank you for your time and guidance in advance.

I agree with both Mr. Madhu and Mr. Student of Life. However, it's important to understand why the company included that wording in the agreement or contract. Before signing, one should carefully consider the implications. By not doing so, a candidate's opportunity is compromised, necessitating the company to restart the recruitment process.

Not all consequences are strictly legal; there are also moral implications. Signing a legally binding contract, such as an offer letter on stamped paper or affidavit, entails a moral obligation to honor its terms. Failure to do so could potentially lead to legal repercussions from the company. However, the enforceability of such clauses depends on various factors, including jurisdiction, contractual language, and local employment regulations. In India, contracts are generally upheld if they fulfill legal prerequisites such as free consent, lawful objectives, and consideration.

Validity of Employment Contracts and Restrictive Clauses

In the case of senior executives, you can have appointment orders franked or stamped. However, in general, it is not required because the employment contract will be governed by other laws than the Contract Act. Putting restrictive clauses and covenants that restrict an employee from leaving and joining another employer offering the same kind of work is illegal and voidable. Therefore, even if it is signed by the employee, it will become a voidable contract, and as such, the employee is always at the weaker end and can terminate the contract without any compensation.

Therefore, even if the employment contract is embodied in a stamp paper, it will not be valid if it contains any negative covenant or restrictive clause. The best example is putting a clause that "you will not be eligible for any gratuity when you leave" or "you will not be entitled to get any leave surrender" or "PF," etc. Even if it is accepted by the employee, it will become a negative covenant and can be challenged. Therefore, what is important is putting the conditions of employment in line with the applicable labor laws and not embodying everything on a stamp paper.