Response
The Indian courts have held that in the event of a breach of contract by the employee, the employer shall be entitled to recover damages only if a considerable amount of expenditure was borne by the employer. Indian law mandates the employment bonds to be ÒreasonableÓ in order to be valid.
The validity of Employment bonds can be challenged on the basis of Section27 of the Indian Contract Act. Section 27 of the Indian Contract Act, 1872 prohibits any agreement in restraint of trade and profession. Any agreement in trade and profession according to Section 27 is void.
As per the mandate of Section 27, any terms and conditions of an agreement which directly or indirectly compels the employee to serve the employer or puts a restriction on them joining the competitor or other employer is not valid under the Indian law, The employee has right to resign from the employment even if he has agreed in the employment bond to serve the employer for a specific period of time.
Sham Singh vs. State of Mysore
A bond was executed between a Student and State of Mysore, The state of Mysore agreed to pay for his education expenses in the United States of America. The stipulation for such payment was that after finishing his studies he would serve the State Government for a period of not less than 5 years. Another clause in the bond stated that if the student was not given employment within six months of his return from USA, the State of Mysore would have deemed to waive the right to claim his services. In the event of a breach of the bond, the Student was obliged to refund all the expenses incurred by the Government with interest. The student finished his studies and obtained a diploma in 1950 and with the permission of State stayed in USA for completing his practical training on his expenses. The Supreme Court held that staying in for 6 months in India after his return on account of domestic reasons did not indicate that he was waiting for the State to offer him an appointment.
Reference: Section 27 of the Indian Contract Act, 1872
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