Response
Legally speaking, any bond that any organisation signs with an employee stands null and void as per the Constitution of India.
As per Contract act in India, such bonds are not enforceable, since they are considered in restraint of trade.
In the past, many employees have violated such bonds and in such cases, companies have resorted to different means
Indian Constitution which deals with the fundamental rights saying that a worker can serve freely in any organization irrespective of a bond or a contract. According to the Indian Contract Act, any one-sided bond is considered null & void.
The agreement must be signed by the parties with free consent.
The conditions stipulated must be reasonable and:
The conditions imposed on the employee must be proved to be necessary to safeguard the interest of the employer.
The employment bond is to be executed on a stamp paper of appropriate value in order to be valid and enforceable.
Subir Ghosh v. Indian Iron and Steel Company
The Calcutta High Court dealt with the scope of Section 74 of the Indian Contract Act, in the context of a trainee. The terms of trainee contract contained a provision agreeing to serve the company for a particular period of time and to pay a fixed sum of damages in the event of a breach. The High Court held that since the stipulation in the agreement was for payment of liquidated damages, it is immaterial to specifically plead or prove damages and that it is open to the management to sue for recovery of the liquidated damages.
Reference: Section 27 of The Indian Contract Act, 1872
Article 19 of The constitution
Sicpa India Limited and Shri Manas Pratim Deb- Where the company stated that employee Manas had to work with them for a duration of 36-months. Leaving the contract in between will lead to a penalty amount of Rs. 200,000 payable to the company.
In this case, the court asked the employer to reveal the actual expense spent on the employee for his training which was Rs. 67,595. The court was in favour of the employee and considering the situation that the employee has served the company for a period of 2-years declared the amount payable to the company as Rs. 22,532 only.
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