I totally agree to it. Article 19 can not curtail the statutory right of the Employer if he has actually spend the money on training of an employee.
From India, New Delhi
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332From India, New Delhi
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Hi Lokesh Babu,
Many views have already been shared in these discussions, and they touch upon the legal or moral aspects of the matter. However, any decision should be based more on practical considerations rather than legal or moral thoughts.
As you mentioned, 75,000 INR is twice the salary they were paying, and you are moving for a "better opportunity," so I assume you will be earning more in the new job. Consider your preferences: would you prefer to remain in this job for another 20 months with the same salary (with periodic increments) or receive a higher salary (again with periodic increments)? Perhaps paying 75,000 will be more practical.
Furthermore, inquire with your new employer if they are hiring you as a trainee. If so, they may not require an experience certificate or a relieving letter from your previous employer. In that case, you may opt not to pay the amount.
If the new employer is hiring you as an experienced individual, you could negotiate with them to contribute to this 'Fund' so that you can join them with an experience certificate. Sometimes, if they truly value you and the amount is not substantial, they may cover the cost.
Keep in mind that the company could pursue legal action and provide a lawyer to handle the situation using legal terms. They may be able to afford it to set an example, especially if they already have a lawyer for other services.
Do you truly wish to invest time and effort in that direction? Would you rather pay a lawyer than settle with the old employer?
If, after careful consideration, you still believe it is wise not to pay, then also contemplate staying in the job for another 20 months. During such periods, employee morale tends to be low, and productivity may decrease. However, focus on pursuing your goals within the company. Acquire additional qualifications, seek training within the company, or dedicate time to your family. You may find these 20 months to be more rewarding than pursuing other goals in a new company.
Regards,
Amod.
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Many views have already been shared in these discussions, and they touch upon the legal or moral aspects of the matter. However, any decision should be based more on practical considerations rather than legal or moral thoughts.
As you mentioned, 75,000 INR is twice the salary they were paying, and you are moving for a "better opportunity," so I assume you will be earning more in the new job. Consider your preferences: would you prefer to remain in this job for another 20 months with the same salary (with periodic increments) or receive a higher salary (again with periodic increments)? Perhaps paying 75,000 will be more practical.
Furthermore, inquire with your new employer if they are hiring you as a trainee. If so, they may not require an experience certificate or a relieving letter from your previous employer. In that case, you may opt not to pay the amount.
If the new employer is hiring you as an experienced individual, you could negotiate with them to contribute to this 'Fund' so that you can join them with an experience certificate. Sometimes, if they truly value you and the amount is not substantial, they may cover the cost.
Keep in mind that the company could pursue legal action and provide a lawyer to handle the situation using legal terms. They may be able to afford it to set an example, especially if they already have a lawyer for other services.
Do you truly wish to invest time and effort in that direction? Would you rather pay a lawyer than settle with the old employer?
If, after careful consideration, you still believe it is wise not to pay, then also contemplate staying in the job for another 20 months. During such periods, employee morale tends to be low, and productivity may decrease. However, focus on pursuing your goals within the company. Acquire additional qualifications, seek training within the company, or dedicate time to your family. You may find these 20 months to be more rewarding than pursuing other goals in a new company.
Regards,
Amod.
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Excellent and a very different way to look at the issue, Amod. Let's see what choice Lokesh Babu will prefer or adopt - which we would know only if he responds to the various views expressed so far, on which I would keep my options open.
However, please desist from mixing up the alternatives at hand. Not that one would do it knowingly, but it's quite easy to slip into such a trap and not realize until it's very late. I have seen many such instances. There would also be some situations, including ones like the one under discussion here, that call for the legal option to be exercised and some where the moral option will need to be adopted - each with its own set of consequences or results. Like the quote goes: "In nature, there are no 'rights' or 'wrongs', only consequences."
The key, I guess, is to adopt the most appropriate solution under a given set of circumstances - and not pass the consequences of our actions or choices onto others.
Regards, TS
From India, Hyderabad
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However, please desist from mixing up the alternatives at hand. Not that one would do it knowingly, but it's quite easy to slip into such a trap and not realize until it's very late. I have seen many such instances. There would also be some situations, including ones like the one under discussion here, that call for the legal option to be exercised and some where the moral option will need to be adopted - each with its own set of consequences or results. Like the quote goes: "In nature, there are no 'rights' or 'wrongs', only consequences."
The key, I guess, is to adopt the most appropriate solution under a given set of circumstances - and not pass the consequences of our actions or choices onto others.
Regards, TS
From India, Hyderabad
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Dear Lokesh,
You have the laws of India in your support, but the moot question is whether you are willing to fight or not. As far as my knowledge and experience goes, as an individual, one will compromise, but given an opportunity, he will advise others to fight.
(1) Any bond executed between a prospective employer and an employee, heavily loaded in favor of the powerful prospective employer in this case, can be struck down by the courts if you are willing to challenge and spend time, money, and peace of mind.
(2) For a bond or contract where you are not allowed to modify or delete clauses not in your favor is again defective and can be challenged. If all employees have put their signature on a similarly worded bond, you have an additional point in your favor.
(3) The present practice of drafting a bond for "compensation of the amount spent on training" is a loophole devised by some companies. This can also be struck down if it is signed before you join the company as an employee. The companies are eligible for compensation for formal training (like sponsoring your training at a professional institute in India or abroad/sponsoring higher studies/fully paid leaves for training or professional courses, etc.) and not what you have learned ON THE JOB. You have protection by Indian laws if your company cannot show payment to a third party for your training.
Now, my advice, even though Indian laws are in your favor, most of us don't have a choice other than signing papers without even a single reading. Since a number of companies indulge in this malpractice, your fight will make these companies limp in offering a job to you.
Even though it is illegal and unethical, companies that don't have sound HR policies to retain talent use your vulnerability as a job seeker for this bond to retain talent. You have a long earning life, probably another 35 years. Your company may not survive that long. Go ahead, find another job, jump the bond without remorse. If payment of the bond amount is unavoidable, pay the bond amount. It is not training for which you are paying but learning from a bad experience.
Best of luck and wishes for grand future earnings which will make this payment look very tiny.
From India, Mumbai
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You have the laws of India in your support, but the moot question is whether you are willing to fight or not. As far as my knowledge and experience goes, as an individual, one will compromise, but given an opportunity, he will advise others to fight.
(1) Any bond executed between a prospective employer and an employee, heavily loaded in favor of the powerful prospective employer in this case, can be struck down by the courts if you are willing to challenge and spend time, money, and peace of mind.
(2) For a bond or contract where you are not allowed to modify or delete clauses not in your favor is again defective and can be challenged. If all employees have put their signature on a similarly worded bond, you have an additional point in your favor.
(3) The present practice of drafting a bond for "compensation of the amount spent on training" is a loophole devised by some companies. This can also be struck down if it is signed before you join the company as an employee. The companies are eligible for compensation for formal training (like sponsoring your training at a professional institute in India or abroad/sponsoring higher studies/fully paid leaves for training or professional courses, etc.) and not what you have learned ON THE JOB. You have protection by Indian laws if your company cannot show payment to a third party for your training.
Now, my advice, even though Indian laws are in your favor, most of us don't have a choice other than signing papers without even a single reading. Since a number of companies indulge in this malpractice, your fight will make these companies limp in offering a job to you.
Even though it is illegal and unethical, companies that don't have sound HR policies to retain talent use your vulnerability as a job seeker for this bond to retain talent. You have a long earning life, probably another 35 years. Your company may not survive that long. Go ahead, find another job, jump the bond without remorse. If payment of the bond amount is unavoidable, pay the bond amount. It is not training for which you are paying but learning from a bad experience.
Best of luck and wishes for grand future earnings which will make this payment look very tiny.
From India, Mumbai
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Dear All
Section 27 of the Indian Contract Act. Agreement in restraint of trade void. - Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void.
Exception of this section is that
Exception-1 : Saving of agreement is not to carry on business of which good is sold – One who sells the goodwill of a business may agree with the buyer to refrain from carrying on a similar business, within specified local limits, so long as the buyer, or any person deriving title to the goodwill from him, carries on a like business therein, provided that such limits appear to the Court reasonable, regard being had to the nature of the business.”
In Superintendence Company of india Vs Krishna (1980 AIR 1717) Supreme court held that a contract for restrain for trade is one by which a party restrains his future liability to carry on his trade, business or profession in such manner and with such person has he choose. A contract of such class is prima facie void.
In Pepsi Foods Limited and Others v Bharat Coca-Cola Holdings Pvt. Ltd. and Others (1981-1985 DLT-) delhi high court has held that that freedom of changing employment for improving service conditions is a vital and important right of an employee, which cannot be restricted or curtailed by a Court injunction.
The learned Single Judge of the Delhi High Court in Ambience India Private Limited v Naveen Jain ( 2005 (3) KLT SN 61 ) observed that the law is well settled that all contracts in restraint of trade are void and hit by section 27 of the Contract Act. He also held that prima facie view that the agreement between the parties prohibiting the defendant for two years from taking employment with any present, past or prospective customer of the plaintiff is void and hit by Section 27 of the Indian Contract Act. The court also held that the employment contract between the plaintiff and defendant was determinable in nature and as such the defendant was entitled to determine the same and seek another employment. Everybody has a right to strive for progress in career. The restrictions imposed upon the defendant in the agreement, therefore, were void and unconscionable.
In Star India Private Limited v. Laxmiraj Seetharam Nayek and Another the Bombay The Court observed that if the plaintiff had right to terminate the contract on the ground of misconduct, it cannot be said that the Defendant had absolutely no right to resign from the employment on account of better prospects or other personal reasons. If he finds a better employment with better remuneration and other service conditions, he cannot be tied down under the terms of the service contract. The Court held that any agreement restraining an employee, post-termination, from seeking employment elsewhere.
In R. Babu and Another v. TTK LIG Ltd Chennai,( 2005 LLR 71 (Mad. HC)). has vacated the injunction order issued by the learned Judge whereby an employee after tendering his resignation has joined another Company notwithstanding that he has entered into agreement that after cessation of his employment with the Company, he would not seek any employment in any establishment elsewhere of similar nature for a period of five years. The Court held that an agreement whereby an employee agrees not to join another competitive concern for a specified period after cessation of his employment, will be violate of public policy as stipulated by Indian Contract Act hence it cannot be legally enforced in the Court
We should understand that Most of the Employment bond are one sided and it is drafted in such a way that it only favors the employers and not the employees. The poor employee are signing the bond only to get a job and to earn a livelihood and there are employers who take advantage of the same. It is to be noted that when the employer gives training to the employee trainee they also make them work for the same and they are only giving them very less amount as salary. So according to me and as per the above quoted judgment by the Supreme Court and various High Courts the bond system ( Employment Bond) is against the law and against the mankind.
From India, Kochi
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Section 27 of the Indian Contract Act. Agreement in restraint of trade void. - Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void.
Exception of this section is that
Exception-1 : Saving of agreement is not to carry on business of which good is sold – One who sells the goodwill of a business may agree with the buyer to refrain from carrying on a similar business, within specified local limits, so long as the buyer, or any person deriving title to the goodwill from him, carries on a like business therein, provided that such limits appear to the Court reasonable, regard being had to the nature of the business.”
In Superintendence Company of india Vs Krishna (1980 AIR 1717) Supreme court held that a contract for restrain for trade is one by which a party restrains his future liability to carry on his trade, business or profession in such manner and with such person has he choose. A contract of such class is prima facie void.
In Pepsi Foods Limited and Others v Bharat Coca-Cola Holdings Pvt. Ltd. and Others (1981-1985 DLT-) delhi high court has held that that freedom of changing employment for improving service conditions is a vital and important right of an employee, which cannot be restricted or curtailed by a Court injunction.
The learned Single Judge of the Delhi High Court in Ambience India Private Limited v Naveen Jain ( 2005 (3) KLT SN 61 ) observed that the law is well settled that all contracts in restraint of trade are void and hit by section 27 of the Contract Act. He also held that prima facie view that the agreement between the parties prohibiting the defendant for two years from taking employment with any present, past or prospective customer of the plaintiff is void and hit by Section 27 of the Indian Contract Act. The court also held that the employment contract between the plaintiff and defendant was determinable in nature and as such the defendant was entitled to determine the same and seek another employment. Everybody has a right to strive for progress in career. The restrictions imposed upon the defendant in the agreement, therefore, were void and unconscionable.
In Star India Private Limited v. Laxmiraj Seetharam Nayek and Another the Bombay The Court observed that if the plaintiff had right to terminate the contract on the ground of misconduct, it cannot be said that the Defendant had absolutely no right to resign from the employment on account of better prospects or other personal reasons. If he finds a better employment with better remuneration and other service conditions, he cannot be tied down under the terms of the service contract. The Court held that any agreement restraining an employee, post-termination, from seeking employment elsewhere.
In R. Babu and Another v. TTK LIG Ltd Chennai,( 2005 LLR 71 (Mad. HC)). has vacated the injunction order issued by the learned Judge whereby an employee after tendering his resignation has joined another Company notwithstanding that he has entered into agreement that after cessation of his employment with the Company, he would not seek any employment in any establishment elsewhere of similar nature for a period of five years. The Court held that an agreement whereby an employee agrees not to join another competitive concern for a specified period after cessation of his employment, will be violate of public policy as stipulated by Indian Contract Act hence it cannot be legally enforced in the Court
We should understand that Most of the Employment bond are one sided and it is drafted in such a way that it only favors the employers and not the employees. The poor employee are signing the bond only to get a job and to earn a livelihood and there are employers who take advantage of the same. It is to be noted that when the employer gives training to the employee trainee they also make them work for the same and they are only giving them very less amount as salary. So according to me and as per the above quoted judgment by the Supreme Court and various High Courts the bond system ( Employment Bond) is against the law and against the mankind.
From India, Kochi
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Even if you quote 100 cases pertaining to section 27 of contracts and Art 19, it is clearly established in India that, the bond which hinders the development of the individual, and the bonds which are void abinitio, the bonds of malafide intentions, acts impossible to do anymore, would only be made exceptions..... In this case, it is only for 3 years, and that too are bifercated, secondly the purpose is clearly established, both parties benefit from it, thridly, terms and conditions of the contract and any clauses in it does not prove the malafide intentions nor does it highlight the exploitation....... And, as discussed earlier, very true and agreed that No body can force any one to do anything, in such cases the other party who under go the losses can not keep quite in silence, he also has the right in personam to get what he was asked for and invested upon, so can always claim either for specific performance, surely for compensation and damages......
I kindly request you to read the case completely, and please know the difference between complete restraining/restrictions and reasonable restrictions, because the cases you have referred are irrelevant in this matter...... I would rather request you to check out for the case for "breach of employment contracts" in which the rights and libilities of the employer and employee.......... and also refer the cases under apprenticeship act......
In this case, if the areement is valid and the employer is bonafide mens mentis , then the candidate here can never escape the liability........
In simple words, no body can force you to do the act, but once you have agreed to do the act, which is legal, possible to be completed, then you are ;iable for what ever you are agreed for, and in case of your failure to do such acts agreed upon, you will have to pay the compensation and damages to the otherparty.....
Just think generally, if what ever the cases mentioned in there apply in every case, what should the employers do?? every on leave after the training..... who will substantiate the losses and what is the return on investment???
If still could not grasp the points said, I can explain the same taking each case being quoted and how they are not relevant in this particular matter, and how the issues completely differ.......
Both the parties are equally supported by law, what ever may the matter, afterall natural justice can never be ignored.....
From India, Bangalore
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I kindly request you to read the case completely, and please know the difference between complete restraining/restrictions and reasonable restrictions, because the cases you have referred are irrelevant in this matter...... I would rather request you to check out for the case for "breach of employment contracts" in which the rights and libilities of the employer and employee.......... and also refer the cases under apprenticeship act......
In this case, if the areement is valid and the employer is bonafide mens mentis , then the candidate here can never escape the liability........
In simple words, no body can force you to do the act, but once you have agreed to do the act, which is legal, possible to be completed, then you are ;iable for what ever you are agreed for, and in case of your failure to do such acts agreed upon, you will have to pay the compensation and damages to the otherparty.....
Just think generally, if what ever the cases mentioned in there apply in every case, what should the employers do?? every on leave after the training..... who will substantiate the losses and what is the return on investment???
If still could not grasp the points said, I can explain the same taking each case being quoted and how they are not relevant in this particular matter, and how the issues completely differ.......
Both the parties are equally supported by law, what ever may the matter, afterall natural justice can never be ignored.....
From India, Bangalore
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Dear Babu,
The company may offer you to sign a service bond at the time of joining. However, the service bond to be valid and enforceable should fulfill the following conditions. If these conditions are not fulfilled, the bond may not be valid and enforceable.
1) The company should have spent at least Rs. 75,000/- towards your training and personal development, etc.
2) Or the company should have offered you an additional amount by way of retention of salary or by any other means over and above the agreed salary offered to you for signing the bond. If no additional benefits are offered, the bond is invalid.
3) In your absence, if the company is, in fact, suffering a loss of Rs. 75,000/- only then can they claim the said amount by way of liquidated damages. Before the said amount is claimed from you, they should be able to establish with documentary proof that they will suffer a loss of Rs. 75,000/- on account of your absence.
4) Under the provisions of the Indian Contract Act, no party can claim a penalty from the opposite party. The imposition of a penalty is prohibited in India.
5) Under present laws, no employer can withhold Provident Fund or any other dues from employees. These are retained by statutory authorities and could be withdrawn in the absence of the employer. Under such circumstances, the only option available to your employer is to file a civil suit for the recovery of their bond amount if they can justify their demand before a court of law.
Just because you have signed a service bond does not mean that you are required to deposit any amount to your employer. If they recover any amount from your full and final settlement, they would be doing so at their own risk and cost and shall also be liable for prosecution under The Payment of Wages Act.
P.N. Pathak
SR HR Manager
From India, Pune
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The company may offer you to sign a service bond at the time of joining. However, the service bond to be valid and enforceable should fulfill the following conditions. If these conditions are not fulfilled, the bond may not be valid and enforceable.
1) The company should have spent at least Rs. 75,000/- towards your training and personal development, etc.
2) Or the company should have offered you an additional amount by way of retention of salary or by any other means over and above the agreed salary offered to you for signing the bond. If no additional benefits are offered, the bond is invalid.
3) In your absence, if the company is, in fact, suffering a loss of Rs. 75,000/- only then can they claim the said amount by way of liquidated damages. Before the said amount is claimed from you, they should be able to establish with documentary proof that they will suffer a loss of Rs. 75,000/- on account of your absence.
4) Under the provisions of the Indian Contract Act, no party can claim a penalty from the opposite party. The imposition of a penalty is prohibited in India.
5) Under present laws, no employer can withhold Provident Fund or any other dues from employees. These are retained by statutory authorities and could be withdrawn in the absence of the employer. Under such circumstances, the only option available to your employer is to file a civil suit for the recovery of their bond amount if they can justify their demand before a court of law.
Just because you have signed a service bond does not mean that you are required to deposit any amount to your employer. If they recover any amount from your full and final settlement, they would be doing so at their own risk and cost and shall also be liable for prosecution under The Payment of Wages Act.
P.N. Pathak
SR HR Manager
From India, Pune
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Dear Mehrunisa,
You are again mixing things. No bond says that you have serve the management for eternity. Every bond says that the employee has to serve till the money spent on the training of that individual employee is recovered and even though you want to leave the organization of the employer, you may do so but in that case you have to pay the amount the employer has spent on the training of such employee.
One simple question from you, Suppose you are the employer and you train a fresher or any employee to raise his skills in his work domain and just when he gets trained he leaves your employment by saying that now i know how to do such things and some other employer is paying me more hence i am going. Just step into the shoes of such an employer, dont you feel it is cheating against him. The employer spends a lot on employee training and he is well within his right to get benefit out of it to some extant. The bonds are totally legal documents. Believe me i have got them enforces in the court of Law. But the same were genuine ones.
Article 19 and section 27 are different Scenarios. they give you safety from being slave of a company not from cheating a company.
From India, New Delhi
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You are again mixing things. No bond says that you have serve the management for eternity. Every bond says that the employee has to serve till the money spent on the training of that individual employee is recovered and even though you want to leave the organization of the employer, you may do so but in that case you have to pay the amount the employer has spent on the training of such employee.
One simple question from you, Suppose you are the employer and you train a fresher or any employee to raise his skills in his work domain and just when he gets trained he leaves your employment by saying that now i know how to do such things and some other employer is paying me more hence i am going. Just step into the shoes of such an employer, dont you feel it is cheating against him. The employer spends a lot on employee training and he is well within his right to get benefit out of it to some extant. The bonds are totally legal documents. Believe me i have got them enforces in the court of Law. But the same were genuine ones.
Article 19 and section 27 are different Scenarios. they give you safety from being slave of a company not from cheating a company.
From India, New Delhi
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Hello Everyone,
Where, in this mela, is Lokesh Babu? Looks like he's vanished into thin air—after realizing that he can't misuse the many well-intentioned provisions of the law—not even clarifying some points as requested by some members. However, a BIG WORD OF THANKS to him—got to learn a lot due to this thread initiated by him. Thanks, everyone, for such a highly enriching level of debate.
Regards,
TS
From India, Hyderabad
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Where, in this mela, is Lokesh Babu? Looks like he's vanished into thin air—after realizing that he can't misuse the many well-intentioned provisions of the law—not even clarifying some points as requested by some members. However, a BIG WORD OF THANKS to him—got to learn a lot due to this thread initiated by him. Thanks, everyone, for such a highly enriching level of debate.
Regards,
TS
From India, Hyderabad
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Mr. Babu,
First of all, a bond is not valid in India under fundamental rights. Secondly, at the time of resignation, you are under a probation period, meaning they have not made you a permanent employee. The relation between 'teacher and student' does not stand because the training period is over (after 16 months). If we consider this relation, the question arises: who is the teacher and who is the student when they have hired your services? Ask the company to provide you with training documents that you have signed indicating that you have received proper training. Never use the word 'prove' before the company; the company can prove it.
Best of luck
From India, Ahmadabad
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First of all, a bond is not valid in India under fundamental rights. Secondly, at the time of resignation, you are under a probation period, meaning they have not made you a permanent employee. The relation between 'teacher and student' does not stand because the training period is over (after 16 months). If we consider this relation, the question arises: who is the teacher and who is the student when they have hired your services? Ask the company to provide you with training documents that you have signed indicating that you have received proper training. Never use the word 'prove' before the company; the company can prove it.
Best of luck
From India, Ahmadabad
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