Public sector bank release/exit/bond/notice period Public sector bank release/exit/bond/notice period

Hello. .. After my training, posting was given in extreme South indian rural village. Being a North indian girl, I faced extreme hardships like no female staff, no veg food, no proper transfer, no medical store, no proper washrooms, no hindi/english speaking people(only tamil speaking), no safety, no basic amenities. I got very scared and depressed in one day only and underwent mental trauma I went back to my home town(2000km away from branch) just after joining branch for one day. I was in poor mental state for a month due to the kind of things I faced alone. After one month of leave, by manager's mistake or by hrm section mistake , my salary of one month credited in account. I withdrawn the salary for my treatment as I had no money. I have now given resignation to bank but bank is asking me to sign a form and also pay: 1 month salary (51000) +3 months notice period gross salary(171000) + bond amount(118000) =4 lakhs approx. This is a very big amount which I cannot pay. I am planning to take tutions Or join any pvt company near my home only.
Kindly let me know what will happen if I am not able to pay the total settlement amount. What all are the consequences. I am scared whether this will lead to case/trial/imprisonment.
Should I return back one month salary?
What all are the possible solutions?

Kishan Dutt Kalaskar Retired Judge

Responded 1 month ago

View All Answers
A.Dear Madam,
It is only a civil dispute and you cannot be imprisoned. You may know the law on this issue as follows:
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Remedies available to employer and employee on breach of service bond
In the event of breach of employment bond, the employer might incur a loss and, therefore, may be entitled for compensation.4 However, the compensation awarded should be reasonable to compensate the loss incurred and should not exceed the penalty, if any, stipulated in the contract.5 Usually, the court determines the reasonable compensation amount by computing the actual loss incurred by the employer having regard to all circumstances of the case. Even if the bond stipulates payment of any penalty amount in the event of breach, it does not mean that the employer shall be entitled to receive the stipulated amount in full as compensation on the occurrence of such default; rather the employer shall be entitled only for reasonable compensation as determined by the court. While exploring alternate remedies available to the employer in the event of default by the employee, it would be interesting and worthwhile to discuss whether the employers are entitled to seek for reinstatement of their employee or obtain restraining order against the employee from joining any competitor/alternate employer because many such similar reliefs have been sought by the employers in various suits. The apex court, while dealing with similar query, has held that the specific performance action cannot be sought for breach of contract of personal service or bond6 and, therefore, the employer shall not be entitled to seek for reinstatement of their employees as relief in the event of breach of bond. In another matter, the apex court has held that it is not bound to grant an injunction in every case and an injunction to enforce a negative covenant would be refused if it would indirectly compel the employee to idleness or to serve the employer7 and, therefore, the courts are also reluctant to grant injunction against the employees restricting their employment with other employer unless it is necessary for the protection proprietary interests or trade secrets of the employer.
As mentioned, the conditions stipulated in the employment bond should be reasonable in order to be valid and, therefore, even if unreasonable condition/clauses are stipulated in the contract such as imposing exorbitant duration of compulsory employment period or huge penalty upon the employee, the court shall award compensation only if it determines that the employer has incurred loss by such breach of contract. The court normally considers the actual expenses incurred by the employer, the period of service by the employee, conditions stipulated in the contract to determine the loss incurred by the employer to arrive at the reasonable compensation amount. For instance, in the case of Sicpa India Limited v ShriManasPratim Deb,8 the plaintiff had incurred expenses of INR 67,595 towards imparting training to the defendant for which an employment bond was executed under which the defendant had agreed to serve the plaintiff company for a period of three years or to make a payment of INR 200,000. The employee left the employment within a period of two years. To enforce the agreement the employer went to the court, which awarded a sum of INR 22,532 as compensation for breach of contract by the employee. It is crucial to note that though the bond stipulates a payment of INR 200,000 as compensation for breach of contract, the judge had considered the total expenses incurred by the employer and the employee's period of service while deciding the compensation amount. Since the defendant had already completed two years of service out of the agreed three year period, the judge divided the total expenses of INR 67,595 incurred by the plaintiff into three equal parts for three years period and awarded a sum of INR 22,532 as reasonable compensation for leaving the employment a year before the agreed time period. Similarly, the High Court of Andhra Pradesh in the case of Satyam Computers v Leela Ravichander,9had also reduced the compensation amount considering the period of service of the employee.
In view of the aforesaid discussions and various court decisions, the employment bond is considered to be reasonable as it is necessary to protect the interests of the employer. However, the restrains stipulated upon the employee in the said contract should be "reasonable" and "necessary" to safeguard the interests of the employer or else the validity of the bond may be questioned. The employees are always free to decide their employment and they cannot be compelled to work for any employer by enforcing the employment bond. The court can; however, issue order restricting the employment of the employee only if the said action is deemed necessary to safeguard the trade secrets/proprietary interest of the employer. In the event of breach of contract by the employee, the only remedy available to the employer is to obtain a reasonable compensation amount. The compensation amount awarded shall be based upon the actual loss incurred by the employer by such breach.
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question iconEmployment bond - have signed a bond of 3 years
Dear Sir, Fertiliser and Chemical Travancore Pvt. Ltd v. Ajay Kumar and Others Three trainees were selected by the employer who signed a bond stating that they would obtain two years of training in the company and after the training they will put in at least five years of service in the company. In the event of breach of this condition Rs. 10,000 was to be paid as reasonable amount of compensation for the damages to be likely incurred by the employer. The trainee resigned after five months of training. The High Court of Kerala held in this case that though the candidates were selected for training and not for permanent service, it still involved a lot of time, energy and expenses of the employer. The employer will surely suffer loss when a trainee breaks the condition of bond and walks off. The employer is derived of the expected service of a competent person. Breach of bond by the trainee is aspect entailing damages to the employer. Only the quantum of damages needs to be decided. The Indian courts have been reluctant to restrain the employee from joining a competitor/other employer ======================================================================================== Non compete clause, it is prohibited under the Law of Contracts. ====================================================================================== Section 27 of the Indian Contract Act-1872 provides that ”Every agreement by which anyone is restrained from exercising a lawful profession or trade or business of any kind, is to that extent void”. Exception : One who sells goodwill of a business with a buyer to refrain from carrying on a similar business within specified local limits so long as the buyer, or any person derivingtitle 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 business. Indian law is therefore very clear and strict on this point, any such non compete agreement shall not be binding on the parties and the same shall be null and void. By using the term void ab initio, for such type of agreements it has shown that it has kept such non compete clause in the agreements beyond consideration. Indian courts have also consistently refused to enforce post termination non compete clauses in employment contracts as “restraint of trade” is impermissible under section 27 of the Indian Contract Act-1872, and have held them as void and against the public policy because of their potential to deprive an individual of his or her fundamental right to earn a living. However considering the developed social, legal, and corporate circumstances, and the required confidentiality and the integrity of the employments, the judiciary has inclined its view towards giving some regard to the non compete agreements. In the case of ‘Niranjan Shankar GolikariVs the Century Spinning and Manufacturing Company Ltd.’ , the Hon’ble Supreme Court observed that-“restraints or negative covenants in the appointment or contracts may be valid if they are reasonable”. Further in one case - V.F.S. global services Pvt. Ltd Vs Mr. Suprit Roy, 2008(2) Bom CR 446, the Bombay High court established the principle that a restraint on the use of trade secrets during or after the cessation of employment does not tantamount to a “restraint on trade” under section 27 of the Act and therefore can be enforceable under certain circumstances. In the case of Mr. Diljeet Titus, AdvVs Mr. Alfred A Adebare& Ors 2006(32)PTC 609 (Del), Delhi High court held that “The real test was the degree of employment control to determine whether it was a contract of service…” . Like these there are several other judgements of various High courts which have laid down certain tests or guidelines to check the validity and legality of imposition of restrictions on such non competing agreements. It shows that Indian courts may in certain circumstances enforce confidentiality agreements intended to protect an employer’s proprietary rights. Like these there are several other judgements of various High courts which have laid down certain tests or guidelines to check the validity and legality of imposition of restrictions on such non competing agreements. It shows that Indian courts may in certain circumstances enforce confidentiality agreements intended to protect an employer’s proprietary rights. Enforceability Of Employment Bond http://www.mondaq.com/india/x/237806/employee+rights+labour+relations/Enforceability+of+Employment+Bond 1 Central Inland Water Transport Corporation v BrojonathGanguly, (1986)IILLJ171SC 2 Niranjan Shankar Golikari v The Century Spinning and Manufacturing Company Ltd, AIR 1967 SC 1098 3 IBS Software Services Group v Leo Thomas, 2009 (4)KLT 797 4 Section 73 of the Contract Act, 1872 5 Section 74 of the Contract Act, 1872 6 NandganjSihori Sugar Company Ltd v Badrinath Dixit, & Ors, AIR1991 SC 1525 7 Gujarat Bottling Co Ltd v Coca Cola Company, AIR 1995 SC 2372 8 MANU/DE/6554/2011 9 MANU/AP/0416/2011 Introduction The present era is experiencing phenomenal changes in the economy and industrial processes, which has resulted in greater business competition. To cope up with competition, the employers incur huge expenditure in imparting training to their employees for improving the quality of goods and services of the company. However, sometimes the employees leave their employment after honing the skills & improving the knowledge of the industry for better salary and incentives. The increasing rate of attrition subjects the employers not only to financial losses but also delays in completing the ongoing projects thereby directly impacting their goodwill & reputation in the market. Therefore, in order to safeguard their interest, employers have of late started to obtain an employment bond from their employees who are found suitable for training or skill development. Such employment bonds are agreements between the employer and employee wherein among other terms & conditions of the employment, an additional clause is incorporated which requires the employee to serve the employer compulsorily for a specific time period else refund the amount specified as bond value. The question that arises here is whether such a method to retain employees is effective, acceptable and enforceable under the law. This article discusses the enforceability of employment bond and the rights available to the employers and employees under the agreement in light of various court decisions. 1. Employment bond: need and enforceability? Generally before selecting employees for providing training or skill enhancement program, employers take necessary safeguard of conducting interviews, take assurances that employee will stick to complete the projects for which he is being trained and shall also train the other co-employees so that an effective and efficient work environment is created. However, employees still tend to leave for greener pastures and, therefore, it is increasingly becoming necessary for the employers to enter into an employment bond to safeguard their interests. If employee leaves the employment without serving the company for agreed time period, the employer is expected to suffer due to the undue delay in completing the work undertaken, which can ultimately affect its reputation/creditability in the market. To prevent such situations, the employer can compensate the loss incurred if a valid employment bond has been executed. Such bonds also deter the employees from committing any breach of the agreed terms and conditions. Now, the most pertinent question that arises here is whether the employment agreement with negative covenant is enforceable under Indian laws? The simple answer is yes. Such employment agreements with the negative covenant is valid and legally enforceable if the parties agree with their free consent i.e. without force, coercion, undue influence, misrepresentation and mistake. The courts in India have held in its various judgments that in the event of breach of contract by the employee, the employer shall be entitled to recover damages only if a considerable amount of money was spent on providing training or incurred other expenses for the employee. Further, the courts have been reluctant to restrain the employee from joining a competitor/other employer. The employment bond will not be enforceable if it is either one sided, unconscionable or unreasonable. Therefore, it is pertinent to be cautious while drafting the employment bond because it is mandatory that the conditions mentioned in the employment bond, including the compulsory employment period and amount of penalty are reasonable in order to be valid under the Indian law. The term "reasonable" is not defined under the legislation and, therefore, the meaning has to be determined on a case by case basis depending upon the issues involved and circumstances of the case. In general, the conditions stipulated in the contract should justify that it is necessary to safeguard the interest of the employer and to compensate the loss in the event of breach of contract. Further, the penalty or compulsory employment period stipulated in the contract should not be exorbitant to be considered as valid and to be regarded as reasonable. 2. Challenging the enforceability of employment bond The validity/enforceability of the employment bond can be challenged on the ground that it restrains the lawful exercise of trade profession or trade or business. As per section 27 of the Contract Act, 1872, any agreement in restraint of trade or profession is void. Therefore, any terms and conditions of the agreement which directly or indirectly either compels the employee to serve the employer or restrict them from joining competitor or other employer is not valid under the law. The employee, by signing a contract of employment, does not sign a bond of slavery and, therefore, the employee always has the right to resign the employment even if he has agreed to serve the employer for specific time period.1 However, the restraints or negative covenants in the agreement or contract may be valid if they are reasonable. For a restraint clause in an agreement to be valid under law, it has to be proved that it is necessary for the purpose of freedom of trade. For instance, if the employer is able to prove that the employee is joining the competitor to divulge its trade secrets then the court may issue an injunction order restricting the employment of the employee to protect the interests of the employer. Whenever an agreement is challenged on the ground of it being in restraint of trade, the onus is upon the party supporting the contract to show that the restraint is reasonably necessary to protect his interests.2 In order to execute a valid employment bond, the parties have to ensure that the following requisites have been complied: (i) the agreement has to be signed by the parties with free consent; (ii) the conditions stipulated must be reasonable; and (iii) the conditions imposed on the employee must be proved to be necessary to safeguard the interests of the employer. Further, the employment bond stipulating conditions such as to serve the employer compulsorily for a specific time period or penalty for incurring the expenses is in the nature of the indemnity bond and, therefore, such kind of employment bond has to be executed on a stamp paper of appropriate value in order to be valid and enforceable.3 3. Remedies available to employer and employee In the event of breach of employment bond, the employer might incur a loss and, therefore, may be entitled for compensation.4 However, the compensation awarded should be reasonable to compensate the loss incurred and should not exceed the penalty, if any, stipulated in the contract.5 Usually, the court determines the reasonable compensation amount by computing the actual loss incurred by the employer having regard to all circumstances of the case. Even if the bond stipulates payment of any penalty amount in the event of breach, it does not mean that the employer shall be entitled to receive the stipulated amount in full as compensation on the occurrence of such default; rather the employer shall be entitled only for reasonable compensation as determined by the court. While exploring alternate remedies available to the employer in the event of default by the employee, it would be interesting and worthwhile to discuss whether the employers are entitled to seek for reinstatement of their employee or obtain restraining order against the employee from joining any competitor/alternate employer because many such similar reliefs have been sought by the employers in various suits. The apex court, while dealing with similar query, has held that the specific performance action cannot be sought for breach of contract of personal service or bond6 and, therefore, the employer shall not be entitled to seek for reinstatement of their employees as relief in the event of breach of bond. In another matter, the apex court has held that it is not bound to grant an injunction in every case and an injunction to enforce a negative covenant would be refused if it would indirectly compel the employee to idleness or to serve the employer7 and, therefore, the courts are also reluctant to grant injunction against the employees restricting their employment with other employer unless it is necessary for the protection proprietary interests or trade secrets of the employer. As mentioned, the conditions stipulated in the employment bond should be reasonable in order to be valid and, therefore, even if unreasonable condition/clauses are stipulated in the contract such as imposing exorbitant duration of compulsory employment period or huge penalty upon the employee, the court shall award compensation only if it determines that the employer has incurred loss by such breach of contract. The court normally considers the actual expenses incurred by the employer, the period of service by the employee, conditions stipulated in the contract to determine the loss incurred by the employer to arrive at the reasonable compensation amount. For instance, in the case of Sicpa India Limited v ShriManasPratim Deb,8 the plaintiff had incurred expenses of INR 67,595 towards imparting training to the defendant for which an employment bond was executed under which the defendant had agreed to serve the plaintiff company for a period of three years or to make a payment of INR 200,000. The employee left the employment within a period of two years. To enforce the agreement the employer went to the court, which awarded a sum of INR 22,532 as compensation for breach of contract by the employee. It is crucial to note that though the bond stipulates a payment of INR 200,000 as compensation for breach of contract, the judge had considered the total expenses incurred by the employer and the employee's period of service while deciding the compensation amount. Since the defendant had already completed two years of service out of the agreed three year period, the judge divided the total expenses of INR 67,595 incurred by the plaintiff into three equal parts for three years period and awarded a sum of INR 22,532 as reasonable compensation for leaving the employment a year before the agreed time period. Similarly, the High Court of Andhra Pradesh in the case of Satyam Computers v Leela Ravichander,9had also reduced the compensation amount considering the period of service of the employee. In view of the aforesaid discussions and various court decisions, the employment bond is considered to be reasonable as it is necessary to protect the interests of the employer. However, the restrains stipulated upon the employee in the said contract should be "reasonable" and "necessary" to safeguard the interests of the employer or else the validity of the bond may be questioned. The employees are always free to decide their employment and they cannot be compelled to work for any employer by enforcing the employment bond. The court can; however, issue order restricting the employment of the employee only if the said action is deemed necessary to safeguard the trade secrets/proprietary interest of the employer. In the event of breach of contract by the employee, the only remedy available to the employer is to obtain a reasonable compensation amount. The compensation amount awarded shall be based upon the actual loss incurred by the employer by such breach.
question iconCompany refusing to pay me full salary after resignation.
Dear Sir, Section 12 in The Industrial Disputes Act, 1947 12. Duties of conciliation officers.- (relevant section 12(2) of ID Act) (1) Where any industrial dispute exists or is apprehended, the conciliation officer may, or where the dispute relates to a public utility service and a notice under section 22 has been given, shall hold conciliation proceedings in the prescribed manner. (2) The conciliation officer shall, for the purpose of bringing about a settlement of the dispute, without delay, investigate the dispute and all matters affecting the merits and the right settlement thereof and may do all such things as he thinks fit for the purpose of inducing the parties to come to a fair and amicable settlement of the dispute. (3) If a settlement of the dispute or of any of the matters in dispute is arrived at in the course of the conciliation proceedings the conciliationofficer shall send a report thereof to the appropriate Government 1 or an officer authorised in this behalf by the appropriate Government] together with a memorandum of the settlement signed by the parties to the dispute. (4) If no such settlement is arrived at, the conciliation officer shall, as soon as practicable after the close of the investigation, send to the appropriate Government a full report setting forth the steps taken by him for ascertaining the facts and circumstances relating to the dispute and for bringing about a settlement thereof, together with a full statement of such facts and circumstances, and the reasons on account of which, in his opinion, a settlement could not be arrived at. (5) If, on a consideration of the report referred to in sub- section (4), the appropriate Government is satisfied that there is a case for reference to a Board, 2 Labour Court, Tribunal or National Tribunal,] it may make such reference. Where the appropriate Government does not make such a reference it shall record and communicate to the parties concerned its reasons therefor. (6) A report under this section shall be submitted within fourteen days of the commencement of the conciliation proceedings or within such shorter period as may be fixed by the appropriate Government: 3 Provided that, 4 subject to the approval of the conciliation officer,] the time for the submission of the report may be extended by such period as may be agreed upon in writing by all the parties to the dispute.]
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