Employment Bond

Dear Client,
It is never advisable to continue with a toxic or unethical work culture in a workplace, along with an apprehension of job insecurity that adversely affects one's skills and career. A service/employment bond itself does not create any relationship between an employer and an employee unless and until it is followed by the essential steps required to make the Bond valid and enforceable under the law. The validity of Employment bonds can be challenged based on Section 27 of the Indian Contract Act,1872, which prohibits any agreement in restraint of trade and profession. The law states that an agreement (employment bond) will be illegal only if it restrains someone from exercising a lawful profession/ trade/ business. As per the mandate of Section 27 of the Indian Contract Act,1872, any terms and conditions of an agreement that directly or indirectly compel the employee to serve the employer or put a restriction on them joining the competitor or other employer are not valid. The employee has the right to resign from employment even if he has agreed to the employment bond to serve the employer for a specific period. In the case where the employer can prove that the employee is joining the competitor to disclose the trade secret, then the court may issue an injunction order restricting the employee from joining the competitor. Further, Section 73 of the Act makes provision for un-liquidated damages (not stipulated in a contract), Section 74 deals with liquidated damages (stipulated in a contract), and no compensation is attracted for mere breach of contract u/s.73 and 74 of the Act unless such breach resulted in an actual loss or damage to the opposite party employer. So, in the prevailing situation, you can tender your resignation following the terms of employment and in case, company takes any legal action, then if you are not holding a position of manager or supervisor in the Company, but a workman as defined under Sec.2(s) of the Industrial Dispute Act, 1947, serving a legal notice to the Company reach out to the office of the concerned Labour Commissioner or the office of the Chief Inspector, Shops and Establishments, as the case may be, to file a complaint against the company over alleged unfair labour practice for redressal of your grievance. But, if you are holding the position of Manager or Administrator in the Company, you have to file a civil suit against the Company before the Civil Court seeking appropriate relief in the matter. If you are an employee of the IT Company then be informed that to restrict IT Companies from exploiting their employees by playing double standards, the Division Bench of the Karnataka High Court in the case of Commissioner of Income Tax v. Texas Instruments India Pvt Ltd (2021) 435 ITR unambiguously held that the IT sector employees considered to be "workmen" under Section 2(s) of the Industrial Dispute Act, 1947. Further, the Hon'ble Bombay High Court in the case of Godrej and Boyce Manufacturing Company Ltd. v. Shivkranti Kamgar Sanghatana, 2024 SCC OnLine Bom 938, decided on 28-03-2024 ruled out that the nature of duties and functions is the determining factor in ascertaining ‘workman’ under S. 2(s) of Industrial Disputes Act, 1947. If required, consult with an Advocate experienced in service matters to navigate the issue in the right way.

Dear Client,

Given that you signed a bond for Rs. 2 lakh rupees for two years, and you're feeling daily stress and trembling due to a toxic environment, it's crucial to understand your options. While paying the bond amount might seem like the only way out, it's often not the case, as the enforceability of such bonds in India can be complex and is often subject to judicial scrutiny, particularly if the amount is deemed punitive rather than a reasonable estimation of damages incurred by the employer.

Your best course of action is to immediately consult with an employment lawyer who can review your specific bond agreement, advise you on its legal enforceability, and help you explore possibilities like negotiating with your employer or challenging the bond in court based on the toxic work environment and its impact on your well-being.

Documenting the instances of the toxic environment and its effect on you can also be helpful evidence if you decide to pursue legal action.