Service bond
Amit
(Querist) 29 February 2020
This query is : Resolved
Respected experts,
I am MBBS doctor. I joined a government organisation with a service bond. But i had to leave the job because it was a kind of typist job,while I was expecting to be in house Doctor . Now the company is demanding me the bond money which includes "liquidated damages" which includes SALARY PAID and TRAINING COST.
My doubt is 1- I had to break the contract because employer hid the working conditions
2- Liquidated damage should be REASONABLE. Salary paid was in lieu of my services. Can it be asked back ? I was in Mumbai,obviously it is the costliest city and I spent on my survival.
Can I avoid such UNREASONABLE TERMS in court ??
ABDUL RAZIQUE
(Expert) 29 February 2020
Dear
you are a learned person and without reading all term and condition or category of jobs not only applying but signed and join as a trainee under the firm, it is a matter of negligence and cause of action is in front of you.
You may contact a local advocate with all documents. there is a chance of save you.
Raj Kumar Makkad
(Expert) 01 March 2020
If you don't contest the employer on the grounds of the breaking the terms and conditions as undertaken in the Service Agreement, you have not other remedy but to bow before his unreasonable demands. Demand damages from him on the ground of breaking his terms so as to make pressure upon him.
P. Venu
(Expert) 02 March 2020
Was any specialized training, involving extra expenditure, imparted? Anyhow, you may submit the reply highlighting the demand made is unreasonable. The Employer cannot unilaterally enforce the Bond.
Raj Kumar Makkad
(Expert) 02 March 2020
Once you violate the period mentioned in the bond, the employer has every legal right to get the same enforced by way of a civil suit.
Dr J C Vashista
(Expert) 08 March 2020
What are the terms and conditions of your service and service bond ?
You have no option but to accept and honour it or face legal consequence.
It is better to consult a local prudent lawyer for appreciation of facts/documents, professional guidance and necessary proceeding.
Raj Kumar Makkad
(Expert) 08 March 2020
The terms and conditions of the bond have already been got cleared by Author but he is silent since a long.
T. Kalaiselvan, Advocate
(Expert) 20 March 2020
Corporations often invest huge amounts of time and money in imparting training to their employees so as to gain competitive advantage. Regardless, the attrition rate continues to be significant. Several employees, after acquiring valuable skills, leave the organization for diverse reasons. Therefore, the employer may incur significant losses in terms of competitive advantage and incur costs in terms of time, money and human capital.
Courts have generally held that employees’ rights to livelihood must prevail over employers’ interests, notwithstanding a pre-existing agreement between the two. For instance, in the 2009 case of Desiccant Rotors International (P) Ltd v Bappaditya Sarkar, the Delhi High Court observed that in instances of conflict between employers’ attempts to protect themselves from competition and the right of employees to seek employment wherever they choose,“it is clear that the right of livelihood of the latter must prevail”. Some authors claim (and reasonably so) that the rationale behind invalidation of the restrictive covenants is that their enforcement would entail that, paradoxically, the employee would be restrained “because of his increased expertise, from advancing further in the industry in which he is most productive”.
However, the Supreme Court in Niranjan Shankar Golikari v The Century Spinning And Mfg Co cited a Calcutta High Court judgment with approval. It provides in clear terms that: “An agreement to serve a person exclusively for a definite term is a lawful agreement, and it is difficult to see how that can be unlawful which is essential to its fulfilment, and to the due protection of the interests of the employer, while the agreement is in force.”
Indian courts, however, have unequivocally held contracts containing restrictive covenants to be valid if the organization has spent significant resources on personnel training or skills enhancement of the employee. This proposition, however, comes with various caveats.
After the perusal of various Supreme Court judgments, the Madras High Court in Toshnial Brothers (Pvt) Ltd v E Eswarprasad & Ors held that the existence of a legal injury accruing as a consequence of breach is a pre-requisite for claiming liquidated damages in accordance with section 74 of the Indian Contract Act, 1872. In other words, the employer must show a legal injury automatically resulting from the breach of the commitment to serve for a minimum period.According to the Court, a presumption of legal injury arises incases“where the employer or the management concerned was shown to have either incurred any expenditure or involved itself into financial commitments to either give any special training either within the country or abroad or in having conferred any special benefit or favour to the detriment of the claimant in favour of the violator involving monetary commitments.” The inevitable conclusion from the foregoing decision is that the employer must prove that the employee was the beneficiary of special favour or training or concession at the expense of the employer. Otherwise, actual injury accruing as a result of the breach would have to be proved.
However, just because a legal injury is proved, that does not per se entail that the court would grant the employer the whole of the damages stipulated by the contract. For example, in Sicpa India Limited vs Shri Manas Pratim Deb, the Court considered the actual loss suffered by the employer. As against the stipulated compensation of Rs 2,00,000, the Court granted damages of Rs 22,532. In this case, the employee resigned from employment after serving two years instead of three years as mandated by the bond.
Therefore you can fight it out through court of law as per the prevailing circumstances with the assistance of a prudent lawyer.
Raj Kumar Makkad
(Expert) 20 March 2020
Thanks Mr. T. Kalaiselvan for adding value to the reply.
