Not joining a company after signing an offer/appointment letter with a penalty clause.

In the event of a candidate not joining after accepting the offer letter, the company can initiate action and claim cost of recruitment, provided such a clause is mentioned in the offer letter. Although difficult to quantify, some companies are known to ask candidates to pay an ad hoc sum of eight per cent of CTC, or some fixed amount. There have been cases, especially in the Middle East, where companies have taken candidates to court for not joining after accepting the offer letter.

Legal implications are time consuming and not preferred by candidates or companies. Some companies, especially in the IT sector, have started the practice of blacklisting the candidates for future employment with the company. Legally, the offer letter is an offer of employment and does not indicate the actual commencement of employment. Hence, one has to prove that the employment relationship has started. Section 5 of the Indian Contract Act, 1872 says ‘A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards'.

In the case of Bhagwandas Goverdhandas Kedia vs M/S Girdharilal Parshottamdas (1966 AIR 543, 1966 SCR (1) 656), where it was noted that “In the case of a contract which consists of mutual promises, the offeror must receive intimation that the offeree has accepted his offer and has signified his willingness to perform his promise.”

Regards,

Anaita Vas

In legal perspective,the contention cannot be refuted as you have received the offer letter stipulating conditions.However, it is the prorogative of the company to enforce the condition.