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Indian Law/Bond Against ESOP ( Stock Option )


I was working with a company x with salary Rs 6 lac CTC.
I was interviewed by another company and selected and offered job with 7 lac CTC out of which 1.5 lac was in form of stock option and 5.5 lac was with out ESOP my salary in new company was lower  and with ESOP higher .
At no point  of time during the interview or at the time of joining there was any mention of any bond to get ESOP.
After 3 month of joining was given bond which said that I had sign a bond for 2 year to work with the company if wanted to get ESOP .
I signed the bond since I could not afford to loose the amount 1.5Lac.
The bond say that I I left the company with in two years I had to return the amount .

As far as I am concerned  1.5 lac was part of my salary .
No special training was given to me by the new company .

After working for 1 year I left the company .
The company is asking me refund the ESOP amount .
The company has with hold my one month salary / form 16 / provident fund amount / clearance certificate .

The company has gone into arbitration to recover Rs 1.5 LAC.

I feel its illegal.
The company used its dominant  position wrt new employee to sign a bond which forces an employee to work for 2 years in order to get his salary in the form of ESOP.
Is this legal?
Rahul Deshmukh

The legal system in our country has long back abolished Bonded Labour. As such, no employee can be kept as a Bonded Labour now. The right of an employee to move on to another employment from time to time is a right that will be protected by the Court, as it is his right to livelihood. However, reasonable restrictions can flow from some benefits that have been conferred on an employee vide the decision given by the Supreme Court of India in Niranjan Shankar Golikari v/s The Century Spinning and Manufacturing Company Ltd. (1967 I LLJ 740).What is reasonable restrictions will depend upon the facts and circumstances of the case. Thus, where a person has been the beneficiary of specialized training, the company can certainly put reasonable restrictions on his right. Similarly, it can put restrictions to protect its intellectual property rights.

Article 19 of our Constitution has given fundamental rights to all citizens to do any occupation, trade or business or to practice any profession. Moreover, Section 27 of the Contract Act, subject to reasonable restrictions in certain cases treats all agreements in restraint of trade, business or profession as void.

Accordingly, in the instant case ,the Company cannot compel you to pay the bonded amount, merely because you have excuted the Bond.My advice is that under no circumstances you should agree to pay it.Even if any amount is genuinely recoverable from you, they should recover it against your outstanding dues.Let them prove before the court,the loss actually suffered by them,for your pre-mature termination of the contract.

An employee is governed by the terms of the contract.If it was specified in your appointment letter that you should be governed by the service rules of the Company ,which was in force at the time of your engagement as well as any subsequent rules/modifications thereof, then they were right in  asking  you to execute the Bond.However, as already explained above, it will be enforceable, provided it was for a resonable purpose and not for the purpose to prevent you from availing a better opportunity.

Moreover, the Company could go in for arbitration provided there was an arbitration clause in your agreement or subsequently they executed a separate arbitration agreement with you and otherwiuse not.Even if there was no arbitration clause, you should defend yourself before the Tribunal by challenging its very appointment.

In view of the above, apparently you have a very strong case and nothing to worry about.Please concentrate on your existing job and take all actions in the above matter in consultation with a good lawyer.

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Arun Kumar Maitra


Contract Law,Companies Act,Sale of Goods Act,Partnership Act,Negotiable Instument Acts,Constitution of India,Arbitration Act,Consumer Protection Act,Maternity Act,Payment of Gratuity Act,Payment of Bonus Act,Shops & Establishment Act etc.The answer to the grievance of the particular online query depends on the facts of the particular case and law applicable to it.However,my comments relating to the various queries raised through the "All Experts" should not be treated as legal advices and should not at all be relied upon.I do not accept any responsibility for them.They will only give you some ideas about the probable merits of your cases.Ultimate actions/decisions in the matter may please be taken in consultation with the Legal Experts in the relevant fields.My purpose of giving the comments is to increase my own knowledge on the subjects and share it with others.It is purely of academic interest to me. I strongly feel the more knowledge we share,the more we shall be able to learn because there is neither any age nor any end to learning.


I have experience of dealing with matters relating to holdings of board/general meetings,maintenance of statutory registers,filing of necessary returns with the RoC,obtaining licenses for import,replies to Parliament Questions,dealing with the Parliamentary Committees,appearing before various courts to defend my employers,filing affidavits/counter -affidavits,preparing written statements/re-joinder,giving advice to management on complicated legal issues,preparation,drafting and vetting of contracts etc. I have more than 35 years of experiences to deal with the Company Law and Other Commercial Laws of leading Organisations in the country both in Public as well as Private Sectors.

Member,Inst. of Chartered Accountants of India Member,Inst. of Company Secretaries of India; Member,Bar Council of India Member,All India Management Association Member,Delhi Management Association Ex. Vice-Chairman,Durgapore Chapter of the I.C.A.I. Expert ,CA Club India Expert ,Lawyers Club India Expert,AllExperts Ex. Faculty ,I.C.S.I as well as I.C.W.A of India Retd. Co. Secy. & G.M.(Law)/NFL(A Mini-Ratna A Schedule Central P.S.U.),New Delhi Ex.V.P.(Secretarial Dept.),Jaiprakash Associates Ltd. Ex. Co. Secy.,MAMC(A Govt. of India Enterprise),Durgapore



Awards and Honors
Obtained ''A'' Grade Certificate in the Parliamentary Procedure from the Secy. General of Parliament in 1994-95.It was in connection with a training course conducted by the BPE for PSU Executives.

Past/Present Clients
I am presently working as a Company Secretary in Old World Hospitality Pvt. Ltd.located in Delhi.It is engaged in Hospitality Industry.It has Units in India and abroad.It has been given the responsibility to look after operation & Management of ''India Habetat Centre'' located at Lodhi Road,New Delhi.

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