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Indian Law/Employment Bond for sponsoring higher education


Hi Arun,

I have been working with an IT MNC since 2005. In 2009, I was selected for an MBA program to be sponsored by my company. We around 20 selected people signed a Bond for commitment to serve for 3 years after completion of MBA. Our program completed in April 2011, therefore we are supposed to serve until March 2014.
Anybody leaving company in first year will have to pay 5 lacs, in 2nd yr 3 lacs, in 3rd yr 1 lac.

After completing MBA, I asked my company to recognize it in terms of Grade & Salary, to bring it at par with MBA recruits hired from B-Schools by them. To which they didnt act upon.

My question is,
1) Though there is a commitment to serve, Can a company continue to exploit the abilities gained through the education by not recognizing it ? in other words, How fair it is to recover the money invested through these means ?
2) One of the candidates who signed the same Bond, have left the company and they didnt enforce Bond conditions on him, Can they discriminate between employees and enforce it on me ?

Do I have strong legal grounds to pursuit in case they enforce it on me ?
Thanks in advance

Generally a service bond is illegal in India as it is one sided. Further, as per Section 27 of the Indian Contract Act, 1972, it is not legally valid, being agreement in restraint of trade, profession or business . Percept D Mark (India)Pvt. Ltd. Vs. Zaheer khan(2006)4 SC 227. Bonds are applicable only if the company has spent money on the personal enhancement of the employees However,it should  not just be a training that helps the employee to perform better. Moreover, in the event of breach of contract, the employer cannot recover anything more than the actual reasonable loss suffered by them.The Supreme Court of India has clearly stated that no employee can be forcefully employed against his will, just because he has signed a contract with the employer. Therefore,enforceability of a particular restrictive agreement depends upon the facts and circumstances of each case. The object is to maintain greater flexibility and bargaining power to the employees.

It is fully at the discretion of the employer to fix the pay of an employee.They take into account several factors including their own financial conditions, size of their organisations,caliber of the selected employees,present market rates etc.Once you have accepted the contract, you are legally bound by it.There is no merit in comparing the accepted scale with the scale of similar competitive businesses and then grumble for the same before your present employer.You could have demanded better scale of pay before accepting the offer.Moreover,if you are dissatisfied with your scale,then you can try for a betterjob and leave the organisation by complying with the termination clause contained in the contract..

In view of the above,my advice is that in case you get a really better opportunity, you should certainly leave but after serving a notice as per the termination clause contained in your contract.Under no circumstances,you should pay any amount from your own pocket.If at all any amount is actually recoverable by your employer on account of pre-mature termination of contract, they can recover it against your outstanding dues.They can demand only the actual reasonable loss suffered, if any ,by them and nothing more.

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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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