Lawfarm Team
Asked June 21, 2016

Consequence of signing a Non-Judicial bond

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I have been working with a private university for 10 years with very low salary as compared to other colleges. I have now been asked to sign a Non-Judicial Bond for 1 year. What will be the legal consequence of signing such a Bond if I want to leave this job for better opportunities?

Answer 1

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Ragini Gupta

The answer to this will obviously depend, in a large way on the exact facts of your case, including the terms of the bond, however, the broad legal principles that govern a situation such as this one will be discussed below. 

First, no employer can legally ‘stop’ you from pursuing other opportunities. The Indian Contract Act provides that an agreement in restraint of trade or profession is void. Therefore, if the terms or conditions of any agreement disallow you from leaving your present employment or from joining a different employer, such terms would be void, and therefore not enforceable in a court of law.(Central Inland Water Transport Corporation v BrojonathGanguly (1986) IILLJ 171 SC ) It has been decided by the Indian Courts that in the event that an employee leaves his employment, even if this is in violation of the terms of the bond, the employer cannot force him to rejoin, because courts will not order ‘specific performance of a breach of contract of service.’ ( Nandganj Sihori Sugar Company Ltd v Badrinath Dixit, &Ors, AIR 1991 SC 1525)

Second, the question of the bond amount and whether its payment can be enforced in a court of law depends on the facts and circumstances of cases, some of which will be discussed here.

In cases involving such bonds, the trend of the Courts has been to award only a reasonable compensation to the employer based on the facts of the case. In an Andhra Pradesh High Court case (Ladella Ravichandar v. Satyam Computer Services Limited, 2011 SCC AP 76) an employee left the company before the end of the period stipulated in the bond and according to the terms of the bond was required to pay a compensation of Rs. 200,000. However, the Court held that since no actual loss had been caused to the company, Rs. 100,000 would be reasonable damages for the employer. In a Delhi High Court case ( M/s Sicpa India Limited v. Shri Manas Pratim Deb (2011), RFA No.596/2002) an employee left his employment shortly before the completion of the five years stipulated in the bond. The employee refused to pay for some medical expenses incurred by the company as the bond stipulated. When the matter was taken to Court, the short duration of time left was considered to award only reasonable damages to the employer and not the Rs. 200,000 stipulated in the bond. In a Madras High Court case,( Toshnial Brothers (Pvt.) Ltd. v. E. Eswarprasad & Ors, 1997 LLR 500)  an employee who left his job in fourteen months as opposed to the three years stipulated in the bond was required to pay the stipulated damages. This was done because the agreement between the parties had prescribed the specified amount as a genuine pre-estimate in case of premature resignation. Thus, to claim compensation, an employer must prove that the employee was the beneficiary of training or special favor at the cost of the company and had breached the undertaking he was subject to as a beneficiary.

In conclusion, you cannot be stopped from seeking employment elsewhere. However, whether the bond can be enforced, and if so, how much can you be compelled to pay will depend on the specific facts subject to the principles explained above.

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