Payment of indemnity bond
NIDHI GOEL
(Querist) 28 August 2013
This query is : Resolved
Plz help me to come out of this situation which I am confronting.
Situation:
I have been selected at the post of Credit manager in a bank wherein service agreement bond (copy attached)of Rs 2 Lakhs is executed at the time of training itself.After undergoing training at Lucknow, I was deployed at Kerala. But since this place is quite far away from my residence ( Ghaziabad) i.e. 2900 KMS.,I resigned.I have also given a request letter for change in my posting but went in futile. Now I have got a demand notice of Rs. 3.13 lac.
(Rs .2 Lac plus 3 months notice period amount mentioned in appointment letter)
Now my queries are :
1)Are bonds really enforceable?
2)What should I do i.r.o further notices despatched by bank - Should I reply to them? What are the consequences of non reply of letter.
3)Is there any way to escape from this bond amount?
Kumar Doab
(Expert) 28 August 2013
You may show the job advertisement, job application, interview call letter, selection letter, offer letter, training letter, appointment letter, service agreement, request for transfer and any other relevant communication/record, to a competent and experienced labor consultant/service lawyer specializing in such matters, give inputs in person and proceed under expert advice of your lawyer.
Did the bank advertise the locations/HQ in its advertisement, interview call letter, selection letter, offer letter, training letter, appointment letter, service agreement or did you mention your HQ/Location applied for in your job application?
Did you ever mention in any of communication on record that you shall be joining at…………..HQ in zone etc?
You have signed the bond by your free will.
If Kerala as your first posting was not acceptable to you, then you could have acted at the first available opportunity.
Let your lawyer find the loopholes if any in the record which would favor you and advice you on what are possible and how you should proceed.
The counsel of an experienced lawyer can help you to arrive at the suitable options and then you can choose wisely the most suitable option.
Employee should always go thru all service related regulations, rules preferably before joining and before taking any decision.
Incidentally Bank’s have Employees Unions and all documents are available on Employee’s and Union portals.
It is your first posting. You may look into rules of the bank and find out ‘What was your Parent state’. It appears this posting is given for exposure to rural area.
There are guidelines for posting and transfer, which should be available at the Bank’s, Bank Employee’s union website. Bank like Union bank of India has taken into consideration the concept of ‘Parent State’, ‘Next Nearest State’. Employees outside parent state are considered for transfer back to their parent state after 3Years.
Still you must have seen that people from South India are located in North India and from North India in South India.
There are other threads to indicate that Banks are placing residents of North India to South India e.g;
http://www.lawyersclubindia.com/forum/Want-to-break-the-service-agreement-87226.asp#.Uh4A_tKAqWM
The hidden/unspoken/unwritten strategy could be that the employee won’t have social circle, and nothing else to do than to work for the bank only.
Advocate Sastry
(Expert) 28 August 2013
You have not attached the copy of service agreement bond.... We can comment after seeing the wordings of the bond.
prabhakar singh
(Expert) 28 August 2013
Look dear!
I am very frank (not as soft as others are)about your query.Did you not know the distance between two stations even after you booked your ticket?
If distance is the reason why did you join the service?
So far law is concerned there can not be an absolute restraint by any service agreement but a reasonable one can be there and in matter of disputes,
'reasonableness' would be decided by civil court or forum opted by parties in the agreement itself.
So far law of damages or compensation is concerned they can claim losses caused to them by your breach whose maxima can never be more beyond amount you agreed but the same is subject to actual losses caused to them on your having deserted the employment.
Kumar Doab
(Expert) 28 August 2013
Fully agreed with Mr. Prabhakar Singh’s comments on reasonableness of the matter, and reasonable amounts if any……………….. .
You are not the only one but there are plenty of enthusiastic, young, budding, intelligent, competent but now aggrieved employees.
The service conditions in the public Sector banks and even in case of some Private Banks are duly negotiated between management and employees. Private Sector bank employees are also member of the unions.
Bank Employees, bank Employee’s union is a huge strength and vote bank.
The matter and single minded, selfish, ruthless conduct needs to contested by all affected employees, employees’ unions under the able counsel of their competent lawyers.
Rajendra K Goyal
(Expert) 29 August 2013
You have signed the bond and other papers, they have imparted training to you. Bank is fully justified to post you at a place they need services. Till some loopholes are searched by your legal adviser in the documents, your escape from claim is doubtful.
NIDHI GOEL
(Querist) 30 August 2013
Very Very thanx for all ur replies.
I would like to make clear that we were required to give preferences of posting place out of places given to us where vacancies are available.
I and my few batchmates have been asked of posting preference place 3 times saying that the preferences we gave have been alloted to others and our ranking is lower than those. In this way , I have given each time 10 preferences twice and the third time , I have given preferences of 15 places of which 11th preference i.e. Kerala is given to him.
I am not able to attach File so I am enclosing service agreement bond in this way.
INDEMNITY BOND WITH SURETY
This Indemnity is made and executed at________ on this ________ day of
________ 20__ by Shri ______________________________ S/o Shri
__________________________ a permanent resident of
________________________________________________________ hereinafter
called “Employee”, the party of the first part,
AND
Shri ________________________ S/o Shri _______________________________
a permanent resident of _____________________________________________
_____________________________ hereinafter called “Surety”, the party of the
second part, IN FAVOUR OF Punjab National Bank, a body corporate constituted
under the provisions of Banking Companies (Acquisition & Transfer of
Undertakings) Act, 1970, having its Head Office at 7, Bhikhaiji Cama Place, New
Delhi-110066 hereinafter called “Employer Bank”.
The terms ‘Employee’, ‘Surety’ and the ‘Employer Bank’ unless repugnant to the
context shall mean and include their heirs, legal representatives, successors,
executors and administrators.
WHEREAS the Employee has been selected for appointment as
___________________________ in ____________ in the service of the
Employer Bank.
WHEREAS an Offer of Appointment containing the terms and conditions
of the appointment has already been issued to the Employee vide letter
No. ____________________ dated_____of the Employer Bank.
WHEREAS the acceptance of the terms and conditions of the
appointment has already been communicated to the Employer Bank on
________________ by the Employee.
WHEREAS one of the terms and conditions of the appointment is the
Employee has to serve the Employer Bank viz. Punjab National Bank for a
minimum period of __3__ years after appointment, has to execute an
indemnity with surety in favour of Employer Bank.
NOW THIS INDENTURE WITNESSETH as under :
1. In compliance of the aforesaid condition in Offer of Appointment subject
to which the Employer Bank has agreed to give appointment to the
Employee, the Employee hereby undertakes to serve the Employer Bank
for a minimum period of ____ years.
2. The party of the second part i.e. ___________________ agrees to stand
as Surety for the due performance of the obligation of the Employee
under this agreement of indemnity. In case of breach of the terms of
this indemnity by the Employee and failure to indemnify the Bank, the
Surety shall be jointly and severally liable to pay Rs._________(Rupees
_______________________________) to Employer-Bank with interest at
12% p.a. per annum, immediately on demand.
3. The Employee further agrees and undertakes that in case he/she
commits breach of the above condition and resigns from or
leaves/abandons the service and /or neglects in performance of the
duty assigned to him leading to termination of his/her service as per
rules/regulations by the Employer-Bank for all losses, costs, charges and
expenses upto extent of Rs.___ lacs and pay an amount of
Rs.________(Rupees__________________________) only with the
interest thereon @ 12% per annum from the date of breach of the
above till payment as liquidated damages/cost of training including on
the job training, the expenses which the bank has incurred/may have to
incur in recruiting another employee at his/her place, and also on
account of business loss suffered/to be suffered by Employer-Bank
during intervening period. The employee and surety agrees that
assessment of liquidated damages as assessed as Rs._________ are
reasonable, which they both agree to pay jointly and severally in case
demand is made by the employer bank.
4. Nothwithstanding anything contained herein above, furnishing of this
indemnity will not create any right in favour of the Employee to continue
in the service of Employer Bank for the aforesaid term of ____ years, and
the Employer-Bank shall always have the right to take appropriate action
against the Employee as per terms of the appointment letter and/or the
rules and regulations of the employer bank as applicable, in case of
commission of any misconduct by the Employee.
5. The amount specified above shall constitute a debt owing to the
Employer-Bank and shall be recoverable from the Employee and the
Surety jointly and severally with interest thereon at the rate specified
above till payment.
IN WITNESS whereof, the EMPLOYEE & the SURETY have put their signatures in
the presence of the witnesses.
Signed and delivered by the Party of the first part i.e. the Employee having read
and understood the contents terms of this
Agreement___________________________________
Signed and delivered by the Party of the second part i.e. the Surety having read
and understood the contents/terms of the Agreement _____________________
1. WITNESS:
NAME & ADDRESS:
2. WITNESS:
NAME & ADDRESS
Advocate Sastry
(Expert) 30 August 2013
Bank has full right to recover the Bond money..
Kumar Doab
(Expert) 01 September 2013
“Clause3: for all losses, costs, charges and expenses upto extent of Rs.___ lacs,………………………………………………. as liquidated damages/cost of training……………
5. The amount specified above shall constitute a debt ………………………………”
The word debt stated here is highly perturbing.
“Reasonableness of the matter, and reasonable amounts if any……………….. .”
Is again emphasized upon.
There should be other candidates/employees like you; wondering what to do. The number may be big and cause is big. All affected employees may approach bank employee’s union also. The bank union would know the precedence's in bank in similar matters.
Let your lawyer examine all of your docs and all other details.
Let your lawyer advice you on the merits. You may understand the merits and proceed under expert advice of your lawyer and as deem fit at your end.
Bank may not issue proper relieving even if the amount of 2 lac+ Notice pay is tendered. You may check, confirm and obtain everything in writing.
Courts are presided by learned judges that are aware of practices and malpractices.
They would know and bring down the irrational to rational, unjustified to justified, unreasonable to reasonable.
Banks were nationalized to free the
citizens and countrymen from the clutches of ‘Sahookar’ (Moneylender) and his ‘Lathait’ (Musclemen)…………………as they would get the ‘Angootha’ (thumb impression) of hapless, gullible, poorly informed citizens and countrymen in the ‘Bahikhaata’ ( Red Book) of SAHOOKAR…………….and then not only the citizen but his coming generations will be remaining under debt.
The ‘Angootha’ (thumb impression) might have become signature now, and there might be witnesses, and ‘Bahikhaata’ ( Red Book) might be agreements now…………………..
Banks can never be allowed to become or remain a ‘Sahookar’ ……………again.
The banks would also know that anything inserted in a document does not become legal and lawful just by insertion.
It is not stated by the bank that if the matter is decided against the bank, all amounts, interest/penalties/damages shall constitute a debt on bank, its signatory on the agreement, and its say MD…………….their assets and legal heirs……………..
>>>>>> Has every candidate that has submitted job application paid any fee with job application?
Let us assume ‘yes’ and fee is Rs.500/ candidate, and some 2 Lakh candidates applied for vacancies of 500 in total.
Thus bank collected Rs.500*200000= Rs100000000/- { Ten Crore Rupees}
Does the bank spend Ten Crore Rupees in recruiting 500 employees?
Let us assume all of these 500 employees decide to resign and bank has to find replacement.
Does the bank spend Ten Crore Rupees in recruiting 500+500=1000 employees?
It is pertinent to mention here that bank has stated cost/ charges/expense for cost of training as liquidated damages………….!!!!!
And not for Recruitment………………….!!!!
Hence only the cost of training should be accounted for…………………!!!!
Let us assume that all of these 500 candidates end up paying Rs2 Lakh as cost to bank this would imply collection of another Rs 500*200000= Rs100000000/- { Ten Crore Rupees}.
Thus bank would collect 10+10=20 Crore Rupees………………………..!!!
Is 20 crore actual cost of training……………………as liquidated damages??????
Let us assume cost of training is say Rs. 2000/person*500=1000000 (and cost of recruitment is Rs.500/person, refund of which is not claimed in agreement) then will the bank stop chasing the resigned employees once this amount is recovered. If the guest house where the training is provided is owned by bank/on rent, the faculty employed for training is bank employees, software/equipments used by bank is owned by bank, since………………………….years( number of years) it can be even lower…………………….
Let us assume that bank writes highly inflated figures in agreements to deter habitual and impulsive job hoppers, still can it be legally and principally allowed.
Would the bank lower the cost on its own to actual expenses when it has to claim its actual cost/person from each of resigned employee, or it will demand the amount inserted in agreement willfully and intentionally: being fully aware that it is not the actual expense??????????
Banks are one of the biggest contributors of burden of litigation………………..thus bank and bankers posses better and refined knowledge of law and precedence’s…………….
They would be aware that courts of law have commented that:
"The effect of Section 74 is to disentitle the plaintiffs to recover simpliciter the sum fixed in the contract whether penalty or liquidated damages. The plaintiffs must prove the damages they have suffered."………………
“The burden is always on the plaintiff to prove the extent of damages. Certainly it is open to him to prove that when damages have been stipulated in the contract the said amount represents a bona fide pre-estimate of the damages consequential to the breach complained of. The burden is on the plaintiff to show that the agreed liquidated damages are the result of a genuine pre-estimate of damages.”
The question arises would the bank and banker have the nerve to lie on record ………………
--Would the bank refund balance amount to all candidates with interest once it has collected its actual cost??????
Would the bank refund balance amount to all candidates in case the court of law has decided the matter in case of one aggrieved employee??
Would the bank stop inserting inflated amounts in contracts if one case is decided or has been decided in the past??
>>>>>> It is no where stated that bank shall be entitled to earn from this exercise…………………….!!!!!!
We are not aware of any written policy, rule, judgment that bank can earn from this exercise of recruitment or training.
The recruited candidate’s i.e employees shall fetch revenue for bank and profits, and shall be loaded with targets to achieve: including sale of some stupid products of the bank e.g Credit Cards { ( Highly profitable : 2.5 % straight from vendor where the CC is swiped and then 3.75% per month penal charges on delayed payments, high profits from tie up lifestyle vendors etc) ( ULIP ;highly profitable up to 60 % commission on first year premiums)……………}
Hence bank is recruiting for its own profits, ranking, leadership status and not for the purpose of service to the nation.
If bank has to expand or even stay in business it has to recruit. It is a selfish, self centered, ruthless motive.
If bank is providing training to run its counters then is it a training for its products, machines, policies, rules, strategies………………………………….. it should be provided without any cost to employee.
>>>>>> The bank and banker probably believes that:
-anything that is inserted in a document becomes valid, legal and lawful.
-anything till declared illegal, unlawful, void by a court of law shall remain to be construed as valid, legal and lawful.
-the other party (employee in this case) that has signed on the document will believe that everything inserted in the document is valid, legal and lawful. The other party shall have jitters and bumps on getting phone calls, letters, notices, legal notices from bank and majority of them will pay with damages, penal interests.
Many of them will consult here and there and will be advised to stay away from litigation and shall pay.
Many of them will calculate the cost of legal consultation, litigation, time, harassment in courts and shall pay.
Many of them will be advised by lawyers also to pay and not to litigate.
Many of them will succumb to tantrums of the management, HR, personnel and since they may not be properly relieved so they will pay.
Only a few will agitate and after result of litigation bank may still get something in hand in terms of monies and the bank shall be able to paint a picture of subdued employee as a deterrent for other employees.
The younger generation is not properly informed, has been drilled to believe in staying away from unions, is not united and hence there won’t be mass agitations, representations, strikes etc……………..So no Big Issues…………….
Bank and banker may not get penalized by court and no one will be behind bars so what the loss to bank and banker is.
In the end the burden of availing legal advice and litigation gets transferred on the employee.
The ill informed employee will not agitate to secure an order for all affected employees hence bank won’t have to refund to everyone.
There can be many other reasons and thought processes in the mind of shrude employer, bank and banker……………………
>>>>> Employee should rise and defend their rights.
@ Nidhi Goel
Next time be careful and do not select ‘Kerala’ even as your 11th choice.
Prepare well and achieve better rank!
Best of Luck!
Guest
(Expert) 01 September 2013
Nicely explained by Shri Kumar Doab.
Advocate Sastry
(Expert) 01 September 2013
I am very happy to find a very interesting discussion on the matter of Sevice Bonds...
I congratulate Mr. Kumar Doeb for a nice lucid analysis.
I request the Queriest Mr Nidhi Goel to clarify the following points:
1. I presume that you joined PNB as a Specialist i.e. Credit Manager in MMS II pursuant to their recruitment advertisement during August 2012.
If that is so see again Point 6 of General Regulations which clearly mentioned that you are required to execute Bond after selection.
2. On your selection you have signed the bond alongwith surety.
3. While signing the bond you and your surety have acepted the reasonableness of the liquidated damages mentioned by the bank... The amount was accepted by all as reaonable... This means that all parties to contract have agreed with the terms.
4. Because of your posting to Kerala, you wish to resign with out notice and avoid paying the Bond money as well as notice period pay.
5.From the time of joining onwards your services are governed by Officers Service Regulation 1979 of PNB. According to this your services are transferable to any of the branches of PNB in India
6. Hence, I stated that Bank has full right to recover the bond money. As regards its reaonableness all parties have agreed while siging the document.
7. Banks have been nationalised with good objective as suggested by many experts. Therefore they opened many number of branches throught out the country.. They need staff to run the branches.
8. If you are posted to place for which you have not exercised your choice, you can always represent you case. But the posting has been given as per your choice.
9. Regarding reasonableness of the bond money you can proceed through an experienced Advocate and pay the amount decided by the court.
10. I can cite a similar case where the parties are diffrent but facts looks similar.. In this case the employee has signed for Rs. 2 lakhs for 3 yeras Bond... He resigned after serving 2 years..
Sipca India Limited Vs Shri Manas Pratim Deb. The court has allowed some Rs. 22,000 as damages...
11. The choice is yours... Either pay the claim to live peacefully and search for another job OR contest in court to bring a landmark Judgement for future generation of employees and employers reagrding Bond matters...
12. I want to make one thing clear that Recruitment Division in a Bank is not a profit center... Had it been so the Govt would have continued erstwhile BSRB process....
Good Luck
NIDHI GOEL
(Querist) 01 September 2013
Once again Very Very thanx for such nice replies.
But what should I do now- should I initiate on my own by filing suit against PNB or allow the Bank only to do so
Anirudh
(Expert) 01 September 2013
Let the bank make a move first.
prabhakar singh
(Expert) 01 September 2013
@ Doab!It's a happy affair that you have developed tremendous power of detailing,a greatest arm of any lawyer.
@querist
Let bank decide how to enforce rights claimed,you would just defend.
Advocate Sastry
(Expert) 01 September 2013
I also do agree that let the Bank take the initial lead....
Kumar Doab
(Expert) 01 September 2013
Heartfelt thanks to Seniors and Learned Experts for their valuable advice in this thread on the subject which has been perturbing many.
These experts are thorough gentlemen, have helped many and have enriched the forum with their valuable advice.
Although Bank might have published in its advertisement that the selected candidates shall have to sign a bond, however bank might have not narrated the reasonableness of the amount stated as liquidated damages…………………
Bank must have not provided any narrative, commentary, presentation (even if power point presentation), leave behind literature, some take away pamphlet on how the bank in its own wisdom has arrived at the amount of Rs.2 Lakh, and how it is a reasonable amount………………..either during process of selection or at the time of signing the bond with candidate or even surety.
This narrative, presentation won’t be available at the bank’s website.
It is for sure that bank shall not reveal to any one in any forum including court of law, which gentlemen in its team of wise men, has made this calculation and which wisest man in Board of the bank has passed it treating it as perfect and reasonable.
When two parties have to arrive at a conclusion then the party which wants liquidated damages should explain to other party how come this amount is reasonable.
Mere insertion in a contract without any narrative and annexure on reasonableness should not be acceptable as valid treatment.
If the candidate or surety raises a question or demand such explanation, it is almost sure that the gentlemen representing the bank would not explain ( or may even state that he does not know/it is management's decision) and would rather ask to either sign or give up the job or would be terminated. All these actions must be termed arbitrary, unconscionable, unreasonable…………………….
Isn't arm twisting, intimidating the selected candidate to sign on dotted line unlawful, illegal………………
@ Nidhi Goel,
You may revert to the advice of Advocate Mr. Sastry and provide details.
Have you submitted your tour bills etc for reimbursement?
Bank may not issue proper relieving even if the amount of 2 lac+ Notice pay is tendered.
You may check, confirm and obtain everything in writing thru any possible means. This should help the resigned employee later at appropriate time in appropriate forum………………….
Proper relieving would mean bank supplies to resigned employee: acknowledgment and acceptance of resignation, PF number, attested copies of PF withdrawal/transfer forms (submit the forms and request to supply the acknowledgment of receipt and its further submission to trust, by redg. post only to you), correct FNF statement, Form 16 as per correct FNF statement, proper relieving letter, no adverse notings in personnel file and/or service card…………………………etc.
Let all representation from your end to the bank, may now be structured and drafted by your able lawyer so as to suit you in the long run.
