Unconscionable contract & termination of services of employee

Rajesh Tandon (Querist) 30 June 2014 This query is : Resolved
1. It is a case which I'm discussing about one of my relative Mrs A who was employed with one of the Indian private companies who had a tie up with one of the US company i.e US-based client. Mrs A was hired by the Indian company and was on the payroll of the Indian company but was reporting to the Indian companies US-based client.
2. The US-based client had closed down its operations in India and accordingly the Indian private company terminated the employment of Mrs A.
3. She was verbally told that the client has terminated the contract with the said Indian private company. The said Indian private company subsequently sent her email that her services have been terminated on the grounds of her poor performance. When she asked them for e-mails, warnings or proofs substantiating her poor performance, the said Indian company replied back that company is under no liability to give her the proofs.
4. When she was hired by the said Indian company, she was never told that she is being hired for the said US company and that when they would quit their work in India, she would have to leave.
5. Incidentally, on being hired, in the terms of contract it was written that your services can be terminated in the probation period without any notice and pay. She signed the contract as this is the standard language of the contracts. If one goes into each and every nitty-gritty of the contract agreement there may be a couple of grey areas which are objectionable and if you start objecting to every terms and conditions then one can never pick up a job with most of the companies. She was working very hard and sincerely.
6. The said US company gave her a mail ID, login ID and password to operate. Subsequently she changed her own password as we all do and continued to work. In fact there were certain other candidates who were also selected but subsequently left the US company. At one such occasion the US company offered her to take on additional responsibility and promised that she would be promoted subsequently. She took on the additional responsibility but was never promoted.
7. Subsequently on the closure of operations of the company in India, her all the mail correspondence through the company mail ID was blocked. She could not access the mail ID. It seems to be a clear-cut case of hacking under information technology act 2000 since she was using her own password & therefore without hacking how can somebody block the account.
8. Now on one side the Indian company is talking of poor performance without substantiating its claims of poor performance by providing any proof in writing or by e-mail. On the other hand all the evidence of e-mail correspondence with US company whereby she could prove her performance is not accessible to her because the e-mail ID being blocked.

9. In fact, the terms of contract as mentioned in para 5 above had been unfair and extremely unreasonable. Further, it seems to be a case of Unconscionable Bargaining Power under Unconscionable contract whereby she could not comprehend the consequences of signing the contract.

10. The Honourable Supreme Court of India in Central Inland Water Transport Corporation Limited vs. Brojo Nath Ganguly held that an unfair or an unreasonable contract entered between the parties of unequal bargaining power was void as unconscionable, u/s 23 of the Contract Act. The Supreme Court held that a printed form contract was void on grounds of coercion, where the parties had unequal bargaining powers.

11. The said judgement mentions that the word unconscionable means showing no regard for conscience, irreconcilable with what is right or reasonable. The fact that there was not only inequality in the bargaining power together with the terms unreasonably favourable to the stronger party i.e the Indian company , it indicated that the transactions involved element of deception i.e the Indian company already had in the mind that if there was the need to terminate the services of the employee they should be able to terminate without notice and may be that accordingly they drafted the contract. My relative Mrs A had no meaningful choice, no real alternative or did not in fact assent or appear to assent to the unfair terms. In fact my relative Mrs A, being the weaker party had only option to obtain this job upon the terms imposed by the stronger party or go without them.

12. In the meantime, Mrs A has been advised by me to keep the Labour Commissioner in loop
13. My querries to the lawyer:-

(a) What are the chances of court taking the stand of Mrs A, noticing the unreasonable element of the contract and awarding the whole contract as unconscionable contract so that it is treated void.
(b) Would such interpretation of Unconscionable Contract can be drawn by labour court or high court?
(c) If the contract is treated void under Unconscionable Contract what are the implications ?
(d) Can she still seek her two months salary since the contract would be void, her termination does not have any application? Actually I am in doubt on this issue since the very fact that if court treats this contract as void then as per the legal meaning of void the status is as if no contract ever existed. So why should she get her dues? So again win win situation for employer despite making unfair contract?

(e) What are the chances that court treats this case as case of illegal termination since all the three essential ingredients/Cardinal principles of natural justice which is basis of of any legal or administrative proceedings have been violated and the actions of the company have been arbitrary as under:-
(i) The first principle of natural justice of giving hearing to the other party has been violated and before even giving a hearing to the party a unilateral decision to terminate her services has been taken. In fact no warning or counselling has been carried out where in she could have represented her case and she would have been given a hearing.

(ii) The second principal of natural justice that judge cannot be biased has been violated since she has not got any satisfactory reply from the MD of the company.

(iii) The third principle of natural justice of passing speaking order is also violated that is the company says that it is not binding on the company to give the proof of her poor performance. The order should be such that it speaks for itself about the justness of the order.

(f) What are the chances that she can seek damages on account of illegal termination as brought out in the case of Central Inland Water Transport Corporation Limited vs. Brojo Nath Ganguly.

(g) What role has the labour commissioner got as an adjudicating authority in such matter?

(h) After labour commissioner office, should the next step should be to go for labour Court?

(i) Can Mrs A lodge a complaint with the secretary of information technology of the state, being the adjudicating authority under the IT ACT 2000 for the offences committed by Indian company, under section66 Of the IT Act for hacking, though the e-mail ID which has been blocked and hacked was provided by the US company but who knows that Indian company might be acting on the orders of US company and might itself would have blocked the e-mail ID so as to destroy all the evidences of the e-mail correspondence between Mrs A and the US client.

(j) How is the jurisdiction extended and exercised over a US company as far as offence of hacking is concerned, since IT secretary of the state will have only jurisdiction over the companies or offences is committed within the area of jurisdiction of the particular state in India?

Follow Query

Report Abuse

Dr J C Vashista (Expert) 01 July 2014
Be precise, no time to read, understand and advise such a long query with so many (may be many more) questions.
It is advised to engage a local lawyer.

Guest (Expert) 01 July 2014
Your case need be discussed in person for advice after taking personal appointment. The discussion can be a time taking one to examine pros & cons of the case. So, any casual discussion here may not help, as my questions & cross-questions may arise from the side of the experts.

malipeddi jaggarao (Expert) 01 July 2014
Repost your query precisely otherwise engage a local lawyer.

P. Venu (Expert) 01 July 2014
She can file a suit for damages against the Indian company who was her employer.

Kumar Doab (Expert) 01 July 2014
Any company has to register in India as per law of the land to do business in India.
Acquire docs from Registrar of the Companies who are Directors and Style and Manner in which company is registered.

The employer of the employee is Company Registered in India.
The employer asked her to send reports to entity based in US. Employee is entitled to retain one copy of daily reports/reports sent by him/her. Employee may lodge demand for all docs it wants and ‘Service card’ and demand to examine the personnel file. The company shall have to bring docs in court of law that is proof of legitimizing action taken by company. Concealing such proof/docs from court can amount to fraud with court.

The termination is due to ‘Poor Performance’……………………….i.e. by leveling a charge………………hence it is stigmatic.

Performance is dependant on multiple factors………………..and such factors may be out of control of employee. Performance is not that easy to prove.

Has the company clearly explained the TGt Vs Perf, KRA’s?

The assignment of additional responsibility during probation period may be highlighted.

The operation in India has been closed………………….the case may amount to retrenchment/lay off……………..
Has the Indian Company (her employer) applied for closure and has it intimated the o/o Labor Commissioner for closure?

The Contract by US client with Indian Company (her employer) has been terminated.
This does not mean that Indian Company shall terminate all employees without subscribing to the provisions of law of the land.
The email of the Indian Company stating that it is not liable to provide any proof of NON Performance speak of High Headed Mindset the Indian Employer is suffering from……………This grants another reason to agitate. Don’t drop the demand for evidence and charge them of concealing willfully and intentionally…………….

The notice Period/pay is part of service conditions and does not depend upon T&C inserted by employer in any private agreement that employer has drafted and signed with employee i.e. appointment letter, contract of employment……………..

Has the employer inserted clause on retrenchment/lay off etc also in the appointment letter/contract of employment.

Natural justice is not granted and Indian Employer (actual employer) is rude, high headed, adamant, recalcitrant as is evident from its email…………. Posted by you.

Being a lawyer you shall appreciate that Labor Law/Service Matters is altogether different field, therefore as advised by experts you must rope in a seasoned, experienced labor consultant/service lawyer in the matter for consultation, polishing the plaint, arguments………….

>>> What is this company/establishment: Commercial, Industrial, Small Enterprise?

It should have displayed its registration Certificate at a conspicuous place e.g near entrance/on notice board! Or You may find out on your own. You may also check the name of Manager/Owner inserted in it.

What is its trade: IT, banking etc……….?

How many employees are employed in it?

What was her designation and nature of duties?

She was located in which state?

Redg. office of the company is in which state?

Has her service been confirmed in writing, or was she under probation?
The establishment works for how many days/week?

Has she ever worked beyond 8hrs/day:::48 hrs/week and does she have its record and did the company pay OT on its own along with payment of monthly wages?

Has the company displayed the standing orders (Certified/Model) applicable to it, on notice board, or circulated to employees or kept at some shared portal e.g HR portal?

Is it mentioned in appointment letter that service conditions shall be governed by HR policy/service rules and regulations and did the company supply these along with appointment letter………………………..or have kept these on some shared portal…………………………..and has she obtained the printed version? If NO minute that these were never supplied. This should be supplied without any cost to employee.

Does the company have an office at location/state where she was located shall be located after leaving this company?

This information shall help, hence post it.

Rajesh Tandon (Querist) 01 July 2014
1.Firstly,Thanks to all experts for their involvement. Thx to Mr P venu for going through the longish querry & giving me hopes of award of damages in the said case.
2. My special thanks to Mr Kumar Doab for not only having patience to go through longish querry but for answering the querry with lots of inputs.
3. Mr Kumar Doab,I am totally flabbergasted by your professionalism & indepth knowledge of the subject.
with profound regards to Mr Kumar Doab.

Kumar Doab (Expert) 02 July 2014
I too join author of the query Mr.Rajesh Tandon to thank the able and learned Experts of LCI for their valuable opinion and for moderating this thread.

@ Mr. Rajesh Tandon

Thanks for your comments.