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suraj1110abc (engg)     07 February 2010

Breaking of service bond


Iam working as an engineer in a psu -govt of india company from june 2008 onwards.just like all psu's I was asked to sign a service bond agreement for 5 years.But unlike other psu bonds this bond was for a sum of10 lakhs for liquidated damages.

eventhough i was selected for the department,i was forced to put up in an uninterested domain which i was reluctunt to accept in interview.but it is in same department.

Now 6 months back I got a training for 5 days in a technical software as part of the work which i was not interested and not told in the agreement .the training was worth 1 lakh.

I am totally exhausted with the current job due to the continuos torture from two superiors .Due to them only iam planning to quit from this company. iam searching to opt for higher studies or other company in my interested field.

could you please advice if i quit what are the possible legal problems and also kindly advice what to do before goinG to quit.

the copy of bond I have signed is atteched here with


 54 Replies

Sarjooram Sharma (Assistant Labour commissioner)     08 February 2010

Any bond can not be over and above to the law of the land. Now can you tell me what is the procedure of retrenchment or termination of services in the PSU. If for termination or retrechment, the notice period is one month, you can resign on one month notice and if the notice period is for 3 months you can resign after giving three months notice. But if there is rule in standing orders or service rules about resignation, you should follow that rule, but in any case if the rule say notice period beyond 3 months, it will not be legal.

suraj1110abc (engg)     08 February 2010

that means if i resign after 3 months notice ,and follow the rule how much compensation i need to pay back? 10 lakhs ?? that is too heavy for me to pay.and company neither invested that money on me other than salary.

Amardeep Srivastava (Senior Law Officer)     08 February 2010

Dear Kanathur,

If you have executed the bond then you would be liable to pay if you leave before that. The only relief available to you is in case if you switch over to another PSU (central or state) or to the government (central or state), then in view of the DPE guidelines the bond will have to be transferred. As regards your contention that they have not spent that much money on you, there can be a counter argument that there is lot of organisational planning behind every recruitment. When somebody resigns without serving the minimum period for which the bond is required, the entire planning goes for a toss. The PSU where you are working can of course waive the bond if they so desire.


V. VASUDEVAN (LEGAL COUNSEL)     08 February 2010

 Mr. Sharma has given the legal standing of such arbitrary "bond" for service and I concur with him. Moreover, going by para 4 which stipulates the condition of liquidated damages appears to have been CRAFTED by an excellent draftsman of legal acumen. As per this clause you are expressly entitled to resign from the services with three months notice AND if the employment is terminated is due to your 'fault'  then the bond is enforceable against you. By no stretch of imagination a resignation per terms can be  terms as "fault". Please submit hour resignation per terms and liberate yourselves. Best WIshes, vasudevan

suraj1110abc (engg)     08 February 2010

In India Bond is illegal as follws

As per the Indian Statute bonded labor system was long abolished and no bond can force any person to work against the employees wishes

Article 19 of Indian Constitution talks of fundamental rights, as per the Article 19 the Constitution the write work is a fundamental right, and under no circumstance does the Fundamental rights under Article 19 be waived by any person nor can any person be forced to do something that’s amounting to the violation of the rights mentioned under Article 19.

[b]As per the Indian Contract Act contracts entered between two parties if is one sided then such contract would be null and void. Most of the Bonds are one sided.

Again as per the Indian Contract Act no contract can be enforced on any person if the contract which is being so enforced causes any harm to the person on whom its is enforced and if performed would violate principles of natural justices.

[/b]As per Sec 368 of Indian Penal Code if any person or institute holds back any document or any use any legal document or threatens any legal suits or actions and thus forces a person to perform any act against his wishes or which is illegal or wrong as per the statute of Law of the land.

Sec 368 of Indian Penal Code talks about extortion by the threatening to file a legal suit. The minimum punishment under this act is 2 two years.

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.

The court also has stated that the employer can not hold back any personal document of the employees as they are earned by the employees and the company has no claim on the same.

[b]Any complain on the company would land the Directors and Managing Directors of the company in Jail, as the company is not a actual living entity but legal entity and the management are hands and heads of the company.[/b]

Bonds are applicable only if the company has spend money on the personal grooving and enhancement of the employees, but not just a training that helps employees perform better."""


Amardeep Srivastava (Senior Law Officer)     09 February 2010

Dear Suraj1110abc,

In case of a service bond there is no bar on the employee from leaving the service. The purpose is not to make him work against his wishes. Its not a case of bonded labour or depriving a citizen from his right to chose a profession. The purpose of having a bond in place is to discourage impulsive job hopping. This system is well recognised in public as well as private sector. In your case reasonableness of the bond amount could be an issue. Your present employer cannot compel you to work for them. The only thing that they can do is to initiate a recovery suit in case if you don't pay. If you are switching over to another PSU or Central or State Govt. then you can draw their attention to the DPE guidelines. In case if you just wish to leave then try challenging the bond itself.


1 Like

Sarjooram Sharma (Assistant Labour commissioner)     09 February 2010

excellent. I really appreciate you.

Rama mohan Acharya (Manager HR(Legal))     09 February 2010

As per the BPE Guidelines remaining period of bond is transferable in case leaving one PSU and joining another PSU.

suraj1110abc (engg)     10 February 2010

there is a statement in para 2 of this bond that "this agreement is for the above mentioned post (engineer-design)".so what happens if my post changes .say if I got transfered to another post like engineer(production).could you please confirm in that case this bond exist or not

Amardeep Srivastava (Senior Law Officer)     11 February 2010

Please read that clause again. The employment is subject to other service conditions also, which includes transfer transfer too.

raj hans (AO)     22 September 2010

sir, i m workng with PSU insurance company...i have entered into service bond of 4 years...while applying, there was option of preferred place of posting....but after 2.5 months of training....i was given posting in Maharastra whereas I belong to chandigarh...company said that there is no vacancy available in or near your hometown dats y u were given posting in maharastra...but the truth is dat a female candidate was given posting in chandigarh and many other people were given posting in delhi n ludhiana(places near chandigarh)...

probation periiod is of 1 year which i hav completed...n even during probation period i applied for request transfer( an employee is eligilble for request transfer only after 3 yaers of continous service)... 5 months have elapsed since then bt i was nt inimated abt my request status..

i m planning to leave the job...as per service bond if i leave before 4 years i have to pay i year of gross salary plus 25000 training charges...

is there any legal remedy.. kindly reply

vivek malhotra (GM)     20 January 2011

I joined a leading PSU as engineer trainee and entered a service bond for one year and one lakh.Now I want to join another PSU by apperaing in the interview and selection exam.My present employer is not giving me the NOC for appearing in the interview of the other PSU while this new PSU is asking for NOC from present PSU.


The terms of present bond do not say that I shall not be given an NOC and that can be diluted if I pay the stipulated amount therein


How this present PSU can refuse the NOC.As per presetn DPE guidelines there is no requirement to guideline to not to issue such an NOC.


pls advise

Ajay (Dealer)     03 February 2011


Sir am working in a share market company.i signed a bond for  three year from 01-12-2009. company give me only offer letter and denied me to give a copy of bond it was my weekness to sign the bond that time company pay me 10000 rs P.m. in bond it was mention that 6 month will be probation period.after probation period company will increase the salary.and after on annually basis. but company did not increase salary after both time (probation& annual).i talked to my HOD he also denied me to increase the salary. now i a have a offer from another company. i give resign but company refuse to accept the resign and give me a notice to join company again.

Sir Let me know if i breake my bond, can company take any legel action against me.

Maddy.Nilesh (Software Engineer)     05 February 2011


I am facing somewhat same issue. I was working in an MNC and while joining they have asked me sign the bond of 2 lakh rupees which they called a training bond. Also before joining I was having the experience of 1.8 years but they informed me that I will be considered as a fresher. The bond period was of 2 years. And due to recession I agreed on signing the bond. They have asked me to work on as a trainee for 3 months and during these three months they haven't provided me any training as such. I have been given few documents to read which are free on some website. 

After a year due to family emergencies I have requested them to relieve me. And I have resigned. They asked me to pay the bond amount and also to serve the notice period of 3 months. I have served the notice of 2.5 months and informed them that I can't pay the bond. My performance till the day I left was 100%. 

I have handed over all the company assets to my manager before leaving. Now company have considered me absconded even after serving the notice of 2.5 months and also they are asking to pay me the bond to get my relieving letter and they are ready to take the absconding letter back. 

I need help on this as I will not be able to pay this much amount.

Please help!


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