kumarlaxmikant (n/a) 27 October 2007

Contract

Hi,

I m a law student and i have query regarding the bonds signed by the employee with the employer at the time of appointment. Are the bonds signed are valid, can the company really do so, what is the legal status of the bond.

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7 Replies

Shambasiv (n/a) 27 October 2007

Bonds are widely accepted today. No court in India has declared bonds to be illegal unless ultravires the provisions of any enactment or statute. As a matter of fact, companies like TCS has been filing several suits for breach of the bond and recovery of the liquidated damages mentioned in the bond.

SanjayVarun (n/a) 28 October 2007

Bonds are valid especially in the private sector where the rule is ""hire and fire"". Companies like TCS hire and impart training i.e. they are investing on the recruitees, so they are entitled to dictate terms vide bonds. If you leave, say after 6 months of joining, the money on spent on you (training etc..) goes waste, they are very much entitled to recover from guys quitting. These bonds, after all, are prepared by legal devils. Will surely stand test of law.

kumarlaxmikant (n/a) 29 October 2007

Thanks for the reply, but what if they dont impart training. And moreover is it logical to get the bond drafted according to ones whims and fancies, wouldnt it get challenged in court of law. Suppose someone is recruited on a salary of 15k and he is asked to sign a bond that if he quits he has to pay 10 lakhs. Its a very important issue as many youth are becoming victim of it.

bupesh (n/a) 29 October 2007

Unfortunately, the employee has no bargaining power at the time of entering into the contract. The contract is drafted to suit the employer's need. Since the employee is aware of the terms at the time of employment and signs the same, it will hold good in the court of law. However, with regard to the liquidated damages, the employer can be compelled to prove the damage sustained on account of the employee leaving the company. In short, the damages claimed should be in consonance with the loss sustained by the employer.

kumarlaxmikant (n/a) 30 October 2007

Thanks Bupesh,

you have cleared my doubt.

(Guest)

It is a contract. Hence it should be as provided in the Indian Contract Act, 1872. All contracts are based on promise and have their roots in the roman law or english law, across the globe, usually contract is understood in same manner.

N.K.Assumi (Advocate) 28 May 2008

I am dealing with a debt case. The case relates to a time barred debt as the cause of action arose in 2002, whereas the plaintiff filed the case in 2007, based on the revival letter signed by my client in 2006 under section 18 of the Limitation act. Counsel for the plaintiff admit that their case is time barred under section 18 of the limitation act but relied on section 25(3) of the Contract act.i have argued that section 25(3) of the CA is for fresh contract with a promise to pay the time barred debt and can not be read into section 18 of the LA. Can you give your suggestions to the case?