Is it legal for a PSU to have a Bond of this kind?


i had joined Steel Authority Of India Limited, a PSU as a "management trainee" in april 2010 with a basic pay scale of Rs 20600 per month. After joining, we are placed under traing for one year and after that we will be under probation for another year. At the time of joining we were made to sign an apprenticeship contract (but NOT on a stamp paper) according to which Rs 5000 are being deducted from our salary every month. This will continue for 2 years, at the end of which, the entire accrued amount will be returned to us (without any interest). However, the contract said that if i were to leave the company before 2 years, then this amount will be forfieted.

Is this legal on company's part? if not, where can i file a complaint against this?

 
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Advocate

Dear Mr. Saurabh,

You have entered into a contract at the time of joining as Management Trainee.  One of the conditions is that if you were to leave the company before 2 years, then certain amount would  be forfieted.  Having agreed to such terms, how can you object to the said condition now, especially when you have left the company before completing 2 years?

Whether it is PSU or any other Company it does not matter.  What matters is that such a contractual condition was made known to you in advance and after understanding the existence of such a provision you entered into such an agreement.  Having agreed, now you cannot question.


 

 
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LEGAL COUNSEL

I do agree with Advocatge Ramachandran. Most of the well educated aspiring candidates sign some bond, contract or other blindly and seek recourse/advice how to escape. The coneditions imposed amount to unfair practice, though you have signed up the contract. Please post the details of training, if any imparted during the 1st one year - internal on the spot and external and ascertain the actual expenditure of training. ALso during the probation, what profile was given - whether a regular manager's profile etc. This would help explore  appropriate remedy.

vasudevan

 
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FIN

Learned experts/members have given their valuable opinion and clarified the matter in such a fine manner  that it provides clarity and education to the forum members.

You have mentioned:

-that "you were appointed with a basic pay scale of Rs 20600 per month"  and "according to apprenticeship contract  Rs 5000 are being deducted from our salary every month"

The amount of deduction is app. 25%,1/4th of monthly wages.

-that "the contract said that if i were to leave the company before 2 years, then this amount will be forfieted"

i.e if you wish to leave the company and fulfill the conditions of seperation e.g notice period/notice pay etc even then you shall loose  1/4th of monthly wages.

Who is the gainer obviously the company since the matter is drafted to weigh towards the company, benfit the company, and cause the loss to the employee who shall be otherwise toiling to satisfy the master/company with his services, pre printed and you are asked to sign it .

Is there is any mention of forfieture if seperation is by termination of service by company, or under some specific reason of termination.

You may use your resources and discreetly speak to HR guys, union leaders,old emplyees who have knowledge and gain clarity. They may even inform you about similar  complaints/litigation/decisions/resolutions in the past which may be useful to you.

If there are internal IC's/unions they may also have useful information.

You may confirm if your designation management trainee" is executive/manager or workman.

You may obtain emplyee service book/handbook if any having detailed information. The HR page on company intranet may provide detailed information.

 

 

 
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Advocate

If you got better placement and to resign forget about deduction as per the agreement of contract, the company has all the rights to forfeit when yourself has breached the contract. luckily there is no default clause or else they would have claimed damages from you.

 
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Was this contract made known to you with the offer of appointment or after joining the company?

 
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COMPANY SECRETARY

Have you been able to notice the fun in the contract ?  The contract is for two years and the situation is like this - if the unfulfilled part of your contract is only one month (i.e. you work for 23 months and then leave), then the company claims  1,15,000 (23x 5000 = 1,15,000).  On the contrary, if the unfulfilled part of your contract is 23 months (i.e. you work only for one month and leave), then the company claims only Rs. 5000.  

Besides the above, this is unfair and one sided contract.   Learned Shri Gopal Soni has rightly said that inspite of the contract, the Company cannot recover anything more from you than they have actually spent on your training.  

Having said so, it is not the case that if you leave the Company before two years, then you have to pay something to the Company.  The situation is different, the Company already has your money and you want to get it back.  To get it back, you have to sue the Company (counsel fee and court fee) and convince the judge.  In other words, you have to take a lottery ticket, say for  Rs. 10,000 and the chances of your winning a sum of (fill here 75%  amount that the company has deducted) are fifty-fifty. 

Good luck.  

 

 

 

 
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FIN

The learned experts/members have given their valuable advice.

Kindly clarify that you have left the company or you are still employed with this PSU? If yes, you shall be completing 2 years in April 2012.

1. You have mentioned ' At the time of joining we were made to sign an apprenticeship contract (but NOT on a stamp paper)".

The process of joining is usually:

-advertisement for post, then submission of employment application, then interview or set of interviews, then selection, and then offer is made and offer letter is issued in which designation and descripttion of KRA's and remuneration is made and time limit for acceptance of job offer is explained.

-Once the offer is accepted, candidate is asked to join, and appointment letter is issued and joining report signed by reportee and reporting authority is submitted and reportee is inducted. Then the various other papers/forms are supplied e.g. PF, Gratuity, mediclaim/group mediclaim policy, and employee is supposed to submit them

-Company may obtain undertaking in one of the forms/or on separate form, that all aspects of the job and conditions have been explained.

In your case has the company issued you any offer letter, appointment letter, and if yes have they stated in your offer letter/appointment letter that you shall have to sign one apprenticeship contract? And is it mentioned that the format of this apprenticeship contract is enclosed or shall be supplied to you later etc?

Or have they issued only apprenticeship contact only, and no offer letter, appointment letter.

Another question that has come up is that if apprenticeship contract signed on plain paper/not on stamp paper is valid? The learned experts/members of the forum are requested to give their opinion. The amount involved is Rs. 5000/per month i.e. 25% of the wages, which shall run for 2 years. Moreover the 25% of the wages deducted shall be refunded without interest after 2 years of continued service.

You shall remain on training for 1 year and after training, on probation for 1 year.

Is it mentioned in your appointment letter that if found successful in completion of training, you shall be placed on probation for 1 year, i.e. you shall to be informed in writing that you shall be removed from job after training, or allowed to be on probation.

Irrespective of training and probation duration, this apprenticeship contact shall remain in force for 2 years.

 

2. Learned Mr. V. Vasudevan has given their valuable opinion that “The conditions imposed amount to unfair practice, though you have signed up the contract. Please post the details of training, if any imparted during the 1st one year - internal on the spot and external and ascertain the actual expenditure of training. Also during the probation, what profile was given - whether a regular manager's profile etc."

The unfair practices are rampant. Many of the unfair practices are illegal.

The employees are subdued by pressure, coercion.

You may update the details in forum.

You may show all documents to your service lawyer/law firm.

 
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