Bond agreement between employee and employer - if I leave the company before 3 years then I need to pay 5 Lakhs

Hi sir, I joined the company on 11th June 2018 and signed a bond stating that I have to serve the company for 3 years during the probation period. On 1st January 2019, after 7 months, I was offered a permanent position and signed another bond. This bond mentioned that if I leave the company before completing 3 years, I would need to pay an amount of 5 Lakhs and serve a notice period of 3 months.

I have submitted my resignation on 29th March 2021 and am currently serving the 3 months' notice period. I would like to inquire whether I am required to pay the bond amount if I am relieved before the completion of the notice period or the bond tenure. Thank you for your assistance.

Employment Bond requires the newly recruited, appointed, trained, and confirmed employee, after successful completion of the probation period, to serve the employer for a specified number of years. Failing to do so will result in paying a predetermined sum of money, commensurate with the time and money spent on training by the employer. This is valid under the Indian Contract Act of 1872.

To determine the value or cost of training, it should focus on personal grooming and enhancing the employees rather than just improving their performance. Courts will assess the reasonability of the bond based on factors such as the job nature, training duration, stipend or salary amount, required service length, preliquidated sum in case of bond renunciation by the employee, and similar considerations. A bond will not be enforceable if it is one-sided, unconscionable, or unreasonable.

For instance, in the case of Sicpa India Ltd v Manas Pratim Deb, the employer sued the employee for leaving service within 2 years against a compulsory service period of 3 years, claiming damages of Rs.2 lakh as agreed in the bond. The Delhi High Court awarded compensation of Rs.22,532 only, by dividing the training cost of Rs.67,595 by 3, considering the remaining service period of one year for the employee.

Therefore, the employee is not required to pay the Rs.5 lakh sum stated in the bond. If the employer insists, negotiation for a reduced amount based on the actual training cost incurred by the employer is possible. If negotiation fails, seeking judicial remedy is an option.

Thank you for your legal advice and knowledge, sir. May I know how much time it will take if I go for a judicial remedy? Is it 1 month or 6 months?

Normally, it will take a long time as it is a Civil Litigation, Saurabh Kumar. Employers also know this. Therefore, on completion of the notice period formalities, even if the employer refuses to relieve the employee on the grounds of breach of the contract, let the employee indicate his willingness to offer a proportionate and reasonable sum based on the cost of training, if any, imparted to him and simply walk out on his own while keeping his prospective employer informed of the fact.

In such a case, the employer has either to drop the matter or to initiate a civil suit for recovery. Thus, let the employee allow the employer to take the legal course first. In this case, the employee will have a valid defense based on several case laws in this regard.