Pankaj Kumar Samantaray
Asked August 21, 2016

contractual employment

  • 1 Answer

Dear Sir, I am Pankaj from bhubaneswar. I was worked as an Electrical engineer in Vishwanath Projects Limited from 10/2014 to 05/2016. During that period I had a contract agreement that, if I leave before 2 years then I have to pay 3 months salary of 3 months without job and I had a probation period of 4 months. After my joining, completion of 4 months my previous company was not issued me my job confirmation certificate or probation extenuation certificate. Therefore, according to law, I don't have to pay my 3 months salary or 3 months job without salary. I was given my resignation on 18/05/2016, still now they are not clearing my full and final settlement. During my job period I was taken a personal loan of 80,000 for my requirement and for that I was given all my educational certificates as security to company that I will not leave. After giving my resignation, they emailed me that, I have to pay balance 13,000 which belongs to my personal loan. After repaying that, still now they are not providing me my certificates.

Answer 1

Default avatar
Shreya Mishra

The clause in the contract about working for minimum of two years is called compulsory employment clause and is legally valid and enforceable in India. Now, there are two types of compensatory clauses where an employee will have to pay compensation in case you breach the contract that is, not work for the compulsory employment period. One is the liquidated damages where a fixed amount is pre decided in the contract after assessing the possible loss that the employer might incur if you leave the job before the compulsory employment period. Second is penalty, which is the compensation claimed by the employer without any reasonable assessment.

Even after a probation period, you have not completed the minimum 2 year requirement as given in your contract and therefore you would be required to give three month’s salary. However, the Supreme Court has, in the case of Sicpa India Limited v Shri Manas Pratim Deb[1], ruled that any amount stipulated in a contract need not be paid and the Court will determine on a case to case basis if the amount demanded as a breach of contract is reasonable.  The court will also determine whether the employer has incurred any loss because of the breach. You can go to the HR of your company and try to prove that it penalty and no prudent person would consider it reasonable. However, asking for two or three months salary is a common practice and hence in all probability it would not be considered penalty.

Therefore you might have to pay the amount. However, you can go to the HR of your company, and if they do not help then you can go to the Labour Commissioner and ask for your employment certificates by showing how it is important for you for joining your next job.





[1] MANU/DE/6554/2011

Agree Comment 0 Agrees about 5 years ago

Please Login or Register to Submit Answer

Directory ads
Need to talk to a lawyer?

Book a phone consultation with a top-rated lawyer on Lawfarm.