Asked September 22, 2016

Employment bond and bond money

  • 1 Answer

Hi, I've been working for a IT company for the past 9months. Due to some issues regarding late payment of the salary I have decided to leave the company. But I have signed a bond period of 1year and they made me give them a undated cheque of 50k. Now they are threatening me to give the compensation else I have to work for another 3 more months. Can you please give me some legal advice. Is bond legal in india? Can I reclaim my cheque back. Can they do anything against me?

Answer 1

Employments Bonds are not illegal in India. Business houses incur expenditure on imparting training to the employees and hence, after investing so much on the employees they want them to serve the company for a minimum number of years. This is how Employment Bonds came into existence.

Employment bonds are agreements between employee and employer where it contains the terms and conditions of employment. They generally contain a clause which requires the employee to serve the employer compulsorily for a specific period of time or else refund the amount specified as bond value. Employment bonds/agreements are legally enforceable as long as they have been entered with the free consent of the parties and are not unreasonable or one-sided.[1]

Since in your case you have breached the employment agreement, your employer COULD seek remedy for such a breach of contract, which is the compensation he is asking from you.

BUT, note that the amount of compensation should be such so as to compensate the employer for the loss suffered by him and it should also not exceed what is mentioned in your contract.[2] So, if you feel that the amount your employer is demanding from you is unreasonable you can approach the court and then court can decide the reasonable amount you are liable to pay to your employer. You have to prove that your consent was not present, and that the amount they demanded was unreasonable.

In one case,[3] the company had incurred expenses of INR 67,595 on training the employee for which an employment bond was executed for three years lock-in period. The amount/penalty mentioned in the bond was INR 2,00,000. The employee left within two years. When the company went to court it was awarded a sum of INR 22,532 as compensation for breach of contract by the employee. Though the bond was for 2,00,000 as compensation for breach of contract, the judge considered the total expenses incurred by the employer and the employee's period of service while deciding the compensation amount. Since the defendant had already completed two years of service out of the agreed three year period, the judge divided the total expenses of INR 67,595 incurred by the plaintiff into three equal parts for three years period and awarded a sum of INR 22,532 as reasonable compensation for leaving the employment a year before the agreed time period.

Therefore, the bond you signed is valid and legally enforceable. The recourse you can take is to approach the court for deciding the reasonable amount of compensation you have to pay to your employer, and to prove to the court that the amount your company is asking you is unreasonable, compared to what they have spent on you.



[1] India: Enforceability of Employment Bond, available at

[2] Central Inland Water Transport Corporation v Brojonath Ganguly (1986) II LLJ 17 SC

[3] Sicpa India Limited v Shri Manas Pratim Deb, RFA No.596/2002. Available at

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