Why an Employment Agreement Bond considered irrelevant in 21st Century

Employment Agreement Bond 2020
bond in employment

Employment Agreement Bond shall be focusing on one of those most urging issues of the 21st century that has received a substantial amount of attention on the Indian Front too.

A Bond in an employment agreement or an Employment Bond in the literal sense means that an employee has to work with that particular employer for a said period of time owing to the fact that the company provides him training and there is a certain amount of money going into imparting such training to the employees.

The provision for the same is usually included in the Agreement of Employment thereby indirectly making the agreement as an Employment Bond. The consequences of the breach of such agreements are unpleasant and drastic, as the employee is forced to pay a certain sum of money in return to the employer if he/she wishes to quit before the end of the bond time period.

Why Employment Agreement Bond irrelevant?

While the concept might be relatively new to the common man’s eye, it is very much existent in all those prominent sectors of India, which houses a major chunk of the workforce such as the IT Sector. The concept behind a bond clause in an employment contract is pretty simple, to avoid/discourage/bar the employees of a particular company from quitting his/her job post those skill enhancement programmes and other work experience offered to the said employee.

Moving forward to the legality part of the debate, the legality solely depends on the involvement of consideration in the said agreement.

While certain companies or entities offer something, for example, a skill development programme for six months and requests for the employee to sign a bond employment contract, for a period of one year, the same can be construed as legally valid in nature. This being said, time and again, most entities tend to misuse the same as they go on to force the employees to sign a bond contract in return for absolutely nothing whatsoever!

Thus, it is in these circumstances that the bond provisions in an agreement become irrelevant to the popular mind and the society at large. 

The Legal Perspective of Bond Agreement

On the legal front, such unwarranted bond agreements can be challenged for its validity using various legislations and provisions. On a general perspective, the Indian Constitution guarantees for the fundamental rights of every Indian citizen under Article 19. 

While Section 27 of the Indian Contract Act states that any and all restrictions on the practice of a trade, a profession so on and so forth are void in nature, Bond employment Agreements are valid owing to the fact that such restrictions operate only during the term of the Agreement, therefore and hence cannot be categorized as a restraint in trade or profession under the said section. 

However, the Indian Contract Act of 1872 specifies that contracts entered into by two parties with no valid consideration stand null and void in nature. Also, no such contract that violates or has a tendency to violate those rights of an individual or cause substantial harm to one party entering into the contract, on account of natural law principles, are null and void in nature.

In the event that the signing of a bond employment contract is absolutely essential, certain prerequisites can be looked into before entering into such a contract with an employer. 

  1. The reasonability of the consideration offered under the contract
  2. The reasonability of the time period 
  3. The reasonability of the non – competition clause contained under the contract (if any)
  4. The reasonability of the Bond Amount to be paid in case of breach
  5. The reasonability of the Confidentiality clause under the Contract
  6. The presence of precise wordings in place of vague clauses such as “abiding by company policies”

Following the aforementioned checklist can help in mitigating those issues which may arise out of a Bond employment contract. It also needs to be kept in mind that the Contract shall be entered into only on the mutual consent of the employee and the employer.

Post Entering into a Employment Contract

It always needs to be kept in the rational mind that bonded labor as a concept has been abolished by the Republic of India ages back and hence no company shall take advantage of the position granted to it by such a contract. In the unlikely event that there arises some issue post the signing of such a contract, various existing laws and regulations shall come to the rescue of an individual.

Since such contracts fall under the ambit of “personal contracts”, an employer cannot claim specific performance of the contract against the employee. The same was iterated by the Supreme Court of India in Nandganj Sihori Sugar Company Ltd v. Badrinath Dixit, & Ors. Liquidated damages exist instead of the same in such contracts and the same ought to be a genuine estimate.

If there exists no such express provision stating the bond amount, the employer can claim reasonable compensation only after proving that there was an actual loss on the part of itself following the breach of the said contract by the employee. In Gujarat Bottling Co Ltd v. Coca Cola Company, it was held by the Hon’ble Supreme Court that it is not bound to grant an injunction in every other case and an injunction to enforce a negative covenant shall not be granted by the judiciary in the event that the same shall compel an employee to idleness or to serve the employer.

Also, Section 368 of the Indian Penal Code lays it down that there shall be extortion by the threat of filing a legal suit against an individual.


Thus, it is a well-settled position that the mere signing of a bond employment contract does not grant an employer the position or the liberty to force his/her will upon an employee. The employee is vested with a plethora of options to break free from any such contract which may prove to be prejudicial to his/her interests. 

At length, it is clarified that owing to those various shortcomings and misuse of the ‘bond’ in an employment contract, it is safe to assume that the same is irrelevant in nature, in these contemporary times and circumstances.

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