When employer can not recover damages for breach of employment bond?

 A perusal of the letter of appointment which is subsequent in point of time, issued on 12th March,2007 however, indicates that if  after the expiry of six months, the petitioner was not issued any letter of confirmation, the petitioner would be continued on probation.

Clause 8 of the said letter of appointment inter-alia indicates that both the parties were entitled to terminate the services by giving one month notice to another. Respondent No.1 could terminate the services of the petitioner on payment of one month consolidated salary and other admissible allowances in lieu of notice and vice versa the petitioner could resign from the service subject to giving one months notice in writing of his intention to do so. If the petitioner wanted to leave the service without notice, the petitioner had agreed to pay to the company the sum equivalent to one month consolidated salary and other admissible allowances to respondent no.1 or respondent no.1 was permitted to sue the petitioner for damages .

39. A conjoint reading of the appointment letter and the bond agreement indicates that there is inconsistency in the provision under the bond agreement and the appointment letter in respect of the period of service. Be that as it may, even if the bond agreement is allowed to be enforced, the terms and conditions of such bond are required to be satisfied before invocation of the said bond.

40. A perusal of the bond agreement clearly indicates that respondent no.1 had agreed to provide the specialized training to the petitioner at considerable costs and expenditure of the company. A  perusal of the record and more particularly the examination in chief filed by the witness examined by respondent no.1, clearly indicates that there was no provision made by respondent no.1 for specialized training for the petitioner. The petitioner was kept under the supervision of some of the superiors. According to respondent no.1, even the same would amount to specialized training. I am not inclined to accept this submission on behalf of respondent no.1.

41. A perusal of the cross-examination of the witness examined by respondent no.1 indicates that respondent no.1 when called upon to produce the time sheets to show that the seniors were sitting with the petitioner and giving support for understanding with the product, respondent no.1 did not produce such time sheets. In my view, respondent no.1 has failed to prove that any specialized training was given to the petitioner as prescribed under the said bond agreement.

42. Insofar as the compensation of Rs.2.00 lakhs claimed by respondent no.1 from the petitioner under the said bond agreement is concerned, in my view since respondent no.1 did not prove the compliance of the terms and conditions for invocation of the bond agreement, respondent no.1 could not have invoked the said bond.

43. Insofar as the submission of Mr.Gupte, the learned counsel for respondent no.1 that the claim made by respondent no.1  under the said bond agreement was in the nature of liquidated damages and thus respondent no.1 though had referred to some expenditure incurred in providing training to the petitioner, respondent no.1 was not required to prove any such loss / damages alleged to have been suffered by respondent no.1 is concerned, in my view, there is no merit in the submission of the learned counsel. In my view, if the loss is capable of calculation and being proved, it cannot be construed as liquidated damages.

Bombay High Court

Milind P. Mane vs Godrej Infotech Ltd. And 2 Ors on 16 January, 2015

Bench: R.D. Dhanuka

ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO.466 OF 2012

Citation;2016(2)ALLMR317

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Whether employer can recover damages for breach of employment bond if no loss is suffered by them?

 In Union of India v. Rampur Distillery and Chemical Company Ltd., (supra) scope of S. 74once again came up for consideration before the Apex Court. Their Lordships of the Supreme Court after adverting to the decision in Maula Bux v. Union of India , held that the plaintiffs in those proceedings, having made no attempt to establish that they suffered any loss or damage on account of the breach committed by the defendants, ought to fail particularly when the breach of contract in that case was not shown to have resulted in any loss to the appellate/plaintiffs.

Madras High Court

Toshniwal Brothers (P) Ltd. vs Eswarprasad, E. And Others on 18 January, 1996

Bench: D J Raju

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When it is not necessary to prove that damages were caused due to breach of employment bond for recovery of damages?

 On the decisions as aforesaid, the principles which follow in the matter of application ofSection 74 are that where an agreement provides that an amount is to be paid in case of breach thereof whether the amount so payable is penalty or liquidated damages what is payable is reasonable compensation. The Court, therefore, is conferred the jurisdiction in adjudicating any such claim whether the amount claimed really represents the reasonable compensation or not and whether the party claiming such amount has suffered any damage or not to sustain such a claim. The Court is to decide this on consideration of all the facts and circumstances proved including the agreement itself so that if on the agreement proved it is found that the money made payable is liquidated damages bated on a genuine pre-estimate of the damage to be suffered and is not excessive or unconscionable with reference to the damage likely to have suffered by the party claiming the amount, the Court can certainly decree the amount so estimated by the party and mere absence of an independent proof of damage or the quantum thereof would not necessarily induce the Court to overrule the claim and dismiss the suit. The claim now under consideration when adjudged in the aforesaid light is quite sustainable. The agreement has been proved between the parties and on our findings made hereinbefore, the amount payable on the breach is based on a genuine pre-estimate of the damage to be suffered by the plaintiff/respondent in case of breach thereof by the defendant/appellant and that amount again on our findings already made, represents a sum which can only reasonably compensate the loss that the company must have suffered on training up the appellant for 6 months Therefore, even if we accept the contention of Mr. Bagchi that the plaintiff/respondent in the present case had not specifically plead any damage nor proved the same, since the plaintiff/respondent had sued for recovery of a liquidated damage it can rely upon the agreement itself for proof of the damage and the quantum of compensation payable there for to sustain the decree in its favour, fn this view, the second point raised by Mr. Bdgchi fails and is overruled.

Calcutta High Court

Subir Ghosh vs Indian Iron & Steel Co. on 12 September, 1976

Equivalent citations: (1977) IILLJ 120 Cal

Bench: A Sen, M Roy

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Golden rules for interpretation of employment bond

The true rule of construction is that when a covenant or agreement is impeached on the ground that it is in restraint of trade, the duty of the Court is, first to interpret the covenant or agreement itself, and to ascertain according to the ordinary rules of construction what is the fair meaning of the parties. If there is an ambiguity it must receive a narrower construction than the wider. In Mills v. Dunham, L.R. [1891] 1 Ch. 576, Kay, LJ. observed:

"If there is any ambiguity in a stipulation between employer and employee imposing a restriction on the latter, it ought to receive the narrower construction rather than the wider-the employed ought to have the benefit of the doubt. It would not be following out that principle correctly to give the stipulation a wide construction so as to make it illegal and thus set the employed free from all restraint. It is also a settled canon of construction that where a clause is ambiguous a construction which will make it valid is to be preferred to one which will make it void."

The restraint may not be greater than necessary to protect the employer, nor unduly harsh and oppressive to the employee. 

Supreme Court of India

Superintendence Company Of India ... vs Krishan Murgai on 9 May, 1980

Equivalent citations: 1980 AIR 1717, 1980 SCR (3)1278,
BENCH:

TULZAPURKAR, V.D.UNTWALIA, N.L.SEN, A.P. (J)

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