Any type of Employment Bonds are nothing but a private agreement between two parties which are governed by Indian Contract Act. There is nothing called Employment Bond Act etc.
Such bonds are applicable only if the company has spent money on the personal grooving and enhancement of the employees, but not just a training that helps employees perform better.
i.) As per the Indian Contract Act contracts entered between two parties if is one sided then such contract would be null and void.
ii.) Again as per the Indian Contract Act no contract can be enforced on any person if the contract which is being so enforced causes any harm to the person on whom it is enforced and if performed would violate principles of natural justices.
In India Bond is illegal in relation to employment since as per the Indian Statute, bonded labor system was long abolished and no bond can force any person to work against the employees wishes.
Article 19 of Indian Constitution talks of fundamental rights, as per the Article 19 the Constitution the write work is a fundamental right, and under no circumstance does the Fundamental rights under Article 19 be waived by any person nor can any person be forced to do something that amounting to the violation of the rights mentioned under Article 19.
As per Sec 368 of Indian Penal Code if any person or institute holds back any document or any use any legal document or threatens any legal suits or actions and thus forces a person to perform any act against his wishes or which is illegal or wrong as per the statute of Law of the land.
Sec 368 of Indian Penal Code talks about extortion by the threatening to file a legal suit and minimum punishment under this act is two years.
The Hon. Supreme Court of India and several High Courts have clearly stated in a number of cases that no employee can be forcefully employed against his will, just because he has signed a contract with the employer and that the employer can not hold back any personal document of the employees as they are earned by the employees and the company has no claim on the same.
Any complain on the company would land the Directors and Managing Directors of the company in Jail or face the risk of Exemplary Damages, as the company is not an actual living entity but only a legal entity and the management are hands and heads of the company.
A bond merely as employee retention tool is bad in law.
I would like to add certain observations by the Court in Superintendence Co. of India v. Krishun Murgai. (AIR 1980 SC 1717):
"The drafting of a negative covenant in a contract of employment is often a matter of great difficulty. In the employment cases so far discussed, the issue has been as to the validity of the covenant operating after the end of the period of service. Restrictions on competition during that period are normally valid, and indeed may be implied by law by virtue of the servant's duty of fidelity. In such cases the restriction is generally reasonable, having regard to the interest of the employer, and does not cause any undue hardship to the employee, who will receive a wage or salary for the period in question. But if the covenant is to operate after the termination of services, or is too widely worded, the Court may refuse to enforce it. ……………At the time of the agreement, the employee may have given little thought to the restriction because of his eagerness for a job; such contracts "tempt improvident persons, for the sake of present gain, to deprive themselves of the power to make future acquisitions, and expose them to imposition and oppression."
In the above case, The respondent was employed in the appellant firm. The contract of service contained a negative covenant restricting him from joining a competitor or doing a similar business of his own. He was terminated by the company and thereafter he started a business of his own which was similar in nature to the business done by the Superintendence Company of India P Ltd.
The court had also discussed in large the matter of "leaving/ resigning and joining a competitor" which should be treated different from 'dismissing/ Discharging/ terminating from service since in the instant case the employee did not leave by himself but was terminated from service.
In view of the aforesaid discussions and various court decisions, the employment bond is considered to be reasonable as it is necessary to protect the interests of the employer. However, the restrains stipulated upon the employee in the said contract should be "reasonable" and "necessary" to safeguard the interests of the employer or else the validity of the bond may be questioned. The employees are always free to decide their employment and they cannot be compelled to work for any employer by enforcing the employment bond. The court can; however, issue order restricting the employment of the employee only if the said action is deemed necessary to safeguard the trade secrets/proprietary interest of the employer. In the event of breach of contract by the employee, the only remedy available to the employer is to obtain a reasonable compensation amount. The compensation amount awarded shall be based upon the actual loss incurred by the employer by such breach.