Bonds are widely used and widely misunderstood, on both sides. The correct position sits between "always void" and "always payable".
What cannot be done
No bond can compel you to continue in employment. Specific performance of a contract of personal service is not granted, and forced labour is prohibited by Article 23. The employer's only remedy is money.
When a bond is enforceable
Courts have upheld bonds where the employer shows it incurred genuine expenditure that would be wasted by early departure, typically:
- Specialised or overseas training paid for by the employer
- Certification and course fees, with invoices
- Relocation and visa costs actually paid
The bond must be for a reasonable period and a reasonable amount, proportionate to that expenditure and usually reducing over the bond period.
Under Section 74 of the Indian Contract Act, 1872, where a sum is named in the contract as payable on breach, the party complaining is entitled only to reasonable compensation not exceeding that amount, whether or not actual damage is proved. Courts consistently read down inflated bond amounts to the actual, provable loss. A bond of several lakhs for on-the-job training with no documented cost is very unlikely to be enforced in full.
What is not a valid bond
- A bond that is really a restraint on future employment, which is void under Section 27 of the Contract Act
- Withholding original educational certificates as security. This is coercive and courts have deprecated it; you can demand their return and complain to the labour authorities
- Withholding earned wages or statutory dues to enforce the bond
- A bond where the "training" was ordinary induction or work the employee performed productively
Practical advice
Ask the employer, in writing, to itemise the actual expenditure claimed with supporting invoices. In a large proportion of cases the demand quietly reduces or disappears, because the figure was never based on anything. If it proceeds, the negotiation is about the real number, not the number in the bond.