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Can you 馃敶Resign after signing Bond with company? | Employment Contract Explained In Hindi - YouTube
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Namaskar Friends, Welcome to this new
episode of the Labour Law Advisor channel.
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So, today we are going to
discuss employment bonds.
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Did you know that no employment
bond can coerce you to stay in a job.
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Did you know that the amounts
mentioned in the employment bonds,
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need not be paid in most cases.
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Do you know whether these
employment bonds are legal or illegal?
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And what are the clauses that render
an employment bond as illegal.
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Or if you are a fresher and do not know
anything about employment bonds,
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Then you must watch this video till the end.
Because whosoever working in this nation,
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must have already faced a bond, or there
is a big possibility that, in future,
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some or the other employer is
going to ask them to sign a bond.
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So, Friends, My name is Rishabh Jain,
You are watching Labour Law advisor,
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In today's episode, we are going to know
everything about employment bonds.
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But, before we move forward,
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Don't forget to subscribe to the
channel and Press the bell icon
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[Intro music]
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So friends, the common definition of bonds is
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Bonds are the documents that force you
to stay put in some shitty jobs.
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That is called a bond. But bonds
do have a legal definition as well.
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Bonds are employment agreements
with the negative covenant which are
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covered under the Indian
Contract Act 1872.
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Under the Indian Contract Act 1872,
agreement with a negative covenant is
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valid if they are signed by both
parties under free consent,
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without any fraud,
misrepresentation or mistake.
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This means, whatever documents,
both the parties, in this case,
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employees and employers,
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with their free will, without any external
pressure, without any mistake,
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without any misrepresentation,
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like someone not reading the document
before signing, Some cases like that or,
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or if the document has some roundabout
language which is difficult to interpret.
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In such cases, if both parties sign
the bond, then it is considered valid.
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But there are hundreds of clauses in the act
which render employment bonds invalid.
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which we are going to discover
in this episode in some time.
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Firstly, in this definition, the first phrase
that occurred was 'negative covenant'.
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Now, what is meant by negative covenant?
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A negative Covenant means an agreement
which stops you from doing some work.
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The agreement is not forcing
you to do something,
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it is stopping you from doing something.
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So that is called a negative covenant.
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Three types of negative covenants
are generally used in the bonds.
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Number one, duration of stay with the firm.
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meaning staying employed with the
company for a certain period.
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For example, a workman joins a factory,
which is into weaving fabrics.
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After joining, the workman was
trained to operate the machines,
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trained into the weaving fabric,
quality control etc.
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In that process, the company invested
a time of around 3-4 months.
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In return, the company asked the employees
to sign a bond which stated them to stay
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in employment with the company
for a minimum of 24 months.
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And in case, they leave the company they
would be imposed with so and so penalty.
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They would have to pay a certain amount
to the company as a penalty or indemnity.
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So, this was the first type of negative covenant.
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The second type of negative covenant, which
is often seen as a non compete agreement.
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In this, the company states, For example,
a sales professional is working
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for an educational publishing house
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where he sells books to various
clients, distributors and schools.
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In such a case, if he leaves the job,
then the company or the publishing house
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demands that he, for the next 12 to
18 months cannot join another education
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publishing house which is
their direct competitor.
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This is called the non-compete clause which
is often found in employment bonds.
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We would understand if this
is valid or not in some time.
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The third negative covenant generally seen
in bonds is the Confidentiality Agreement.
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For example, there is a software
developer working for an IT company.
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His confidentiality agreement states
that he cannot share the details of the
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company's software, design, data & program with
any competitor after he leaves the company.
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We would also discuss the validity
of this clause in detail in this episode.
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Regarding these negative covenants,
a very good article has been written
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by a Supreme Court's advocate Mr Dilip Goswami.
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If you want to understand these
negative covenants in more detail,
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then, we would share the
articles on our Telegram group
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Telegram group link is given
in the decription box below.
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Or you can download the Telegram App
and search for Labour Law Advisor into it.
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And you can go and join our group there.
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Firstly, let's understand what types
of bonds are considered valid.
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So keep some pointers in your mind.
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Number 1, the agreement must be signed
by both parties under free consent.
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Like I told you in the definition, that both
parties, employee and employer,
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must sign the agreement with free consent.
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Also, there must not be any undue influence,
misrepresentation, mistake etc.
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The second point is the condition
stipulated must be reasonable
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and reflect the expenditure of
the employer on employee's training.
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Whatever condition is given in the bond,
whether it be the condition of penalty,
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or staying with the company,
it should be reasonable,
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Whatever the company has invested upon the
employee, in terms of his training and grooming etc.
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It should be reasonable according to that.
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Now this reasonable word doesn't have an
exact definition anywhere in the law.
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But when such cases are presented in court, the
court pays attention to the word "reasonable",
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The third condition which makes a bond valid is
whatever conditions stated in the bond,
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it should be mentioned to safeguard
the interest of the employer.
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And not as something to extort an employee.
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Meaning the condition should serve to
protect some interest or law of the company,
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and not merely to extort or threaten the employee
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If it happens, then again the
bond is considered invalid.
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The fourth point is the bond must be executed
on a stamp paper with a proper notary.
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Otherwise, again that bond will be invalid.
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The fifth important point is if you are stating that
the employee should stay with the company
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because you have invested in his training etc.,
You must have that proper training material
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to produce in the court, in case there arises
a dispute and the parties approach the court.
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The last point is that your bond
must at least have the
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confidentiality agreement
and non compete clause,
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so that you can defend it. If it is
not a part of your bond,
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you will never be able to sue
your employee against it.
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So when can you enforce these
employee agreements or bonds?
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It can be enforced when you have invested
in the training of our employee, grooming etc.,
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You've spent your money, time and resources
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And against this, your employee has signed
a bond with you, with his consent and free will,
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and he has agreed to work with
you for a stipulated period of time
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because you have spent some
amount for my training etc.
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Now if that employee leaves or resigns the
company before the stipulated time,
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then this bond can be enforced if the company has
incurred some loss because of him leaving.
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So this was the condition about
when this bond can be enforced.
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So a lot of cases happen online, where
people are given the work of data feeding,
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and you are made to sign some bonds,
and afterwards, due to the site being down
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or due to ten other reasons, you are not
able to do that data operating work,
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Or are unable to complete it or
are not able to do it well,
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then against it, you are sent heavy
notices of Rs 50,000 or Rs 60,000.
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and you are threatened that we have filed
a case against you in so and so court,
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and you will have to pay a certain amount.
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These are all fraud cases. They are
fake cases and have no validity at all.
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Because there was no
expenditure on your training,
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so in such cases, you are
not liable to pay anybody.
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So now we will understand that
if any such cases arise,
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how can it be challenged inside the court?
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by both, employee and employer.
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But before that, we would know about the
three negative covenants that I have told you.
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What rulings have the courts decided
in some of the major cases.
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Have they been decided in the favour of
employees or in favour of the employer?
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So the first negative covenant is
resignation before bond duration.
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The most important case regarding this has been
of SIPCA India Limited vs Shri Manas Dev.
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In this case, the company said that Manak
Dev will have to work with us for 36 months.
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If he resigns before 36 months, he will
have to pay Rs 2,00,000 to the company.
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Manas left his company after two
years rather than working for 3 years.
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So the company filed a case in
the court against Manas Dev.
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In this case, the court first asked the company
about the actual amount spent on Manas's training.
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The company said the amount was Rs 67,000.
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And Manas had already worked
with the company for 2 years.
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The court finally ruled that Manas only
needs to pay Rs 22,532 to the company.
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He did not have to pay Rs 2,00,000
as a penalty to the company.
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You may write any amount in the bond.
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But the actually reasonable amount,
the actual loss that the employer is bearing,
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Only that much amount will
be payable by the employee.
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The bond could be mentioning any amount, the
employee doesn't need to pay that amount.
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A lot of companies, just to keep their employees
in the job, quote huge amounts in the bonds
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There is no significant investment on
training or grooming of the employees.
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There's also no such training which is
benefitting the employee at any level.
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Those trainings are designed only
to benefit the companies.
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So all those cases don't stand
valid inside the court.
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And, Court always asks to pay
only the reasonable amount,
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If any such case is accepted in court, the
employee has to pay a reasonable amount.
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Whatever amount may be mentioned in the bond.
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The second negative covenant is the Post
Termination Obligation or the Non-Compete clause.
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There are many such cases,
I am citing the example
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of Trigo Services Limited
Vs Kaushik Pal Chaudhary.
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He had signed the non-compete
clause with his company.
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Stating that he would not join a
competitor for a certain period.
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When this case reached the court, the
court again ruled in favour of Mr Chaudhary.
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And stated that no such clause can
be signed by the company.
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And this is not the only case. There are
many other cases like this too.
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For example, Pepsico Food Limited Vs Bharat.
High Polymer Limited Vs R.K. Mukherjee,
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And there is a very recent case, Lee Passenger
to India Tours Vs. Deepak Bhatnagar.
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In all of these cases the rulings mostly
come in favour of the employees.
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Any such non compete agreement
doesn't stand valid in court usually.
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The third negative covenant is
the confidentiality clause.
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Let me give you an example for
the confidentiality clause,
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Assume there is a professional
working in a sales job profile,
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He might think that all the data, clients
and leads have been fetched by me
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And so, these are my clients. If I join any other
company, I can share this data with them
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or I can sell the data gathered by
me to any competitor.
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The employee is completely
at fault for thinking like this.
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If you are working with a company & you've
signed the confidentiality clause with them,
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then during your tenure with the
company, whatever data you gather,
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the latter has the right over the same.
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But in this case, The Head Hunter's
CEO Mr Kris has said that
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all these cases can stay valid
up to a limited time only.
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That means the confidentiality clause
can stay valid for a reasonable time
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period only and not perenially.
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It cannot be applicable for
an indefinite period of time.
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If someone leaves a job then
up to a certain time limit,
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you must follow whatever is
written in your bond
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and as an employee, obey
the confidentiality clause.
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Now let us understand if, in the name of
these bonds, any employer is harassing you,
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He has withheld your original documents with
him or is trying to extort money from you,
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Or is forcing you to stay put in the job.
What should be done in such cases?
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And what are the Indian legal statutes or
clauses that support you firmly in such cases.
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Firstly an Indian statute says that any form
of bonded labour has been abolished.
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Meaning, no agreement cannot
coerce you to continue in any job.
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At the maximum,
upon leaving the company
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you may be liable for a
reasonable compensation.
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But no agreement can
forcefully keep you in the job.
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Second, Article 19 of the Indian Constitution,
which is about the fundamental rights,
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That allows every person to
work with their free will.
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So, if any contract stops you from any action,
it is a violation of our fundamental rights.
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In such cases, the court imposes a
very heavy penalty on the employer.
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So, if any contract is stopping you from any
work, it is a violation of article 19.
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Other than this, the Indian Contract Act sees
any one-sided agreement as null and void.
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Generally, the employment bonds or agreements
are one-sided & mostly favours the employer,
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So, As per the Indian Contract Act,
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such agreements are generally
considered null and void.
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The Indian Contract Act, Section 27
says all agreements that stop you
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from working in your trade or profession,
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are considered invalid. A lot of employers also,
withhold the documents of employees
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such as their Passports,
Pan card, Aadhar Card etc.
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Or keep their legal documents with them
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or threaten them to file court cases, that if
they leave the job or do not pay them a
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certain amount or do not fulfil certain terms
of the bond, they will file a suit against them.
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Then, section 368 comes to our rescue.
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Section 368 of the Indian
Penal Code says that
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any type of extortion or harm, if you
commit after threatening someone
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that you would file a case against them, or
you have taken someone's legal documents,
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and you are extorting or threatening someone,
then company's management or directors
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can be punished for a minimum of 2 years
by the court. It can be more than that too.
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Since the company is a legal entity
and not a particular person
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So, the company's management, the directors
and CXOs, are liable in such cases.
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And the punishment is awarded to
them, under section 368.
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So if any employer, in the name of bond,
forces you to stay in the company,
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harrases you or confiscates your legal
documents and threatens to sue you,
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then you need not be afraid at all. If the
matter actually reaches the court,
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Your employer can be
jailed for up to two years.
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So, overall, in conclusion, we can understand that
if an employer is spending on your training etc.,
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and against it, wants you to stay with the
company for a reasonable certain period,
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then his demand is quite reasonable. And the
employer is rightful & justified in doing so.
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But if this demand is unreasonable or the
amount mentioned in the bond is too big,
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then it is not considered valid in the court.
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No employer can harass or extort
you in the name of the bond.
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And these online frauds that we come across,
where they fool and threaten innocent employees
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in the name of bonds, they are not valid at all.
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Such people should be reported to the
police or complained about in the court.
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Now, just don't stop here
after watching the video.
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Share this video with all your employee
friends, so that they become aware.
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If you are an employer, share
it with your employer friends
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So that they create a valid, legal
bond or employment contract.
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So friends, before I leave, Here is
the question for the day.
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Whosoever gives the right answer, one lucky
winner will get Paytm cash of Rs 51.
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And here is the question on your screen.
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Which section under The Indian Contract Act, prohibits
any agreement in restraint of trade and profession?
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Section 25, Section 26, Section 27, Section 28
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If you do not know the answer to this question,
probably you haven't seen the video properly.
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Watch the video again and write your
answer in the comment section below.
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That's all for today's episode.
Stay Tuned, Stay Aware
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Jai Hind. Jai Bharat.
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[Outro music]
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