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Where an employee resigns in breach of service bond executed post receiving specialised training, relieving letter may be withheld by the employer
The Hon’ble High Court of Bombay (“Bombay HC”), in the Bharat Aviation Private Limited and Anr. vs. Rahul Sudhindra Soni, held that when an employee has failed to comply with the provisions of the service bond, resulting in the employer not accepting the employee’s resignation, the employer cannot be mandated to issue a relieving letter or a service certificate to such an employee.
The Bombay HC observed that providing a relieving letter and service certificate is a consequential act, undertaken after acceptance of an employee’s resignation. However, in the present case, the resignation was made in violation of the terms of the service bond, and therefore not accepted by the employer. The employer cannot be compelled to issue the relevant documents.
The ruling signifies the validity of the service bonds, executed in consideration of the specialised training provided by the employer to its employees. Further, the judgement reinforces the balance between an employee’s right to livelihood with the legitimate business interests of the employers, where latter has invested resources in advanced training for its employees.
Brief facts
Rahul Sudhindra Soni (“Respondent”) was employed with Bharat Aviation Private Limited (“Petitioner”) and had executed a bond in favour of the Petitioner on November 7, 2022, to remain employed with the Petitioner, for a period of 3 (three) years after securing a specialised training. This training was to be conducted on the Boeing B777 aircraft and was conducted by a third-party.
Under the terms of the service bond, the Respondent had the option of leaving employment by giving 60 (sixty) days’ notice, along with payment of liquidated damages of INR 10,00,000 (Indian Rupees ten lakh).
Accordingly, the Respondent was contractually required to be employed with the Petitioner from November 7, 2022, to November 6, 2025. However, the Respondent resigned from his employment via an email dated April 9, 2024, and stopped working from April 12, 2024. Consequently, the Respondent did not comply with the conditions enumerated under the service bond, i.e., did not serve 60 (sixty) days’ notice and did not pay the liquidated damages.
Subsequently, the Respondent demanded for a relieving letter and service certificate from the Petitioner. However, the Petitioner did not comply with this demand.
Aggrieved by this, the Respondent approached the Industrial Court, which by an interim order, directed the Petitioner to provide the relieving letter and service certificate to the Respondent.
Challenging this interim order, the Petitioner had reached the Bombay HC.
Issue
Whether the employer could withhold relieving letter and service certificate of the employee, who after receiving training, left the employment, before completion of the service tenure determined under the service bond?
Findings and analysis
The Bombay HC reiterated the validity of service bonds, upholding that where an employer invests time and effort in training an employee, it is prudent to expect the employee to remain employed for the determined tenure.
Notably, the Bombay HC highlighted that the Respondent, having acted in breach of the contractual agreement, cannot insist on receiving the relevant documents to secure employment with a rival employer.
The judgement clarified that a relieving letter follows from the acceptance of a resignation and is not an automatic right. As the Petitioner did not accept the Respondent’s resignation in the first place, the Petitioner had no obligation to furnish such documentation to the Respondent.
The Bombay HC further observed that directing the Petitioner to provide such documentation could promote unhealthy competition within the aviation industry, as employers may begin soliciting trained engineers from competitors instead of investing in training their own workforce. The ruling reflects the Bombay HC’s inclination to protect the Petitioner’s legitimate commercial interests over the Respondent’s argument that withholding the documentation could affect his prospective employment opportunities.
Further, the Bombay HC noted that the Respondent upgraded his position from ‘Technician’ to ‘Engineer,’ substantiating the claim that the Petitioner provided specialised training. Additionally, the Bombay HC rejected the Respondent’s contention that a third party had provided the training, highlighting that the identity of the training provider was immaterial; the focus should be on the party that bore the cost, which in this case was the Petitioner.
The Bombay HC also observed that the Petitioner had not obstructed the Respondent from joining a competitor, nor initiated a suit to recover damages for breach of contract. Therefore, no court should direct the Petitioner to assist the Respondent in securing other employment by issuing such documents when the Respondent had not fulfilled his contractual obligations.
Based on the above findings, the Bombay HC set aside the interim order given by the Industrial Court.
Conclusion
The ruling further reiterates that employers may withhold relieving letter and service certificate, if an employee has failed to comply with reasonable contractual obligations. It also clarifies that a relieving letter is not an absolute right of an employee who has breached a reasonable service bond.
The ruling also recognises the economic interests of employers and emphasises that the routine poaching of trained employees by other employers should not become the norm.
This Prism has been prepared by:
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Sajai Singh |
Parvathy Manoj |
Akshita Sharma |
For more details, please contact km@jsalaw.com.
