Delhi District Court
Union Of India vs Sh. Vineet Laroia on 6 January, 2022
IN THE COURT OF MS. COLETTE RASHMI KUJUR: ADJ-10: TIS
HAZARI COURTS: DELHI.
CNR NO.:- DLCT01-000016-2005
SUIT NO.:- 64/2019
UNIQUE CASE ID NO.:- 609772/2016
IN THE MATTER OF :-
Union of India,
through its Secretary (R)
Aviation Research Centre,
Directorate General of Security,
Cabinet Secretariat, Government of India,
Bikaner House Annexe,
Shahjahan Road, New Delhi-110001 ....Plaintiff
VERSUS
Sh. Vineet Laroia
S/o Sh. Satish Kumar Laroia,
R/o GP-34, Maurya Enclave,
Pitampura, Delhi-110088,
2nd Address:-
Sh. Vineet Laroia, Trainee First Officer
Through Lt. Gen. (Retd) I. K. Verma, PVSM, AVSM
Executive Vice President,
Jet Airways (India) Pvt. Ltd.
SM Centre, 4th Floor,
Andheri-Kurla Road,
Andheri (East), Mumbai-400059 ....Defendant
CS No. 609772/16 Page 1 of 38
Suit for recovery of Rs. 7, 50,000/- (Rupees Seven Lacs Fifty Thousand
Only) along with pendentelite and future interest
Date of Institution of the Suit : 02.09.2005
Date on which Judgment was reserved : 06.09.2021
Date of Judgment : 06.01.2022
::- J U D G M E N T -::
1.This is a suit for recovery of Rs. 7,50,000/- filed by the Union of India against the defendant Vineet Laroia who was offered an employment by the plaintiff as a trainee pilot.
2. The facts of the case as given in the plaint are;
The plaintiff, ARC (Aviation Research Centre), the Directorate General of Security, Cabinet Secretariat, which is a unit instrumentally of the UOI established for providing the intelligence and security services to the Govt. of India for safeguarding the territory of India under the Cabinet Secretary, Govt. of India.
3. The defendant was employed as trainee pilot in the pay scale of 8000-13,500 vide offer of appointment bearing no.4/50/2002-DO-II-5164 dated 25.07.2003, on the terms and conditions given in the said offer of appointment dated 25.07.2003.
CS No. 609772/16 Page 2 of 384. As per the clause 1 (iii) of the said Memorandum/Offer of appointment dated 25.07.2003 "the plaintiff as well as the defendant was entitled to terminate the appointment at any time giving a month's notice without assigning any reason, however, the appointing authority however, reserves the right of terminating the services of the appointee forthwith or before the expiry of the stipulated period of notice by making him liable for the payment of a sum equivalent to the pay and allowances for the period of notice or the unexpired portion thereof.'
5. Clause 5 of the Memorandum/Offer of appointment dated 25.07.2003 reads, "the defendant was to execute a bond of the value of Rs.7.5 Lakhs to serve in ARC i.e. with the plaintiff for at least 10 years"
in violation of which the defendant was liable to pay Rs.7.5 Lacs as liquidated damages to the plaintiff. It is the case of the plaintiff that the defendant accepted the said offer on the terms and conditions of the offer of appointment dated 25.07.03 and joined his duties as a trainee pilot at Charbatia (Orissa) w.e.f. 30.09.2003 (FN) and an order confirming his appointment was subsequently confirmed by the plaintiff vide order dated 21.10.03.
6. In compliance of the appointment dated 25.07.03 the defendant duly executed the bond dated 20.09.2003 thereby agreeing to serve the plaintiff for a period of 10 years w.e.f. 30.09.2003 and in case of breach of this CS No. 609772/16 Page 3 of 38 bond, the defendant would pay a sum of Rs. 7.5 Lacs to the plaintiff.
7. As per the offer of appointment clause 1 (iii), the appointment could be terminated by either of the parties with one month's notice without reason. The plaintiff was however also empowered to terminate the services any time by paying one month's salary in lieu of one month's notice. That on 27.11.03 the defendant unilaterally and arbitrarily sent his resignation letter from the post of trainee pilot through fax to accept the resignation w.e.f. from 15.12.03. It is submitted that the defendant thereafter proceeded on tour upto 2.01.04 and did not turn up to resume his duties w.e.f. 02.01.2004. Upon enquiry by the plaintiff, it was learned that the defendant had joined Jet Airways services as Trainee First officer w.e.f. 2.01.04 much prior to the expiry of one month's notice. The defendant did not wait even for the acceptance of his resignation.
8. It is the case of the plaintiff that it had incurred a huge amount in advertising for recruitment to this post for its security arrangement which are of grave public importance, shortlisting of applicants, constituting selection board, conducting interviews and thereafter final selection. The plaintiff has spent a huge amount in the training of the defendant on his monthly lodging, boarding and clothing, till he remained with the plaintiff organization. That the plaintiff had to make alternative arrangements at high rates/costs to meet the requirements for its security measures to be adopted by it in grave public importance besides initiating fresh CS No. 609772/16 Page 4 of 38 recruitment which fell vacant because of the arbitrary resignation.
9. The plaintiff has averred that the defendant has violated the terms and conditions of the appointment dated 25.07.03 therefore he is under a legal obligation to pay the amount of the bond of Rs. 7.5 lakhs besides the pendente lite and future interest @ 12% per annum. A legal demand notice dated 24.05.05 was issued thereof but the defendant miserably failed to make the payment or reply to the legal notice.
10. In reply to the said suit the defendant filed his WS stating that the present suit is liable to be rejected under Order VII rule 11 CPC as it is without a cause of action. That the clause 5 of the appointment letter for executing a bond of Rs.7.5 lakh to serve the plaintiff for 10 years is illegal and unenforceable in law. It is submitted that the defendant was appointed as trainee pilot, on probation for a period of 2 years w.e.f. 30.09.2003. It is contended that plaintiff had not provided the defendant any training during the period he worked on probation with the plaintiff i.e. from 30.09.2003 to 01.01.2004. Therefore, any claim arising out of this dispute has to be adjusted against the salary or allowance paid by the plaintiff.
11. It is further the stand of the defendant that the plaintiff did not provide any training to the defendant during the period he worked on probation with the plaintiff i.e. 30.09.2003 to 01.01.2004. The defendant before joining the plaintiff had already obtained a commercial pilot licence CS No. 609772/16 Page 5 of 38 from the Civil Aviation Department after undergoing training at Udan Research & Flying Institute, Indore. The defendant was granted licence for flying single engine aircraft in September 1997 by the Civil Aviation Department after completing 270 hours of flying. Thereafter the defendant was granted licence for multi- engine aircraft in October 1998 when he completed 35 hours of flying. The defendant has already spent Lakhs of rupees for the aforesaid training and obtaining the licences before joining the services of the plaintiff.
12. The defendant had signed the bond under duress, force, coercion and undue influence as he was in an unequal bargaining power. The plaintiff was not ready to give him the job unless he accepted the conditions of appointment letter and signed the bond on dotted lines. Not only was this, during his entire service period, despite requests, not paid a single penny either towards the salary or other benefits as per the letter of appointment. On the other hand, the defendant had to spend a huge amount on his boarding and lodging during the period he worked with the plaintiff at Charbatia, Orissa. The defendant time and again requested the officials of the plaintiff to release his salary and other allowances as it was not possible for him to continue in the service due to financial condition but to no effect instead he was threatened to have to pay the bond amount. The plaintiff was under a liability to pay regular salary and allowances and was further liable to provide proper service conditions.CS No. 609772/16 Page 6 of 38
13. The defendant further states that the bond amount of Rs.7.5 lakh which is the basis of the present amount is by way of penalty and as per settled law penal clause in an agreement cannot be enforced and as such the suit of the plaintiff is liable to be dismissed. The clause 5 of the appointment letter and the bond is void in view of Sec 27 of the contract Act, as it amounts to restraining the defendant from exercising lawful profession, trade or business. The bond of 10 years is extremely unreasonable and amounts to negative covenant and as such cannot be enforced. The same is also in violation of Articles14, 19 & 21 of the Constitution of India.
14. In their replication the plaintiff have reaffirmed and reiterated the contents of the plaint.
The issues were framed on 18.07.2006 as under:
1. Whether the plaint is liable to be rejected under Order 7 Rule 11 of CPC? OPP
2. Whether plaintiff is entitled to enforce the bond/agreement against the defendant according to provisions of Section 51 of the Contract Act? OPD
3. Whether the amount of bond of Rs. 7.5 lacs plus interest is illegal? OPD CS No. 609772/16 Page 7 of 38
4. Whether Clause 5 of the Agreement of Appointment Letter dated 25.07.2003 is void according to provisions of Section 27 of the Contract? OPD
5. Whether the condition in the bond to work with plaintiff for a minimum period of ten years is unreasonable and also illegal in terms of Article 14, 19 and 21 of the Constitution of India? OPP
6. Whether the plaintiff provided any kind of training to the defendant, as alleged, if so to what effect? OPP
7. Whether the plaintiff is entitled to the amount claimed, if so to what amount? OPP
8. Whether plaintiff is entitled to the interest, if so at what rate and what amount? OPP
6. Relief.
15. In evidence the plaintiff examined Sh. T. K. Rath, DD(A) AW, ARC, DG(S), Cab. Sect. Govt of India, New Delhi. His evidence by way of affidavit is Ex PW1/A. The plaintiff relied upon documents Ex PW1/1 to 8.
16. In cross examination, the witness failed to show any authority letter from the Union of India as having authorized to sign, verify and institute the present suit. As per this witness, the defendant was qualified to be a pilot though he had to be imparted training on their aircrafts. It is stated by the witness that there was no reason for the doubting the facts given in the CS No. 609772/16 Page 8 of 38 application by the defendant. That it is also correct that till date they had not found any fact contrary to the facts given in the application of the defendant.
17. On further cross examination, the witness stated that he cannot disclose as to how many types of aircrafts are kept by Aviation Research Centre, as the same effects the security of the country. On further cross-
examination, it is stated that the defendant would have been given training on few aircrafts if he had worked with the plaintiff organization and proved to be competent.
18. The witness admitted that the defendant was given ground training only on eight different relate subjects. On completion of ground training he would have to appear for examinations and only after passing all of them he would have been permitted to progress on to actual flying training. He admits, "we have not filed any proof that we have incurred any amount on the ground training of the defendant as aforesaid. (Vol. this is not my area of responsibility or competence as the costing aspects are not under my jurisdiction. There is separate accounting departments for the same). The witness further stated that he would be unable to comment as to whether the defendant was given any personalized training. I will not be able to say anything if any expenses were incurred by the plaintiff on the ground training of the defendant.
CS No. 609772/16 Page 9 of 3819. The witness admits that no salary was released to the defendant during his employment with the plaintiff organization. The plaintiff states that if the defendant had not left the plaintiff prematurely, he would have got the dues. The plaintiff however, admits that the permission granted by the cabinet secretary has not been brought by him nor such facts are mentioned in the plaint or replication. The witness however denied that no permission was granted by the Cabinet Secretary that is why the same has not been brought on record or mentioned in the pleadings. The witness also admits that they had not informed the defendant when his salary will be released. The witness also admitted that it is correct whatever salary had accumulated in the account of the defendant during the period he was employed with the plaintiff has not been released to the defendant till date. The witness volunteered to state that in the absence of necessary office order, pay has not been released, which is the normal practice in government service.
20. The witness admitted that the defendant served the plaintiff during the one month's notice period. However he denied that the resignation letter sent by the defendant was not through proper channel. The witness also denied that the plaintiff was bound to accept resignation letter of defendant after expiry of one month's notice period. He volunteered, that the resignation could have been accepted if the defendant had paid/submitted the bond amount. The witness further admitted that in response to the resignation letter dated 27.11.2003, 10.03.2004 and the CS No. 609772/16 Page 10 of 38 letter dated 01.01.2004 the plaintiff had sent the reply only on 28.06.2004 stating the approval for the resignation is still awaited.
21. Further, the witness states that it is correct that during probation period the defendant could terminate/leave his services by giving one month's notice or salary in view thereafter. (vol. There were other conditions to be fulfilled in terms of appointment letter Ex PW1/1). The witness stated that he did not agree that the job of the defendant was purely on temporary basis. The witness further admits that 'it is correct that the reason for taking service bond of Rs.7.5 lacs was to secure the amount spent on the high cost of the training imparted to the defendant and the plaintiff did not want the defendant to leave services after obtaining training at a very high cost over the years. (Vol. his leaving the service before ten years would be setback to the organisation as having trained a pilot, the aircraft would be sitting on the ground after he left affecting our operations adversely)
22. When the defendant was asked whether the clause 5 of the appointment letter would come into effect after expiry of probation period or whether the services are confirmed? The witness did not agree, he however stated that, it is incorrect to suggest that the bond of Rs. 7.5 Lakh was taken by way of penalty for leaving the services of the organisation prior to ten years.
CS No. 609772/16 Page 11 of 3823. The witness confirmed that the defendant had sent his resignation on 27.11.2003 through fax and that the defendant had asked for his resignation w.e.f. 15.12.2003 which did not amount to one month's notice. He also confirmed that the defendant worked in the plaintiff organization till 01.01.2004.
24. As per the witness the resignation would have been considered and forwarded for approval to the cabinet secretariat only if he had fulfilled all conditions including depositing the bond amount and thereafter, decision of cabinet secretariat would have been received.
25. As per the witness the government had at the time banned direct recruitment. That it is also correct that we have not brought on record nor stated anywhere in our plaint or replication that prior to advertising the post on which the defendant was employed, the government had waived the ban for direct recruitment by the plaintiff organization. It is wrong to suggest that we have not placed any such documents on record because they do not exist. The witness was unable to state/ confirm whether the defendant was paid the salary during his period of employment from 30.09.2003 to 01.01.2004.
26. He further went on to depose that accommodation charges are normally debited directly from the pay by DACS. However, food and other charges are billed at the end of the month. It is correct that Ex PW1/DX1 to CS No. 609772/16 Page 12 of 38 DX2 are the bills of mess, payment receipts with respect to the payment made by the defendant towards the same, payments made by the defendant for the stay charges as well as other payments were made by the defendant during his employment and stay. It is correct that nothing was paid by the plaintiff towards mess charges, boarding, lodging and other expenses and everything was paid by the defendant. The witness although denied the suggestion that the defendant had to leave the employment of the plaintiff because of the adverse conditions created by the plaintiff in not paying the salary and other allowances. The witness could not specify any amount which was spent on training of the defendant or in the processing of the advertisement for recruitment of the trainee pilots...I have not filed any proof with respect to any of statement made in sub para 11 of my affidavit which is Mark A to Mark A1. The witness was unable to state anything about the proof of alternative arrangement upon the resignation of the defendant or fresh recruitment and cost of that recruitment. The witness could not specify any amount spent on the selection process.
27. The witness goes on to state that, "I have not placed any document to that effect on record. It was the condition of recruitment /advertisement that the candidates whether selected or not would not pay the cost of election process, advertisement, examination and etc. it is also correct that the service bond was not executed by all the candidates/applicants. It is correct that nothing was taken from the candidates who were unsuccessful in selection process. It is correct there was no reference of furnishing CS No. 609772/16 Page 13 of 38 service bond of Rs.7.5 lac in the advertisement inviting the candidates for the post in question. It is correct that the furnishing of bond was never linked to the selection process. I cannot say how much amount was spent by the plaintiff on the salary, lodging and clothing of the defendant till he remained in our service. (vol. while I cannot say the exact amount, the salary calculated by the DACS has been submitted on record. ...)
28. The witness on further query averred that it is correct that the issue of proportionate reduction of bond amount is not within the discriminator power, the same has to be referred to Cabinet Secretary or Finance Ministry.
29. He further stated that no separate amount was paid to the persons imparting ground training as they were the employees of the plaintiff and was being paid salary by the government. It is also stated that the defendant was credited 7 days earned leave for the period the defendant worked with the plaintiff organization.
30. Thereafter, the plaintiff examined PW2 T. R. C Pillai, Retd. ATO from ARC, DG(S), Cab. Sectt. GOI, New Delhi. His evidence by way of affidavit is Ex PW2/A. The witness brought the course completion report of the defendant dated 21.10.2003 along with list of instructors and the result Ex PW2/1 (Colly).
CS No. 609772/16 Page 14 of 3831. Upon cross examination the witness admitted that it is correct that he had mentioned B-200 aircrafts in his affidavit. And that no permission was taken for disclosing the said information. The information with respect to B-200 aircrafts was disclosed only with the convenience of the present case. He further stated that, "the entire course mentioned in Ex.PW2/1 was classroom training. Vol. On the ground, cockpit training was given on the aircraft standing on the ground." He was further unable to say whether any document has been placed on record to show that any expenditure was incurred on the training of the defendant. He also affirmed that no new equipment was acquired for the training of the defendant. It is also correct according to him to say that it was a group training and not for a single person. This witness further confirmed that he was getting his salary from the government and not given anything extra as remuneration for conducting the training. The witness was also unable to say as to on how many aircrafts training was given to the defendant.
32. Thereafter, PE was closed and the defendant led his evidence. The evidence by way of affidavit of the defendant is Ex DW1/ A. the witness has relied upon Ex DW1/1 (OSR) which is a copy of the Commercial Pilot Licence issued by Udan Research and Flying Institute P Ltd. DW1/3 (Colly) copy of his resignation letter dated 27.11.2003, letter dated 01.01.2004. Ex PW1/DX3, DX1.
33. The defendant was cross- examined at length wherein he states that CS No. 609772/16 Page 15 of 38 he is not liable to pay the bond amount as he had left the services after giving one month's notice as required in the letter of appointment and during his probation period. As per the witness it is correct that there is no description of amount for using the term Lakhs of rupees spent on training and obtaining commercial licence. The states, My parents had spent money for my all trainings and obtaining commercial licence. It is correct that no such document has been placed on record."
34. The witness states that he was not in a bargaining position with the organization as they were not willing to give him a job without signing the bond. It is stated that he had not written the word duress, coercion, force or undue influence in his resignation but had written unavoidable circumstances. He further states that he has not written separately about the non- receipt of salary but has stated so in his resignation.
35. The witness has denied the suggestion that he had not been threatened and hence did not file any complaint. The witness further states that he has mentioned in the resignation letter that the plaintiff had created such situation and service condition that it had become impossible for him to continue his service with the plaintiff.
36. The witness further states that he had already been selected in Jet Airways before joining ARC and that he got a joining date in December 2003 for his appointment in Jet Airways on 02.01.2004. the witness states CS No. 609772/16 Page 16 of 38 that he was not made aware of any restrictions while working with ARC /intelligence organizations nor could he recollect any booklet named DSI (Department Security Instruction) or that he was made aware about the fact that while serving with ARC he was specifically governed by Intelligence Organization (Restrictions of Rights) Act 1985.
37. The defendant stated that he was aware of the condition of the bond of Rs.7.5 Lakhs. It was put to the witness that advertisement in employment newspaper, conducting exam, conducting interview, etc, cost money to the plaintiff to which the witness stated that it is a common process but he was not informed that this exercise cost money that is why successful candidates are required to serve for 10 years with the plaintiff by executing a bond of Rs. 7.5 lakhs.
38. As there were no further witnesses to be examined, DE was also closed and final arguments were heard. The parties have filed their respective written arguments and the same is on record.
Plaintiff's arguments:
39. The plaintiff has argued that it is one of the most decorated departments of the Central Government and that it is governed by the Official Secrets Act, 1923. That the defendant worked with the organization only for two months and 15 days and in this short span whatever was CS No. 609772/16 Page 17 of 38 necessary was made available as per the curriculum.
40. The plaintiff has argued that the defendant was aware of the bond amount as well as the minimum period of service of 10 yrs. The defendant did not give a valid notice period before resignation and therefore the clause V of the appointment letter is enforceable and defendant is liable to pay the bond amount. It is argued that the defendant has not proved that he was under any duress, coercion, force or undue influence in either joining the plaintiff organization or in continuing with the service. The defendant has made no such complaint and rather he has used the term unavoidable circumstances in his resignation which is still unexplained. It also argued that the defendant has nowhere stated that he spent lakhs of money to get a commercial pilot training/ licence. It is suggested by the plaintiff in the cross examination that the defendant has not asked for the payment of salary/ release of the due salary. It is argued that the organization provided proper service conditions and the defendant was subject to certain restrictions as per DSI (Departmental Security Instruction) and Intelligence Organization (Restriction of Rights) Act 1985. It is argued that the defendant was aware of these conditions as the same was part of the newspaper advertisement of the organization. The defendant is only wanting to escape from the liabilities arising out of the breach of contract.
41. As per the plaintiff the law evolved in case titled Sir Chunnilal V Mehta & Sons Ltd.Vs. Century Spinning and Manufacturing Company CS No. 609772/16 Page 18 of 38 Lvt. Ltd. [ AIR 1962 SC 1314(1)] which deals with the situation where the termination/ breach of contract is of such nature that before the fixed period of time the actual loss cannot be calculated accurately for the remaining period of the contract. Therefore, the predetermined liquidated damage in the contract will prevail and the same will not be hit by section 74 of the contract Act.
42. The second judgment relied upon by the plaintiff is Fateh Chand vs. Balkishan Das [(1964) 1 SCR 515] which deals with termination/ breach of contract where the loss cannot be calculated and can be proved , therefore the predetermined liquidated damage will be hit by section 74 and will prevail as penalty.
43. The plaintiff is further relying upon Ashwani Bahl & Ors. Vs. Air India Ltd. Wherein the Hon'ble High Court of Delhi has observed that the losses caused to the airline on account of a pilot leaving before the contractual period has various ramifications of which cost of the training is only but one aspect. The Hon'ble High Court held that there would be no illegality in awarding the fixed damages as specified in the contract and would not be in the nature of a penalty as specified under section 74 of the Contract Act.
44. It is argued that the case squarely covers the plaintiff's case. It is argued that the defendant had sufficient time to go through the offer of CS No. 609772/16 Page 19 of 38 appointment and was under no coercion to agree to do so and is hence bound by the law of estoppel. The covenant which the defendant spells as negative is within the purview of law and imposes reasonable restriction in the public interest.
45. The plaintiff also cites Maula Bux Vs. Union of India [1969(2) SCC 554] wherein the Supreme Court of India had observed that where a court is unable to assess the reasonable or actual compensation due from the breach of the contract, the court may in such circumstances take into account the damages predetermined by the parties as measures of reasonable compensation. It is argued that the bond carries the maximum amount of damages that can be quantified in terms of money. It is stated that the plaintiff has determined the maximum damages to be 7.50 Lakhs.
46. It is argued that even as per the constitution, reasonable restriction can be imposed on freedom of trade to ensure welfare of general public. It is argued that the provision of the bond which reasonable restricts the defendant from serving any employer other than the plaintiff for a period of ten years only for the limited purpose of recovering the costs incurred by the plaintiff on training the defendant does not violate the provision of Article 19 (1) (g) of the Constitution of India. It is argued that the covenant imposed upon the defendant is only for public interest and to secure the national interest. In supportof his argument the plaintiff has cited Niranjan Shankar Golkari vs. Century Spinning and Manufacturing Co. Ltd. [ AIR CS No. 609772/16 Page 20 of 38 1967 SC 1098] stating that an injunction can be passed to restrain the employee from taking up a job during the subsistence of a contract period.
47. The plaintiff has specifically argued that Negative covenants operative during the period of the contract of employment when the employee is bound to serve his employer exclusively are generally not regarded as restraint of trade and therefore do not fall under section 27 of the Contract Act. In support of this argument the plaintiff has cited W. H. Milsted and Sons Ltd. [1927 WN 233 (Supra)]. The plaintiff also states that the judgments cited by the defendant are with respect to private bodies whereas the defendant has entered into a contract with central government department and intelligence organization dealing and working with serious issues related with national security.
Defendant's arguments:
48. The defendant on the contrary has argued that one has to look into the justifiability and the reasonability of the bond sought at the appointment. It is argued that the clause V of the appointment letter providing for the execution of bond of Rs.7.50 lakhs to serve the plaintiff for a period of 10 years is illegal and unenforceable in law. Since no salary or allowance was paid nor the plaintiff provided any training to the defendant during the period he worked on probation with the plaintiff i.e. from 21.08.2003 to 01.01.2004 no question of actual damages arise in CS No. 609772/16 Page 21 of 38 favour of the plaintiff. It is argued that this fact has been admitted by the plaintiff witness. The defendant had an unequal bargaining power as plaintiff was not ready to give him the job unless he accepted the terms of employment. Instead the defendant has had to spend a huge amount for his boarding and lodging for the entire time he was with the plaintiff. It is argued that nothing was paid towards lodging, mess charges, no reimbursements. It is argued that the plaintiff was under an obligation to pay the regular salary and allowances and was further liable to provide proper service condition for working of defendant as employee.
49. During the arguments is was also submitted that the job offered had not been approved by the Ministry and it was for this reason the defendant was not given salary. Since there was a ban on recruitment, the ARC could not recruit, appointment of the defendant itself was wrong. It is argued that the cross examination of PW1 has proved that no training was imparted and that the defendant was a trained pilot.
50. The defendant has further argued that the plaintiff has failed to prove the loss occurred to it, no proof has been brought on record to that effect. It is also argued that the plaintiff has failed to show that it had to make alternative arrangement upon receiving the resignation of the defendant, or that it had to advertise afresh for new /fresh recruitment as replacement, or that, it had to process 1000 applications. The plaintiff has failed to show any proof of damages. It is argued that the plaintiff's argument that the CS No. 609772/16 Page 22 of 38 bond amount is being sought to secure the high cost of training is unconstitutional. The plaintiff witness has in fact averred that the amount is being sought by way of penalty. A contract is not automatically payable, actual loss has to be proved. If at all, only reasonable compensation can be claimed. Since the plaintiff has not proved the actual damage the suit is liable to be dismissed.
51. It is further argued that the resignation was to be approved by the Cabinet Secy. But the plaintiff did not approve the same even till January
19. As such the defendant had given notice well in advance.
52. The Defendant has relied upon the following judgments in support of his argument:
Now I proceed to decide the issues:
First Issue: Whether the plaint is liable to be rejected under Order 7 Rule 11 of CPC? OPD The onus to prove this issue was upon the defendant. It was stated by the defendant that the appointment letter dated 25/07/2005 stipulates that either of the parties can terminate the appointment by giving one month's notice without assigning any reason during the period of probation. The clause V of the letter that the defendant was liable to pay the bond amount would CS No. 609772/16 Page 23 of 38 come into force only after the expiry of probation period and before that period either party was at liberty to terminate the service by giving one month's notice. As such the defendant was well within his right to tender resignation during the period of probation by giving one month's notice and is not liable to pay the bond amount. Therefore, the suit is without a cause of action and is liable to be rejected on this ground alone.
The stand of the plaintiff is that the clause in Ex PW1/1 cannot be read in isolation and that the offer of appointment mentions other clauses which are to be read together with each other. The defendant is giving his own interpretation whereas the defendant has signed and executed the bond that he accepts these terms and conditions and that he will pay a sum of Rs.7.5 Lakh to the government if he resigns the service before the expiry of period stated in the memorandum of the plaintiffs.
Record perused.
The Memorandum Dated 25.07.2003 Ex PW1/1 states in its clause iii that employment can be terminated at any time by giving one month's notice by either side....thereof. There are however further clauses, which are conditions of appointment including clause 5 for executing the bond for at least 10 yrs. There is nothing in the memorandum to indicate that clauses 2- 7 shall be applicable only after the expiry of probation of 2 years. A probation period even otherwise has a different relevance and may or may CS No. 609772/16 Page 24 of 38 not be a pre- condition for other clauses to come to force.
Therefore, the issue is decided in favour of the plaintiff and against the defendant.
Second Issue: Whether plaintiff is entitled to enforce the bond/agreement against the defendant according to provisions of Section 51 of the Contract Act? OPD Section 51 of the Contract Act is provided for situations when promisor is not bound to perform, unless reciprocal promisee is ready and willing to perform generally this section is applicable for contracts which deal in goods transactions. However, if the same analogy is to be carried to employment bonds, it is to be proved that plaintiff had performed or remained ready and willing to perform the contract.
It is the case of the defendant that the recruitment was done without taking sanction from the proper authority, Cabinet Secretary herein, which fact is not denied by the plaintiff, rather in the evidence of the plaintiff, this fact has been confirmed. As per the witness the government had at the time banned direct recruitment. The plaintiff admits that they have not brought on record nor stated anywhere in their plaint or replication that prior to advertising the post on which the defendant was employed, the CS No. 609772/16 Page 25 of 38 government had waived the ban for direct recruitment by the plaintiff organization. The plaintiff goes on to deny the suggestion that they have not placed any such documents on record because they do not exist. The witness was unable to state/ confirm whether the defendant was paid the salary during his period of employment from 30.09.2003 to 01.01.2004.
It is a matter of record that the plaintiff had not obtained sanction before recruitment, as required at the time of signing the agreement with the defendant. Hence, it can be concluded that the plaintiff was not ready and willing to perform his part of the contract. It is for these reasons that the defendant was not paid salary, other dues and proper service conditions during his tenure with the plaintiff.
In Pepsi Foods Ltd. Vs. Bharat Coca-Cola Holdings (P) Ltd., the Delhi High Court held that negative Covenant that restrained from undertaking employment for 12 months after they left the plaintiff service amounted to violation of Section 27 of the Contract Act. It is for the plaintiff to show that there is expenditure or financial commitments.
In Sicpa India Ltd. Vs. Sh. Manas Pratim Deb, the Court considered the actual loss suffered by the employer.
If there was violation of the employment bond by the defendant then the plaintiff was under an obligation to show the loss suffered due to such CS No. 609772/16 Page 26 of 38 violation.
This issue is hence decided in favour of the defendant.
Fourth Issue: Whether Clause 5 of the Agreement of Appointment Letter dated 25.07.2003 is void according to the provisions of Section 27 of the Contract Act? OPD Section 27 of the Contract Act makes void i.e. unenforceable, every agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind.
The onus was upon the defendant to prove that Clause V of the agreement is void. The employment bond restraining the defendant from leaving the organization till after 10 years is purportedly imposed by the employer for impanting valuable skills, and training in specified fields such that he has an edge over other competitors to avoid significant loss to itself in terms of money and human capital. The defendant however has proved that he was already trained pilot having 270 hours of flying a single engine aircraft and 35 hours of flying multi engine aircraft to his credit whereas the plaintiff has imparted only 8 days of training without a salary during the tenure of service.
In Desiccant Rotors Internation (P) Ltd. Vs. Bappaditya Sarkar (2009), CS No. 609772/16 Page 27 of 38 the Delhi High Court observed that in instances of conflict between employer's attempts to protect themselves from competition and the right of employees to seek employment wherever they choose, "it is clear that the right of livelihood of the latter must prevail."
Even though an agreement to serve an organization exclusively for a definite term is a lawful agreement, a term of 10 years is rather long / a whole decade. The plaintiff had demanded only persons below the age of 27 to apply for the job. Assuming that defendant was 27 at the time of recruitment, he would already be 37 years of age by the time he would be allowed to leave this job and overage for any other recruitment. It is not the case of the plaintiff that defendant joined the service of a competitor. Jet Airways and ARC have very different functions and objectives.
In view of the above consideration, the issue is decided in favour of the defendant.
Third Issue: Whether the amount bond of Rs.7.5 lacs plus interest is illegal? OPD Fifth Issue: Whether the condition in the bond to work with plaintiff for a minimum period of ten years is unreasonable and also illegal in terms of Article 14, 19 and 21 of the Constitution of India? OPP
a) The onus to prove both the issues was upon the defendant. The CS No. 609772/16 Page 28 of 38 defendant in his written statement has categorically stated that, "the said bond of Rs. 7.5 Lakhs was signed by the defendant under duress, force, coercion and undue influence and at the point when the defendant was in unequal bargaining power as the plaintiff was not ready to give him the job unless he accepted the conditions of appointment letter and signed the bond on dotted lines."
b) It is stated by the defendant further in his WS that the condition of appointment/ bond prescribing defendant to work with the plaintiff for a minimum period of 10 years is extremely unreasonable and amounts to negative Covenant and as such cannot be enforced. That the same also violates the Art 14, 19 and 21 of the Constitution of India. It is stated in evidence that the bond amount of Rs.7.5 lakh which is the basis of the present suit is being levied by way of penalty and the bond clearly restrains him from exercising lawful profession, trade or business.
c) The defendant was examined as a witness and was duly cross examined by the plaintiff, during which he has stated that his parents had spent money for him to obtain the commercial pilot licence. He states, it is correct that he has not placed any such document showing the expenditure on him. He also states that it is wrong to suggest that he was under no duress, force or coercion or undue influence while executing the bond. He admits that he did not use the words duress, force, coercion and undue influence in his resignation but had cited unavoidable circumstances.
CS No. 609772/16 Page 29 of 38d) First thing to be noted in the submission is that the defendant is aggrieved by the amount of 7.5 lakh sought by the plaintiff and not specifically the period of 10 years prescribed for the defendant to work with the plaintiff organization. It is stated in his cross examination that he was aware of the terms of serving the ARC for 10 years and the condition of bond of Rs. 7.5 Lakh but it is incorrect to suggest that he considered the stipulation as reasonable.
e) Duress as defined in the dictionary is 'threat, violence, constraints, or other action used to coerce someone into doing something against their will or better judgment.'
f) By common understanding the employment bond is a security for the amount a company is going to invest in an individual. In normal circumstance a company does not get any profit as soon as they recruit a fresher and hence they need to train them before extracting any work from them. In this way, the companies spend a lot of time, energy, resources and money in training to make the individuals productive. It is the competition in the corporate world that has led to the business houses undertaking training for their employees with the aim of improving the quality of the goods and services of the company. But the increased rate of attrition has forced the employers to obtain an employment bond or agreements requiring the employee to serve the employer compulsorily for a specific CS No. 609772/16 Page 30 of 38 period or else refund the amount specified as bond value.
g) These is no doubt it is a negative covenant, and cannot be enforced if they are obtained by fraud, coercion, undue influence, mistake and misrepresentation. It has been held variously that the employer shall be entitled to recover damages only if a considerable amount of expenditure has been borne by the employer. Nevertheless, the employment bond are to be reasonable in order to be valid. And the amount of the bond and the employment period should not be exorbitant.
h) Going by the statement of the defendant that his parents had spent a considerable amount for his license and that he would not get employed unless he signed the bond with the plaintiff is sufficient to fall within the definition of duress. The terms and conditions of the bond put a restriction on the employee from joining a competitor or another employer and directly or indirectly compel the employee to stick to the employer. So when the plaintiff says that there was no threat or violence to the defendant in joining its organization do we mean to ignore the economic situations which place the employees under duress, in terms of their future, the uncertainty in progression in their career etc. or are we to understand that the employee when still at the nascent stage of his career is at the same level of bargaining with the terms and conditions fixed by the employer. It is most certain that the drafting of the security bond had no contribution from the employee in preparing the clauses of the bond nor could he have CS No. 609772/16 Page 31 of 38 argued on the same. It is most certain that the employee would, any employee would, seek to join the company and also sign the bond knowing fully well the boundations specified in it or lose the job.
i) In its own words, the plaintiff company is stated to be a highly reputed government unit providing intelligence and security services to the government of India for safe guarding the territory of India under the Cabinet Secretary, GOI, making it one of the most desirable services in the country. Unfortunately, in some cases the employment bonds imposed unethical and unfair restriction to the deteriment of the employee and often impress upon the employee to pay excessive sums of money if they leave the company during the bond period which is also the case of the defendant, therefore the present issue is decided in favour of the defendant.
Sixth Issue: Whether the plaintiff provided any training to the defendant, as alleged, if so to what effect? OPP
a) The onus to prove this issue was upon the plaintiff. The defendant had strongly argued that he was given no training by the plaintiff and therefore the demand of the bond amount is not justified rather it is unconstitutional.
b) The burden of proof was therefore upon the plaintiff to show that the training was imparted to the defendant during the period the defendant CS No. 609772/16 Page 32 of 38 worked with the defendant. In evidence the defendant has relied upon the Ex PW2/1 (Colly) which is the result of course, report of course completion and list of instructors.
c) The plaintiff witness no.1 under cross examination admits that he has not filed any proof that the plaintiff has incurred any amount on the ground training of the defendant (Vol. this is not my area of responsibility or competence as the costing aspects are not under my jurisdiction. There is separate accounting department for the same). The witness admits, "It is correct that the reason for taking service bond of Rs.7.5 Lacs was to secure the amount spent on the high cost of the training imparted to the defendant and the plaintiff did not want the defendant to leave services after obtaining training at very high cost over the years." The witness on further cross examination states, "It is correct to suggest that the bond of Rs.7.5.Lacs was taken by way of penalty for leaving the services of the organization prior to ten years."
d) This witness further confirms on cross-examination that no salary was released to the defendant during the period of employment with the plaintiff organization.
e) The plaintiff witness PW2 has elaborated that the "entire course mentioned in Ex. PW2/1 was classroom training. Vol. on the ground, cockpit training was given on the aircraft standing on the ground." The CS No. 609772/16 Page 33 of 38 witness goes on to state upon cross-examination that "I am not aware of the fact as to whether any document has been placed on record to show that any expenditure was incurred on the training of the defendant. It is correct that no new equipment was acquired for the training of the defendant. It is correct that it was a group training and not for a single person. " Upon further cross examination, the witness admits that, "I was getting salary from the government. I was not given anything extra as remuneration for conducting the training. It was part of our duty. I am not aware as to on how many aircrafts, training was given to the defendant. It is wrong to suggest that whatever I have stated above, is false. It is wrong to suggest that no actual training was imparted to the defendant during the tenure with the plaintiff. .......it is correct that the document Ex. PW2/1 has not been countersigned by the defendant. It is wrong to suggest that no expenses were incurred on the defendant by the plaintiff during his tenure with the plaintiff."
f) On perusal of the Ex PW2/1 it is observed that the course completion report with respect to B-200(Pilots) specifies that the training was conducted 15.10.2003 and 18.10.2003 and the entire training was held from 13.10.2003 to 18.10.2003 as per the result of the defendant. No other document has been relied upon by the plaintiff to show that after joining the services on 21.08.2003 any further training was imparted.
g) The Ex PW2/1 is clear that the training was only with respect to CS No. 609772/16 Page 34 of 38 B-200 Aircraft and that too on ground subjects. The plaintiff witness has agreed that the defendant would have been given training on few aircrafts if had worked with the plaintiff organization and proved to be competent. He admits that the defendant was given training only on eight different related subjects.
h) The witness has stated that he cannot comment whether the defendant was given a personalized training. The witness acknowledges that the defendant had taken license for multi- engine aircraft in May 2001. That the defendant had already undertaken training on single engine aircraft, Cessna 152, C150 and Pushpak Mark 1. He admits that as per their record the defendant had taken CPL in the month of July 1997. He further admits that , "After the defendant joined, we did not impart any flying training to him. However, ground subjects were being taught."
i) Going by the evidence led by the plaintiff, it cannot be said that no training was imparted however, the training, even by the record of the plaintiff has been imparted only for 5 days after the joining of the defendant and cannot by any sense be construed as high cost incurred in the defendants training or even as upgrading or upskilling which eventually is the objective of the training, as averred in the evidence of the plaintiff. The issue is there fore decided against the plaintiff.
Seventh Issue: Whether plaintiff is entitled to the amount claimed, if CS No. 609772/16 Page 35 of 38 so to what amount? OPP
a) The plaintiff has proved that the defendant was given 6 days training on the ground subjects. The instructors were not paid for imparting training and it was their part of the job. There were no outside resource persons. It is also stated that the defendant would have been trained to handle other more aircrafts if he had stayed employed with the plaintiff. However, it is a fact that for the 3-4 odd months that the defendant stayed only 6 days training was imparted.
b) It has also come on record that no salary was paid nor other benefits paid. The plaintiff has not been able to clarify whether the recruitment was made with the sanction of the government. The onus was upon the plaintiff to prove the same. It is the case of the defendant that he was not paid any salary during the period of employment with the plaintiff nor was he reimbursed for the lodging and boarding. It is stated by the defendant that he had to bear the entire cost of staying with the organization.
c) This fact, has not been denied by the plaintiff rather the plaintiff witness has categorically admitted that no salary was paid to the defendant during his term of employment with the plaintiff.
d) Clearly the plaintiff has also failed to justify the amount sought as CS No. 609772/16 Page 36 of 38 security and to go further it has averred during the evidence it is being levied as a penalty. The plaintiff has categorically stated that it is correct that the reason for taking the service bond of Rs. 7.5 lacs was to secure the amount spent on the high cost of the training imparted to the defendant. The plaintiff as such has been unable to specify any amount spent n the training of the defendant or in the processing of the advertisement for recruitment of the training pilots. There is no proof filed by the plaintiff witness to the statement made by the PW regarding high cost of training. The plaintiff witnesses were also unable to justify that alternative arrangement was made for fresh recruitment and cost of that recruitment.
e) If the service falls under the secret officials act, then the defendant would for obvious reasons have lesser knowledge than after 10 years. The term of bond prescribing 10 years of minimum service is restricting and without justification.
The issue is decided against the plaintiff and in favour of the defendant.
Eighth Issue: Whether plaintiff is entitled to any interest on the suit amount? If so, at what rate and for what period? OPP As the fourth issue is decided against the plaintiff, this issue too for CS No. 609772/16 Page 37 of 38 the same reasons is decided against the plaintiff.
53. Relief.
As a result of the above discussions, the present suit is dismissed. File be consigned to record room after due compliance.
Announced in the open court (Colette Rashmi Kujur)
on 06.01.2022 ADJ10/Central/THC/Delhi
CS No. 609772/16 Page 38 of 38