“Can Employers Enforce a Minimum Service Period” Supreme Court Upholds Employees Must Pay for Premature Resignation
The Supreme Court upheld the validity of Vijaya Bank's employment bond clause requiring a minimum 3-year service period or payment of Rs. 2 lakhs for premature resignation. The Court ruled this condition does not violate Section 27 of the Indian Contract Act (restraint of trade) as it applies during employment, nor is it opposed to public policy under Section 23. The judgment clarified that while standard form contracts reflect unequal bargaining power, such terms remain enforceable unless proven unconscionable or unreasonable. The Court recognized the bank's legitimate interest in maintaining workforce stability through such reasonable restrictions. This decision reinforces the distinction between restraints during employment versus post-employment and sets parameters for evaluating liqui...