Decoding The Validity Of Employment Bonds

In a landmark ruling titled Vijaya Bank & Anr. v. Prashant B Narnaware¹, the Hon'ble Supreme Court of India ("SC"), upheld the validity of an employment bond clause requiring a bank employee to serve a minimum of 3 years or pay ₹2 lakhs in liquidated damages upon premature resignation. This judgment carries significant implications for employers seeking to enforce minimum service obligations and outlines the circumstances under which employment bonds are considered lawful.

Brief Facts

The respondent ("Employee") joined Vijaya Bank ("Bank") as a Probationary Assistant Manager in 1999 and was later promoted. In 2007, he was appointed as a Senior Manager under a fresh recruitment drive. As per Clause 11(k) of his appointment letter, he was required to serve the bank for at least three years or pay INR 2 lakhs in case of early resignation. The Employee executed an indemnity bond accordingly. However, in 2009, he resigned before completing three years to join