The Bombay High Court has clarified that while an employee who breaches a service bond cannot compel an employer to issue a relieving letter or service certificate, the employer’s refusal must be grounded in contractual validity - not punitive denial of documentation essential to livelihood. This judgment balances the enforceability of training bonds with the fundamental right to earn a livelihood.
Background & Facts
The Dispute
The dispute arises from a service bond executed between Bharat Aviation Pvt. Ltd. (Petitioner) and Rahul Sudhindra Soni (Respondent), an Aircraft Maintenance Engineer. The Respondent, after receiving specialized training on Boeing B777 aircraft through a third-party arrangement with American Airlines, resigned before completing the three-year service period stipulated in the bond. The Petitioner refused to issue a relieving letter or service certificate, citing breach of contract. The Respondent filed a complaint under the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act, 1971 (MRTU & PULP Act), seeking interim relief for issuance of these documents.
Key Facts
- The Respondent was appointed on 01.02.2019 as an Aircraft Maintenance Technician.
- On 07.11.2022, he executed a bond agreeing to serve the Petitioner for three years after completing training on Boeing B777 aircraft.
- The training occurred between 24 - 26 October 2022 and 31 October - 4 November 2022, conducted by American Airlines at the Petitioner’s cost.
- The bond stipulated that if the Respondent left before three years, he must pay liquidated damages of Rs. 10,00,000 and serve a 60-day notice.
- The Respondent resigned via email dated 09.04.2024, without serving notice or paying damages, and ceased duties from 12.04.2024.
- The Respondent admitted in his complaint that the training was provided free of cost to him, though the Petitioner incurred expenses through its client airline.
- The Respondent’s resignation email acknowledged his promotion from Technician to Engineer due to the training.
- The Petitioner withheld the relieving letter and service certificate, prompting the Respondent to file ULP Complaint No. 450 of 2024.
Procedural History
- 07.11.2022: Service bond executed by Respondent.
- 24 - 26 October 2022 & 31 October - 4 November 2022: Training completed on Boeing B777.
- 09.04.2024: Respondent submitted resignation via email.
- 12.04.2024: Respondent stopped attending work.
- 2024: ULP Complaint No. 450 of 2024 filed before Industrial Court, Mumbai.
- 13.01.2025: Industrial Court passed interim order directing issuance of relieving letter and service certificate.
- 23.04.2026: Writ Petition No. 334 of 2026 heard by Bombay High Court.
- 05.05.2026: Judgment pronounced.
The Parties' Positions
Petitioner: Argued that the bond was valid, training was costly and specialized, and withholding documents was justified due to breach. Relied on Amrit Pal Singh v. Pawan Hans Helicopters Ltd. and Vijaya Bank v. Prashant B Narnaware to assert enforceability of service bonds.
Respondent: Contended that the training was minimal, online, and cost-free to the Petitioner. Argued that denial of service certificate violated his fundamental right to livelihood under Article 21 of the Constitution. Cited Model Standing Orders to assert statutory duty to issue certificates.
Relief Sought
The Petitioner sought quashing of the Industrial Court’s interim order dated 13.01.2025. The Respondent sought enforcement of the order and continuation of proceedings for monetary dues.
The Legal Issue
Can an employer lawfully withhold a relieving letter or service certificate from an employee who has breached a valid service bond, even if the employee seeks to secure alternate employment?
Arguments Presented
For the Petitioner
The Petitioner relied on Amrit Pal Singh v. Pawan Hans Helicopters Ltd., where this Court held that an employee must pay liquidated damages before resignation is accepted. It also cited Vijaya Bank v. Prashant B Narnaware, where the Supreme Court upheld the enforceability of service bonds even without training, as a reasonable restriction under Article 19(1)(g). The Petitioner argued that the bond was voluntarily signed, the training was substantial and costly, and withholding documents was a legitimate consequence of breach. It emphasized that issuing certificates would incentivize other employees to breach bonds, undermining investment in training.
For the Respondent
The Respondent contended that the training was brief, online, and incurred no direct cost to the Petitioner. He argued that the denial of service certificate was punitive and violated his right to livelihood. He cited Model Standing Orders, which mandate issuance of service certificates upon termination, regardless of breach. He further argued that the bond’s liquidated damages clause was enforceable only through civil suit, not by withholding documentation.
The Court's Analysis
The Court acknowledged the validity of the service bond under Vijaya Bank, noting that restrictive covenants are not per se void under Section 27 of the Indian Contract Act if they protect legitimate business interests. The Court observed that the Respondent had received specialized training enabling his upgrade from Technician to Engineer - a clear benefit conferred by the Petitioner’s investment, even if funded by American Airlines.
"The condition of signing of Bond cannot be prima facie treated as unconstitutional or violative of provisions of the Indian Contract Act as held in Vijaya Bank (supra)."
The Court rejected the notion that the Petitioner’s failure to file a suit for liquidated damages negated the Respondent’s breach. It held that the obligation to pay damages and serve notice remained intact regardless of litigation status.
Crucially, the Court distinguished between the enforceability of the bond and the statutory or contractual duty to issue service documents. It noted that while the Petitioner was not obligated to accept the resignation due to breach, the issuance of a relieving letter is not a reward for performance but a procedural formality tied to the end of employment. However, the Court found that the Industrial Court erred in granting interim relief on this issue before final adjudication.
"A trained employee, who has acted in breach of the contract, cannot insist that the employer must cooperate and assist him/her in securing employment with another employer."
The Court emphasized that the Respondent’s resignation was unilateral and non-compliant with the bond. The Petitioner was therefore justified in not accepting the resignation, and issuance of a relieving letter is a consequential act that follows acceptance of resignation - not an independent right.
The Verdict
The Petition succeeded. The Bombay High Court set aside the Industrial Court’s interim order dated 13.01.2025. The Court clarified that the Respondent may offer a reasonable amount toward liquidated damages to resolve the matter. If offered, the Petitioner must consider it in good faith, keeping in mind the broader deterrent purpose of the bond. The Industrial Court was directed to decide ULP Complaint No. 450 of 2024 within six months, with priority. All other rights of the parties remain open.
What This Means For Similar Cases
Service Certificates Are Not a Right Upon Breach
- Employers may lawfully withhold relieving letters and service certificates when an employee breaches a valid service bond, provided the bond is not unconscionable.
- The issuance of such documents is a consequence of accepted resignation, not an automatic entitlement.
- Practitioners must advise clients that filing a ULP complaint for certificates alone, without addressing breach, is legally precarious.
Training Bonds Are Enforceable Even Without Direct Expenditure
- Costs incurred by third-party trainers (e.g., airline partners) count as employer investment under Vijaya Bank.
- Employers may enforce bonds even if training is online or short-term, if it confers specialized, job-specific skills.
- Liquidated damages clauses are valid if proportionate and not punitive - courts will not interfere unless grossly disproportionate.
Interim Relief in ULP Matters Requires Caution
- Industrial Courts must avoid granting final relief (e.g., issuance of documents) at interim stage without full hearing.
- Courts should prioritize expeditious disposal of ULP complaints involving livelihood issues, as directed here.
- Employees cannot use ULP proceedings as a shortcut to bypass contractual obligations.
