Telangana HC Warns Against Misuse of Employment Bonds in Software Sector

 Hyderabad: The Telangana High Court held that while employment bonds were not inherently void, their misuse through successive and indefinite imposition, coupled with disproportionate penalties and coercive practices, could not be sustained.

Justice Nagesh Bheemapaka of the High Court found that while minimum service clauses may be permissible in appropriate circumstances, the repeated execution of consecutive employment bonds by the employer would effectively bind the employee for an indefinite period. The court viewed that this practice amounted to a harsh and unconscionable bargain, especially in the context of unequal bargaining power between employer and employee.

The court observed that such conduct appeared to be a deliberate attempt to circumvent statutory protections and potentially attract penal consequences under labour welfare laws.

Justice Bheemapaka made these observations while dealing with a petition filed by a software professional, Rajesh Potnuru, which raised a question on the legality and constitutional validity of “minimum service bonds” imposed by private employers, particularly in the software sector. The petition arose out of a dispute between an employee and a private software company, Algonox Technologies Pvt. Ltd, concerning repeated execution of employment bonds and recovery of a substantial sum as a condition for accepting resignation.

The petitioner joined the company in September 2019, and said he was compelled to sign employment bonds on three occasions, each prescribing a minimum tenure of service. When he resigned in August 2023, the company allegedly refused to relieve him unless he paid Rs 5.9 lakh towards “bond breakage”, withheld his salary for several months, and compelled him to sign a declaration waiving his right to initiate legal proceedings.

Vijay Gopal, counsel for the petitioner, argued that such practices violated provisions of the Indian Contract Act, 1872, the Bonded Labour System (Abolition) Act, 1976 and sought judicial intervention to declare employment bonds unconstitutional and void.

Algonox contended that substantial investment was made in training the petitioner and that minimum service commitments were mutually negotiated to prevent attrition in key projects.

The court cited settled principles under Section 27 of the Indian Contract Act, which invalidated agreements restraining lawful profession or employment, subject to well-recognized exceptions during the subsistence of employment.

Apart from that Justice Bheemapaka raised serious concerns over the lack of security and welfare protections available to software employees, despite their substantial contribution to the country’s economy through skilled services and consistent payment of income-tax. The judge observed that a large section of software professionals was without basic support systems, at least medical insurance, when they unexpectedly lose their jobs.

The court expressed concern that, unlike economically weaker sections who benefit from various welfare schemes and freebies from tax money, the middle-class salaried taxpayers received little to no assistance when they faced sudden job loss or health emergencies. Justice Bheemapaka called attention of the legislatures and higher authorities to positively consider the welfare measures at the countries or other jurisdictions where taxpayers receive medical insurance support during unemployed phases.

The court also suggested that the legislature may examine these issues in depth and explore the framing of appropriate laws to ensure welfare, health security, and social protection for the software-working community.

Telangana HC Restrains State From Transferring 4 Acres of Govt.e Land at Mothkur to Private Individuals

The Telangana High Court on Friday restrained the state government from reconveying or transferring four acres of state land situated in Survey No.s 859 and 860 of Mothkur in Yadadri Bhuvanagiri district to any private individual or entity. The court also emphasised the need to fence the land on all sides to prevent encroachments or unauthorised constructions.

A division bench comprising Chief Justice Aparesh Kumar Singh and Justice G.M. Mohiuddin directed the Chief Secretary, the principal secretary (revenue), commissioner of Mothkur municipality and the Yadadri Bhuvanagiri district collector to protect the land and ensure that it was utilised exclusively for public purposes. The Bench specifically ordered that the land be used for constructing hostels, school buildings, playgrounds and allied facilities for Kasturba Gandhi Balika Vidyalayas, which cater to girls from marginalised, SC, ST, OBC and below-poverty-line families.

The directions were issued while allowing a public interest litigation filed by Dr Gurram Lakshminarasimha Reddy, along with a writ appeal preferred by the state government. The PIL challenged an order dated November 21, 2024 passed by a single judge, which had directed reconveyance of four acres to private individuals on the ground that the land originally donated for a mini sports stadium had not been fully utilised. Only two acres were utilised by the government out of the six acres donated by private persons.

The bench noted that the land had been alienated in favour of the district sports development authority and that two acres were subsequently utilised for constructing a Kasturba Gandhi Balika Vidyalaya. Setting aside the single judge’s order, the bench held that the remaining land must continue to be preserved for public educational purposes.