IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 08.06.2010 CORAM THE HONOURABLE MR.JUSTICE K.CHANDRU W.P.NOs.264 and 5674 of 2010 and M.P.NOS.1 AND 2 OF 2010 Dr.S.Gobu .. Petitioner in both the petitions Vs. 1.The State of Tamilnadu rep. By its Secretary to Government, Transport Department, Fort St. George, Chennai-600 009. 2.The Director, Institute of Road Transport, Tharamani, Chennai-600 113. 3.The Dean, Perundurai Medical College and Hospital, Perundurai, Erode District. .. Respondents in both the petitions W.P.No.264 of 2010 has been preferred under Article 226 of the Constitution of India praying for the issue of a writ of certiorarified mandamus to call for the records relating to the order of the third respondent in Ref.No.308/E2/Sa Po Ni/Pea Ma Ka Ma/2009 dated 7.12.2009 and the conditions of agreement in Clause (1) and (5) of the Agreement dated 2.9.2006 executed by the petitioner in favour of the second respondent as null and void and to quash the same and consequently, direct the second respondent to treat the petitioner as deemed to have resigned with effect from 30.11.2009. (prayer amended as per MP No.2 of 2009, dated 23.4.2010) W.P.No.5674 of 2010 has been preferred under Article 226 of the Constitution of India praying for the issue of a writ of certiorarified mandamus to call for the records relating to the order of the second respondent in his letter No.2063/A4/IRT/94 dated 26.2.2010 and the conditions of agreement in Clause (1) https://hcservices.ecourts.gov.in/hcservices/ and (5) of the Agreement, dated 2.9.2006 executed by the petitioner in favour of the third respondent and to quash the same and consequently direct the second respondent to treat the petitioner as deemed to have resigned with effect from 30.11.2009. For Petitioner : Mr.R.Gandhi, SC for Mr.R.G.Narendiran For Respondents : Mr.N.Senthilkumar, AGP for R1 Mrs.Kala Ramesh for R2 & R3 COMMON ORDER The two questions arise for consideration in these two writ petitions are (1) whether the petitioner, an Associate Professor in General Surgery working in the third respondent College is entitled to wriggle out of an agreement reached between him and the management on 2.9.2006? and (2) whether the petitioner is entitled to leave his service as a matter of right without fulfilling his obligations? 2.The petitioner in both the writ petitions is one and the same person. In the first writ petition, the petitioner was seeking to quash the order, dated 7.12.2009, wherein and by which he was informed that his letter of resignation, dated 30.11.2009 sent along with the amount in lieu of three months' notice was rejected and returned. He was further informed that since he had undergone Post Graduate Degree in M.Ch (Gastroenterology) as a service candidate and had executed an agreement to serve the institution for a period of six years, failing which he was bound himself to pay six months' salary together with three months' notice pay. The petitioner was directed to report for duty on account of rejection of his resignation letter. The petitioner subsequently filed a petition in M.P.No.2 of 2010 seeking amendment of prayer challenging not only the order refusing to accept his resignation letter, but also Clauses 1 and 5 of the agreement, dated 2.9.2006 executed by him. The same was ordered by this court on 23.4.2010. 3.Subsequently, the petitioner filed the second writ petition with an identical prayer. That writ petition came up for admission on 22.3.2010 and the matter was directed to be posted along with the other writ petition. Accordingly, both the writ petitions were posted together. 4.On notice from this court, the second respondent has filed a counter affidavit, dated 24.3.2010, for which the petitioner has filed a reply affidavit dated 14.4.2010. It is seen from the records that the petitioner had passed MBBS Degree course in the year 1986. He was appointed as a Medical Officer in the third respondent Medical College and Hospital on https://hcservices.ecourts.gov.in/hcservices/ 10.1.1991. His services were regularised on 13.1.1992. The petitioner wanted to pursue his higher studies in MS (General Surgery) and applied for leave on loss of pay. He was relieved from service on 28.7.1994. After completion of his course, he rejoined the institution on 1.12.1997. The petitioner's post was redesignated as an Assistant Professor with effect from 1.10.1998 based on the PG qualification acquired by him. Subsequently, he was promoted as an Associate Professor on 5.2.2005. At the time of his promotion, the petitioner had executed an indemnity bond to serve the institution for a minimum period of two years from the date of promotion as an Associate Professor. 5.The petitioner applied for PG course (Super Speciality) course in M.Ch Gastroentrology by an application, dated 18.5.2006. His application was forwarded by the institution to the selection committee to treat him as a service candidate on 26.5.2006. At the time of forwarding his application for the course, he was informed that during the study period, he will not be paid any salary or stipend as well as course fee and the period will be treated as leave on loss of pay. Even when the application was forwarded, there is no guarantee that his leave on loss of pay will be sanctioned and it will be done on the basis of administrative exigency prevailing at that time. He was also informed that for doing PG Super Speciality course, he should execute an undertaking cum indemnity bond that he will serve in the third respondent college for a minimum of twice the period of study leave after completion of course (i.e. for six years). In case, he discontinues the course before completion or leave the college after completion but before the bond period, he had to pay penalty as per the bond condition. He was also informed that the selection committed has declared the third respondent as an unaided non-minority institution. The petitioner did not object to these conditions at the time of forwarding his application. 6.In the meanwhile, the petitioner filed a writ petition before this court being W.P.No.20916 of 2006. Pursuant to the said writ petition, the petitioner was treated as a service candidate and he was directed to be admitted for the said course under the service quota. Consequent upon his admission, he was relieved from the third respondent College on 2.9.2006. He was also relieved even before completion of two years bond period which he had executed after acquiring PG qualification. The petitioner successfully completed PG Super Speciality course and rejoined the college on 11.8.2009. Before he was relieved for attending the course, he had executed an agreement and an undertaking dated 2.9.2006 to serve in the college for a minimum period of six years after completion of the course. The said agreement was signed in the presence of witnesses. He had bound himself for the reimbursement of the amount equal to pay and allowance for bond period as well as expenditure for study which https://hcservices.ecourts.gov.in/hcservices/ was borne out by the institution. But notwithstanding the agreement executed by the petitioner, after serving for three months, he applied for earned leave from 30.11.2009 to 28.12.2009 which were not entertained. Thereafter, the petitioner sent a resignation letter, dated 30.11.2009 by post enclosing a Demand Draft for Rs.96192/- and requested to relieve him with effect from 1.12.2009. The said request of the petitioner was rejected by a letter, dated 17.12.2009 by the third respondent. He was informed that his resignation cannot be accepted as it was contrary to the bond condition. It was also informed that if he did not report for duty, action will be taken against him as well as against the sureties. The petitioner never went back to work. But he has chosen to file these two writ petitions. 7.The conditions of bond executed by the petitioner and impugned in the writ petitions as found in Clauses 1 and 5 are as follows: "1.The Employee agrees and undertakes to serve the employer for a minimum period of six years after completion of the course for which the employee was sponsored. ..... 5.That the employer reserves the right to terminate the appointment at its absolute discretion after giving three months notice or on payment of three months salary in lieu of notice." 8.But Clause No.2 of the agreement which is not under challenge is as follows:- "2.That in the event of the employee leaving the Employer or any of the Offices that come under the control of the Director of the Employer on his own accord within the minimum period of six years specified in the earlier paragraph from the date of his joining with the employer, after completion of the course for which he was sponsored, the employee shall reimburse to the employer an amount equal to pay and allowance for this bond period and the expenditure on the study by the institution if any." 9.The ground of challenge of the petitioner was that the contractual obligation between the petitioner and the second respondent was only to give three months notice either way or three months pay in lieu of notice. Once the petitioner has sent a valid resignation, there is no master and servant relationship between the petitioner and the second and third respondents. The agreement executed between the petitioner and the second respondent has no legal validity. https://hcservices.ecourts.gov.in/hcservices/ 10.Per contra, Ms.Kala Ramesh, learned counsel appearing for respondents 2 and 3 submitted that not only the petitioner was treated as a service candidate, but was paid full salary for the said period. The college even waived the earlier bond condition for serving two years to enable him to join the said course. Even the prospectus released by the selection committee under the Director of Medical Education for undergoing the PG course in respect of the service candidates had stipulated the following two conditions in paragraphs 59(c) and (d) and they read as follows: "59(c)All Service Candidates of Tamil Nadu having more than five years of a service after passing the PG Degree/Diploma courses shall execute a bond for a sum of Rs.5,00,000/- (Rupees Five lakhs only) for Diploma courses and Rs.10,00,000/- (Rupees Ten Lakhs only) for Degree courses and MDS/5 year M.Ch Neuro Surgery Courses as security amount with the undertaking that they will service the Government of Tamil Nadu till Superannuation. Two permanent Government servants in the same or higher rank than the candidate shall execute sureties. The prescribed form will be available in the colleges at the time of admission. The bond will become infructuous if the service candidates serve the Government of Tamil Nadu after the completion of the Course until superannuation. (d)All service candidates of Tamilnadu who have less than 5 years of service after passing PG Degree/Diploma courses have to serve the Government for a period of 5 years from the date of passing the examination irrespective of the date of superannuation, if the Government requires their services. They will be paid salary/stipend till superannuation only. They have to furnish an undertaking to this effect at the time of joining the course." 11.Therefore, the learned counsel stated that it is not as if only the second respondent insisted upon bond condition, but even in respect of the Government Hospitals, such condition is available. The petitioner having availed leave with wages and waiver of the earlier bond condition cannot wriggle out of the agreement. Therefore, both writ petitions are deserve to be dismissed with a direction to the petitioner to pay the amount as agreed to by him. 12.In the reply affidavit, the petitioner contended that the agreement was an unilateral agreement and it has no legal value. Once the College forwards the name of the petitioner, no further condition is valid. The forwarding was only for the https://hcservices.ecourts.gov.in/hcservices/ purpose of selection. The second respondent college did not have any service rules akin to the rules framed under Article 309 of the Constitution of India. The petitioner had worked in the institution for nine years. Since the third respondent college is a State within the meaning of Article 12 and the matter is pending in the Supreme Court as of now any order passed by them should be confirm to non arbitrariness protected by Article 14 of the Constitution. If the bond requires to be executed, that will be impracticable. 13.In the light of the rival submissions, it has to be seen whether the impugned order suffers from legal infirmity and whether the agreement is liable to be declared as null and void by this court. 14.It is admitted case by both sides that there are no service rules framed by the second and third respondents in respect of the employees engaged by them. Therefore, the question of agreement being contrary to any terms of employment or statutory service conditions did not arise. The very fact that the petitioner has chosen to challenge Clauses 1 and 5 of the agreement, dated 2.9.2006 itself shows that the agreement exists and the petitioner had executed the agreement on his own volition and that there was no compulsion or contravention of provisions of the Indian Contract Act, 1872. 15.In cases of breach of contracts, Section 73 provides for compensation of loss or damages caused by breach. Section 73 reads as follows: "73. Compensation for loss or damage caused by breach of contract.— When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it. Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach. Compensation for failure to discharge obligation resembling those created by contract.—When an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default, as if such person had contracted to discharge it and had broken his contract." https://hcservices.ecourts.gov.in/hcservices/ 16.Section 74 of the Contract Act also provides for penalty when parties agreed to such term. Section 74 reads as follows: "74. Compensation for breach of contract where penalty stipulated for.— 1[When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for." 17.If a party enters into a contract and the damages are quantified, the question of assessing actual damages will not arise as held by the Supreme Court in Chunilal V. Mehta and Sons Ltd. vs. Century Spg. & Mfg. Co. Ltd., reported in 1962 Supp (3) SCR 549 = AIR 1962 SC 1312. In paragraph 11 of the order, the Supreme Court observed as follows: "11....Again the right to claim liquidated damages is enforceable under Section 74 of the Contract Act and where such a right is found to exist no question of ascertaining damages really arises. Where the parties have deliberately specified the amount of liquidated damages there can be no presumption that they, at the same time, intended to allow the party who has suffered by the breach to give a go-by to the sum specified and claim instead a sum of money which was not ascertained or ascertainable at the date of the breach...." 18.The Supreme Court further held that if the terms of contract provides for certain rates after entering into contract, it is not open to consumer or any contracting party to state that the terms are not fair as held by the Supreme Court in S. Narayan Iyer v. Union of India reported in (1976) 3 SCC 428. In paragraph 6, the Supreme Court held as follows: "6. There are three principal reasons why the writ petition is incompetent and not maintainable and the appeal should fail. First, when any subscriber to a telephone enters into a contract with the State, the subscriber has the option to enter into a contract or not. If he does so, he has to pay the rates which are charged by the State for installation. A subscriber cannot say that the rates are not fair. No one is compelling one to subscribe......." 19.Mr.R.Gandhi, learned Senior Counsel contended that he https://hcservices.ecourts.gov.in/hcservices/ had signed on the dotted lines and there was no level playing field in signing the agreement. But, the Supreme Court after analysing the English decisions which have bearing on the question of "inequality of bargaining power" vide its judgment in Central Inland Water Transport Corpn. v. Brojo Nath Ganguly, reported in (1986) 3 SCC 156 dealt with the concept under Indian Law with Constitutional backdrop. It is necessary to extract the following passages found in paragraph 83, 90 and 91, which is as follows: "83....It was in Lloyds Bank Ltd. v. Bundy232 that Lord Denning first clearly enunciated his theory of “inequality of bargaining power”. He began his discussion on this part of the case by stating: (at p. 763) “There are cases in our books in which the courts will set aside a contract, or a transfer of property, when the parties have not met on equal terms, when the one is so strong in bargaining power and the other so weak that, as a matter of common fairness, it is not right that the strong should be allowed to push the weak to the wall. Hitherto those exceptional cases have been treated each as a separate category in itself. But I think the time has come when we should seek to find a principle to unite them. I put on one side contracts or transactions which are voidable for fraud or misrepresentation or mistake. All those are governed by settled principles. I go only to those where there has been inequality of bargaining power, such as to merit the intervention of the court.” (emphasis supplied) He then referred to various categories of cases and ultimately deduced therefrom a general principle in these words: (at p. 765) “Gathering all together, I would suggest that through all these instances there runs a single thread. They rest on ‘inequality of bargaining power’. By virtue of it, the English law gives relief to one who, without independent advice, enters into a contract on terms which are very unfair or transfers property for a consideration which is grossly inadequate, when his bargaining power is grievously impaired by reason of his own needs or desires, or by his own ignorance or infirmity, coupled with undue influences or pressures brought to bear on him by or for the benefit of the https://hcservices.ecourts.gov.in/hcservices/ other. When I use the word ‘undue’ I do not mean to suggest that the principle depends on proof of any wrongdoing. The one who stipulates for an unfair advantage may be moved solely by his own self-interest, unconscious of the distress he is bringing to the other. I have also avoided any reference to the will of the one being ‘dominated’ or ‘overcome’ by the other. One who is in extreme need may knowingly consent to a most improvident bargain, solely to relieve the straits in which he finds himself. Again, I do not mean to suggest that every transaction is saved by independent advice. But the absence of it may be fatal. With these explanations, I hope this principle will be found to reconcile the cases.” (emphasis supplied) .......... 90. It is not as if our civil courts have no power under the existing law. Under Section 31(1) of the Specific Relief Act, 1963 (Act 47 of 1963), any person against whom an instrument is void or voidable, and who has reasonable apprehension that such instrument, if left outstanding, may cause him serious injury, may sue to have it adjudged void or voidable, and the court may, in its discretion, so adjudge it and order it to be delivered up and cancelled. ...... 91.......Contracts in prescribed or standard forms or which embody a set of rules as part of the contract are entered into by the party with superior bargaining power with a large number of persons who have far less bargaining power or no bargaining power at all. Such contracts which affect a large number of persons or a group or groups of persons, if they are unconscionable, unfair and unreasonable, are injurious to the public interest. To say that such a contract is only voidable would be to compel each person with whom the party with superior bargaining power had contracted to go to court to have the contract adjudged voidable. This would only result in multiplicity of litigation which no court should encourage and would also not be in the public interest. Such a contract or such a clause in a contract ought, therefore, to be adjudged void. While the law of contracts in England is mostly judge-made, the law of contracts in India is https://hcservices.ecourts.gov.in/hcservices/ enacted in a statute, namely, the Indian Contract Act, 1872. In order that such a contract should be void, it must fall under one of the relevant sections of the Indian Contract Act. The only relevant provision in the Indian Contract Act which can apply is Section 23 when it states that “The consideration or object of an agreement is lawful, unless ... the court regards it as ... opposed to public policy.” (Emphasis added) 20.In the very same judgment, in paragraph 111, the Supreme Court held that the employer under certain contingencies can refuse to accept the resignation. In paragraph 111, it was observed as follows: "111. ..... By entering into a contract of employment a person does not sign a bond of slavery and a permanent employee cannot be deprived of his right to resign. A resignation by an employee would, however, normally require to be accepted by the employer in order to be effective. It can be that in certain circumstances an employer would be justified in refusing to accept the employee’s resignation as, for instance, when an employee wants to leave in the middle of a work which is urgent or important and for the completion of which his presence and participation are necessary. An employer can also refuse to accept the resignation when there is a disciplinary inquiry pending against the employee. In such a case, to permit an employee to resign would be to allow him to go away from the service and escape the consequences of an adverse finding against him in such an inquiry. There can also be other grounds on which an employer would be justified in not accepting the resignation of an employee. The Corporation ought to make suitable provisions in that behalf in the said Rules. ......" (Emphasis added) 21.The Supreme Court also held that the principles of the Contract Act, 1872 are also applicable to contract in industrial employment in Uptron India Ltd. v. Shammi Bhan reported in (1998) 6 SCC 538. In paragraph 9, the Supreme Court observed as follows: "9. The general principles of the Contract Act, 1872 applicable to an agreement between two persons having capacity to contract, are also applicable to a contract of industrial employment, but the relationship so created is partly contractual, in the sense that the agreement of service may give rise to mutual obligations,....." https://hcservices.ecourts.gov.in/hcservices/ 22.As to whether such agreement could be enforced came to be considered by the Supreme Court in M. Sham Singh v. State of Mysore reported in (1973) 2 SCC 303. In paragraph 8 of the order, the Supreme Court held as follows: "8. .... The High Court is quite right in saying that when the appellant came to Bangalore in