06 Feb 2026
SC validates PSU bond clause; legal experts say private sector unlikely to be impacted
21 May 2025
21 May 2025
This is a link-enhanced version of an article that first appeared in Economic Times.
Article overview:
The Supreme Court has validated Vijaya Bank’s employment clause, mandating officers to serve three years or pay ₹2 lakh for early resignation. The court emphasized that this is reasonable for PSUs due to their extensive recruitment processes. Experts believe this ruling primarily impacts public sector undertakings and is unlikely to significantly alter private sector employment agreements.
Our Partner, Apeksha Mattoo, Labour & Employment Law Practice, Trilegal shared her perspective. Here’s what she had to say:
“Bearing in mind past precedent, employees working in the private sector have not been required to make payments in case of premature cessation of employment which breaches an employment bond unless the employer had borne any expenses for specialized training of such employee, and the bond specifies the quantum of the liquidated damages that are anticipated in the event of breach of the bond or is able to prove the actual damages incurred by the employer (in monetary terms). This is because the public sector undertakings cannot deviate from the setprocedures, so the cost of replacing an
employee is fairly high. (PSUs) have an elaborate and detailed recruitment process, which is time-consuming, and such companies incur higher costs given that there is a loss of continuance of the role.”
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