Service bonds requiring graduates to serve an educational institution for a fixed period in exchange for subsidised training are valid, enforceable contracts that do not violate constitutional prohibitions against forced labour or statutory restraints of trade, provided the terms are reasonable and serve public interest.

THIS WRIT APPEAL FILED U/S 4 OF THE KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE ORDER DATED 14/02/2020 OF THE LEARNED SINGLE JUDGE IN W.P. NOS.30406-411/2018 ON THE FILE OF THIS HON'BLE COURT AND DISMISS THE WRIT PETITION WITH COSTS.

THIS WRIT APPEAL HAVING BEEN HEARD AND RESERVED FOR JUDGMENT, COMING ON FOR PRONOUNCEMENT THIS DAY, JUDGMENT WAS PRONOUNCED AS UNDER:

CORAM: HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE

and

HON'BLE MR. JUSTICE C.M. POONACHA

C.A.V. JUDGMENT

(PER: HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE)

INTRODUCTION

1. This intra-court appeal arises from a common judgment and order dated 14.02.2020 [hereinafter ‘the impugned order’] passed by the learned Single Judge of this Court in W.P.Nos.29365-29368/2018 clubbed with W.P.Nos.29817-29818/2018 & 29820-29822/2018, W.P.Nos.29823-29828/2018, W.P.No.29874/2018 & W.P.Nos.29876-29879/2018, and W.P.Nos.30406-30411/2018 (EDN-RES), whereby the learned Single Judge allowed the said writ petitions. The learned Single Judge allowed the writ petitions and quashed the impugned posting orders. Further, the court restrained the Employees’ State Insurance Corporation [hereinafter ‘ESIC’ or ‘the Corporation’] and its colleges from enforcing the five-year compulsory service bond furnished by the writ petitioners and directed ESIC and its colleges to unconditionally relieve the petitioners from the obligation of compulsory service.

2. The present appeal, W.A.No.312/2020, is preferred by the ESIC and its Medical College & PGIMSR, Rajajinagar, Bangalore [hereinafter collectively referred to as ‘the appellants’] assailing the impugned order insofar as it relates to W.P.Nos.30406-30411/2018. The said petitions were filed by respondents Nos. 1 to 6 herein [hereinafter ‘the respondents’ or ‘the petitioners’].

3. The petitioners are students who were admitted to the MBBS course at the ESIC Medical College & PGIMSR, Rajajinagar, Bengaluru [hereinafter ‘the College’] for the academic year 2012-13, in the Government quota seats allotted by the Karnataka Examinations Authority [hereinafter ‘KEA’]. They had furnished service bonds undertaking to serve at the Hospitals of ESIC for a period of five years after completion of their course. The dispute essentially concerns the legality and enforceability of the service bond [hereinafter, the service bond or bonds] furnished by the petitioners. In terms of the bonds furnished by the petitioners, they are required to serve five years at any of the ESIC hospitals across the country and on failure to do so, are liable to pay an amount ₹7,50,000/-.

4. It is important to note that the terms of the service bond were subsequently relaxed under the Memorandum dated 28.07.2020 issued by ESIC; the duration of the compulsory service was reduced to one year, and the amount payable on avoiding the bond was reduced to ₹5,00,000/-. The said terms were applicable prospectively, that is, with effect from 28.07.2020. But the benefit was also available to students already serving at the ESIC Hospitals under the bonds furnished by