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Karnataka HC Revives ESIC Service Bonds: Subsidised MBBS Comes with Strings Attached
In a significant win for the , the Division Bench—comprising Chief Justice Vibhu Bakhru and Justice C.M. Poonacha—overturned a 2020 single judge order on April 6, 2026. The court upheld the enforceability of service bonds signed by MBBS students from ESIC's Rajajinagar Medical College, ruling that they do not amount to bonded labour or violate constitutional rights. Appellants ESIC and its college challenged the earlier decision that had quashed five-year bonds and freed students from service obligations.
Subsidised Seats, Hidden Strings: How the Dispute Began
The saga started in 2012 when six students—Abhishek Choudhari, Sachin M Khemkar, Saqlain Mohamed, Chandra Keerthy D.M., Chandan Kumar L T, and Meghana Rao C—secured government quota seats at , via counselling. Admitted under a low-fee structure (Rs 24,000 annual tuition), they signed five-year service bonds promising to work in ESIC hospitals post-graduation or pay Rs 7.5 lakh penalty.
After completing their course and internship in 2018, ESIC issued posting orders to hospitals across India. Students, facing withheld certificates needed for registration, filed writ petitions claiming the bonds were unlawful. A single judge quashed the postings in February 2020, citing lack of statutory power and rights violations. ESIC appealed, noting a 2020 memorandum relaxing bonds to one year service or Rs 5 lakh—applicable retrospectively for remaining periods.
Students' Stand: 'Unfair Coercion, Double Duty'
The students argued ESIC lacked authority under the ESI Act to impose personal service bonds, as only allows establishing colleges, not mandating post-graduation work. They claimed violation of (right to profession), (prohibition on forced labour), and (restraint of trade). Bonds weren't disclosed in KEA's CET brochure, only sprung at admission amid tight deadlines, rendering consent uninformed. Already bound to one-year rural service for Karnataka, extra ESIC duty created "captive doctors" for up to nine years. They protested delay pleas, saying cause arose only on enforcement.
ESIC's Counter: Legitimate Power, Fair Exchange
ESIC defended its actions under , aimed at building a doctor pool for insured workers' healthcare. Bonds, part of the 2010 prospectus and 2010 fee memo, formed contractual consideration for subsidised education—far below actual costs. Students accepted voluntarily, completed the course without challenge, and couldn't renege post-benefit. No compulsion to serve; pay Rs 5 lakh (relaxed amount) instead. ESIC highlighted Supreme Court precedents upholding similar bonds and dismissed laches, as students enjoyed years of training.
Decoding the Law: Contracts Over Chains, Precedents Seal the Deal
The Bench meticulously dismantled the single judge's reasoning. ESIC, as a body corporate, holds implied powers to contract for scheme objectives, including bonds aiding hospital staffing. Upholding Association of Medical Superspecialty Aspirants v. Union of India (2019 8 SCC 607), the court rejected /23 violations: bonds offer service or payment options, not forced labour—like repaying education loans. Niranjan Shankar Golikari v. Century Spinning (1967 2 SCR 378) affirmed negative covenants during contracts aren't void restraints. Kerala, Uttarakhand, and ' rulings reinforced bonds as reasonable for public service.
The court brushed aside "unawareness" claims: bonds were pre-admission conditions; challenging post-course smacked of opportunism. Even with state seats, ESIC could stipulate terms. Total duty now two years max (one each for state/ESIC)—"not onerous."
News reports echoed this, noting ESIC's doctor shortage drove college setup, with bonds ensuring returns on public funds.
Key Observations from the Bench
"The conclusion that executing a service bond as a part of availing education for subsidised rate is bonded labour is without any basis in law. It is common for students to avail themselves of study loans to defer the cost of education."
"A conjoint reading of clearly indicates that the establishment of medical colleges is not an end in itself but an aid in the provision of services under the Employees' State Insurance Scheme."
"Plainly, the petitioners cannot be permitted to challenge the same after completion of the entire course and after having availed the corresponding benefit of education at subsidized costs."
Appeal Allowed: Bonds Back in Force, Flexibility Offered
The impugned order was set aside; bonds enforceable under 2020 memo—one-year service or Rs 5 lakh. Willing students get placements "commensurate with experience"; others pay up. ESIC must sympathetically consider deferrals (e.g., for PG pursuits). Some petitioners reportedly paid already.
This ruling strengthens institutions' leverage for subsidised seats, prioritising public health over individual mobility. Future MBBS admissions may see clearer bond disclosures, balancing access with accountability.
