Karnataka High Court
Employees State Insurance Corporation vs Sri Abhishek Choudhari on 6 April, 2026
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WA No. 312 of 2020
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 6TH DAY OF APRIL, 2026
PRESENT
THE HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE
AND
THE HON'BLE MR. JUSTICE C.M. POONACHA
WRIT APPEAL NO. 312 OF 2020 (EDN-RES)
BETWEEN:
Digitally 1. EMPLOYEES STATE INSURANCE CORPORATION
signed by K
P SWETHA MEDICAL DIVISION-IV
Location: HEAD QUARTERS OFFICE
High Court PANCHADEEP BHAVAN
of Karnataka
C.I.G. MARG, NEW DELHI-110 002
REPRESENTED BY ITS DIRECTOR GENERAL
2. EMPLOYEES STATE INSURANCE CORPORATION
MEDICAL COLLEGE AND PGIMSR, BANGALORE
RAJAJINAGAR, BANGALORE
REPRESENTED BY ITS DEAN
RAJAJINAGAR, BANGALORE - 560 010
...APPELLANTS
(BY SMT. GEETHA DEVI M.P., ADVOCATE)
AND:
1. SRI ABHISHEK CHOUDHARI
AGED ABOUT 26 YEARS
SON OF SRI PULAKESHI CHOUDHARI
RESIDING AT 155, VIJAYA NIVAS
OPPOSITE TO NUCLEUS PRESS
SHIKHARKHANE ROAD
BIJAPUR - 586 104
2. SRI SACHIN M KHEMKAR
AGED ABOUT 25 YEARS
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WA No. 312 of 2020
SON OF SRI MOHANA. M
RESIDING AT NO 164, 2ND CROSS
V. P. ROAD, MADIVALA
BENGALURU - 560 068
3. SRI SAQLAIN MOHAMED
AGED ABOUT 26 YEARS
SON OF SRI RAHMATHULLA
RESIDING AT NO. 2647
4TH CROSS, CLOCK TOWER
DARGAH SHAHI MOHALLA
KOLAR - 563 101
4. SRI CHANDRA KEERTHY D.M.
AGED ABOUT 26 YEARS
SON OF SRI DHANANJAYA. N.M
RESIDING AT SRI. VENKATESHWARA NILAYA
GOKULNAGAR, VIRUPAKSHI ROAD
MULBAGAL - 563 131
5. SRI CHANDAN KUMAR L T
AGED ABOUT 25 YEARS
SON OF SRI TEEKESHAPPA
RESIDING AT MAHALASA NILAYA
ASHOKA ROAD, SAGAR - 577 401
6. SRI MEGHANA RAO C
AGED ABOUT 25 YEARS
DAUGHTER OF SRI SADANANDA RAO C
RESIDING AT NO 481
3RD FLOOR, 7TH CROSS
7TH BLOCK (WEST), JAYANAGAR
BENGALURU - 560 070
7. STATE OF KARNATAKA
DEPARTMENT OF HEALTH AND FAMILY WELFARE
OFFICE AT No.105, 1ST FLOOR
SECRETARIAT BUILDING, VIKASA SOUDHA
SESHADRI ROAD, BENGALURU - 560 001
REPRESENTED BY ITS SECRETARY
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WA No. 312 of 2020
8. KARNATAKA EXAMINATION AUTHORITY
SAMPIGE ROAD, 18TH CROSS
MALLESHWARAM, BENGALURU - 560 012
REPRESENTED BY ITS
EXECUTIVE DIRECTOR
9. KARNATAKA MEDICAL COUNCIL
NO 70, 2ND FLOOR
VAIDYA KEEYA BHAVANA
K R ROAD H B SAMAJA ROAD CORNER
BASAVANAGUDI
BENGALURU - 560 004
10. RAJIV GANDHI UNIVERSITY OF
HEALTH SCIENCES
4TH T BLOCK, JAYANAGAR
BENGALURU - 560 041
REPRESENTED BY ITS REGISTRAR
11. MEDICAL COUNCIL OF INDIA
POCKET-14, SECTOR 8, DWARKA
PHASE-1, NEW DELHI - 110 077
REPRESENTED BY ITS SECRETARY
...RESPONDENTS
(BY SMT.AKKAMAHADEVI HIREMATH, ADVOCATE FOR R1, R5 & R6,
SRI K.S. HARISH, GOVERNMENT ADVOCATE FOR R-7,
SRI N.K. RAMESH, ADVOCATE FOR R-8 & R-10
– COPY SERVED V/O 13.10.2020
SMT. RATNA SHIVAYOGIMATT, ADVOCATE FOR R-9
– COPY SERVED V/O 13.10.2020
SRI N. KHETTY, ADVOCATE FOR R-11
– COPY SERVED V/O 13.10.2020 AND
APPEAL DISMISSED AGAINST R2 TO R4 V/O 29.06.2021)
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.
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WA No. 312 of 2020
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. POONACHAC.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
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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/-.
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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 them. Thus, if the
remaining period of service under the service bonds furnished by
them was greater than a period of one year, the same was limited
to that period.
5. The aforesaid memorandum relaxing the conditions of the
service bonds was issued after the impugned order was
pronounced. Thus, the petitioners’ challenge to the legality of a
service bond is required to be tested on the basis of the terms and
conditions as relaxed by the memorandum dated 28.07.2020.
6. The petitioners challenged the legality of the service bonds
on several fronts. First, they contended that ESIC is not competent
to prescribe any condition for personal service as it is beyond the
powers conferred under the Employees’ State Insurance Act, 1948
[hereinafter ‘the ESI Act‘]. Second, the College does not have any
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WA No. 312 of 2020
power to enter into a contract providing for a service bond. Third,
that the requirement of rendering compulsory services offends the
right to carry on a profession guaranteed under Article 19(1)(g) of
the Constitution of India. Fourth, it violates the provisions of Article
23 of the Constitution of India, as it amounts to Bonded Labour.
Fifth, that the service bond is void under Section 27 of the Indian
Contract Act 1872. And sixth, the petitioners were compelled to
execute the service bond, and the same, being without free
consent, is void. They claim that the condition for executing the
service bond was not made known to them prior to their opting for
admission to the college. Additionally, the petitioners claim that,
since they were admitted against seats released to the State
Government and had already executed bonds to serve the State,
no additional condition could be imposed on them.
7. The appellants contest the said contentions. They claim that
the ESIC/College has the necessary powers to enter into contracts.
The service bond was intended to ensure the provision of medical
services to ESIC subscribers and thus fell within the scope of the
ESIC’s powers and functions. The appellants further claim that the
service bond is a contract voluntarily entered into by the parties
and that they are thus bound by it. The appellants also question the
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petitioners’ conduct in raising a challenge after they had completed
the course.
PREFATORY FACTS
8. ESIC had established the College and commenced the post-
graduate courses for the academic year 2010-11. The College is
affiliated to Rajiv Gandhi University of Health Sciences
[hereafter, ‘RGUHS’]. The College also obtained permission from
the Medical Council of India [hereinafter, ‘MCI’] to commence the
MBBS course with an intake of 100 (one hundred) students.
9. By a Memorandum dated 09.03.2010 bearing No.L-
11/12/3/07/M.E (Fee Struc), the Deputy Medical Commissioner
(ME), ESIC Headquarters, New Delhi, circulated the fee structure
for the Under Graduate and Post Graduate courses in the
proposed ESIC medical institutions. The said Memorandum set
out, inter alia, the following fee structure for the MBBS/BDS course:
(i) Tuition Fee: Rs.24,000/- (Rupees Twenty Four
Thousand only) per year;
(ii) University Charges: As per actuals per year;
(iii) College Security (Refundable): Rs.5,000/-
(Rupees Five Thousand only) per annum i.e.,
chargeable annually
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10. It is material to note that the aforesaid Memorandum also
stipulated the following conditions:
“(1) A bond to serve the scheme at least for a period
of 5 years will be executed by each student at the
time of admission. The cost of the entire course will
be recovered if one ceases to be in corporation
service before completion of Bond period. The format
of agreement to be executed will be circulated in due
course.
(2) If a candidate is admitted beyond requirement of
the scheme a separate fee structure will be
applicable/determined keeping in view the total cost
involved for the medical education. This is to ensure
that medical education on the same lines as in Govt.
Medical Colleges is available only to those who shall
serve the scheme on completion of their studies.
Separate fee structure for this purpose will be
advised on a later date.”
11. ESIC issued a prospectus for the MBBS course for the
academic year 2012-13. The said prospectus (a copy of which is
annexed as Annexure R-4 to the statement of objections) contains
inter alia the admission policy, the fee structure, and the bond
conditions. Section VII of the prospectus set out the bond proforma
for UG students. There is some controversy over whether the
prospectus was communicated as claimed by ESIC/College. The
same is addressed later.
12. For the academic year 2012-13, the College surrendered
15% of its seats to the All India Quota under the Central
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WA No. 312 of 2020
Government, and the remaining 85% seats to the State
Government of Karnataka. The seats surrendered to the State
Government were to be filled under the State quota through the
Common Entrance Test (CET) conducted by KEA. It is not in
dispute that the petitioners in W.P.Nos.30406-30411/2018 were
admitted through the State quota.
13. The KEA conducted the Common Entrance Test for the year
2012 (CET-2012) for admission to Medical, Dental and other
professional courses. The order of merit in the CET in which the
petitioners were placed qualified them for the online counselling
process introduced by the Government for the first time in the said
year. The KEA issued a brochure containing details of the CET-
2012 and the seat allotment procedure. The CET brochure did not
contain any reference to executing the service bond (a five-year
compulsory service bond) for admissions to the College.
14. By a notification dated 23.06.2012 bearing No.ED/KEA/Legal
Cell/CR-66/2011-12, KEA notified the schedule for the online
option entry by eligible candidates from 12.07.2012 to 18.07.2012
(subsequently extended to 23.07.2012). The Real Allotment was
announced on 25.07.2012, and the candidates who opted for
Choice-1 were required to collect the Admission Order from
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26.07.2012 to 30.07.2012 and report to the allotted college by
31.07.2012.
15. By a further notification dated 23.07.2012, the KEA notified
the Admission Round Seat Allotment and instructions to
candidates. The said notification, inter alia, required all candidates
who had been allotted Medical Seats through KEA to compulsorily
submit a sworn affidavit on `100/- e-stamp paper as per the format
posted on the KEA website while collecting the admission order. It
is relevant to note that the said notification also stated that the last
date for reporting to the allotted college was 31.07.2012.
16. The petitioners, having weighed their options, selected the
College (College Code: M066ME) in the online counselling held on
27.07.2012. The petitioners were thereafter issued allotment orders
by KEA. Upon issuance of the allotment orders, the petitioners paid
the prescribed fees and executed bonds for one year’s compulsory
rural service in favour of the State Government of Karnataka, in
terms of Rule 11 of the Karnataka Selection of Candidates for
Admission to Government Seats in Professional Educational
Institutions Rules, 2006, as amended by the Government
Notification No.HFW 79 RGU 2011 dated 17.07.2012. The said
bond required the petitioners, on completion of the MBBS course,
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to serve in any Primary Health Centre or Primary Health Unit
situated in rural areas in the State of Karnataka for a minimum
period of one year, failing which they would be liable to pay a
penalty of Rupees Ten Lakhs to the Government of Karnataka.
17. Upon execution of the said bonds in favour of the State
Government, KEA issued Admission Orders to the petitioners
between 26th and 30th July 2012, directing them to report to the
College for admission.
18. In terms of the prospectus issued by the College, the
petitioners were called upon to execute the service bond for five
years of compulsory service. In terms of the bond, the petitioners
were required to commit to serving in ESIC hospitals anywhere in
India for a period of five years after the completion of the MBBS
course, failing which they would pay a sum of `7,50,000/- (Rupees
Seven Lakh Fifty Thousand only) together with 15% interest.
19. Petitioner No.1, Mr.Abhishek Choudhari, claims that he
addressed a letter dated 30.07.2012 to the Executive Director,
KEA, Bengaluru, requesting for a change of college on account of
the requirement of executing the service bond. His father is also
stated to have addressed a letter dated 30.07.2012 to the Dean of
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the College, complaining that there was no specific condition for
furnishing a bond posted on the website of CET or the College.
Therefore, his son, petitioner No.1 ought to be exonerated to
furnish such a bond.
20. Whilst the said letters have been placed on record, the
learned counsel appearing for the ESIC submits that there is a
dispute as to whether they were sent at the material time. ESIC is
not in a position to confirm whether any such letters were received.
However, it is material to note that there were no further
communications sent by petitioner No.1 to pursue his request for a
change of college or for exemption from complying with the service
bond. The petitioners took no steps to challenge the same at the
material time.
21. The petitioners completed their 4.5-year MBBS course and a
1-year compulsory internship at the teaching hospital by
approximately January 2018. Thereafter, the petitioners were
required to register with the Karnataka Medical Council [hereinafter
‘KMC’] for which the College was required to issue the Certificate
of Internship, Study Certificate, and Conduct Certificate. The
petitioners approached the Dean of the College requesting the
issuance of the said certificates. However, the College refused to
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issue the certificates and directed the petitioners to serve in ESIC
hospitals as per the service bond.
22. On 22.05.2018, the petitioners, along with other similarly
situated students, submitted a joint representation to the Dean of
the College, requesting the issuance of their original documents
and certificates required for registration with KMC. In their
representation, the petitioners stated, inter alia, that despite having
completed their course successfully two months ago, they had not
been issued the necessary certificates and clearances to register
themselves to practice medicine or continue their medical
education; that similarly placed students in other colleges had
received their certificates immediately; that some of them had
applied for the PG entrance examination at PGIMER, Chandigarh,
and their names had been published in the list of ineligible
candidates for MD/MS July 2018 session for want of registration;
and that they were unable to practice medicine or take up any
employment for want of regular registration. They also drew the
attention to an earlier order of this Court dated 13.08.2014 in
W.P.Nos.35537-35540/2014 (EDN-RES), wherein, under similar
circumstances involving PG students, this Court had directed the
College to return the original documents and certificates and had
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WA No. 312 of 2020
held that the Corporation may enforce the bond in appropriate
proceedings but could not withhold the documents after the course
was completed.
23. Subsequently, on 03.07.2018, ESIC, through its
Headquarters at New Delhi, issued posting orders (Office Order
Nos. 8, 11 to 14 of 2018) bearing No.L-11/12/3/Bond(ESIC-
JR)/2017/MEC, deploying the petitioners and other MBBS pass-
outs (internship completion 2018) from the College to various ESIC
hospitals in different parts of the country as ESIC Junior Residents
under the ESIC Residency Scheme. The petitioners in
W.P.Nos.30406-30411/2018 were posted to various ESIC
Hospitals across the Country, including hospital at Bhiwadi
(Rajasthan), Bareilly (UP), Ankleshwar (Gujarat), Avideshwar
(Gujarat), Vapi (Gujarat) and Rourkela (Odisha). The posting
orders stated that the deployment was done in public interest, in
fulfilment of the condition of compulsory service for a period of five
years under the service bond. The candidates were directed to
report for joining within seven working days of receipt of the letter.
24. Aggrieved by the posting orders and the insistence of ESIC
to enforce the service bond, the petitioners filed W.P.Nos.30406-
30411/2018 before this Court in July 2018.
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25. The reliefs sought by the petitioners are set out below:
“(a) A Writ of Certiorari quashing the posting orders
dated 03.07.2018 (Annexures H to N) bearing
identicalNo.L-11/12/3/ Bond (ESIC-JR) /2017 / MEC
issued by the 3rd Respondent (ESIC Headquarters)
posting the petitioners for compulsory service for five
years;
(b) A declaration that the 3rd Respondent had no
legal basis to insist upon the petitioners to compulsorily
serve the 3rd and 4th Respondents for a period of five
years upon completion of their MBBS degree;
(c) A declaration that the bonds obtained from the
petitioners by the 3rd and 4th Respondents are without
authority of law and are unenforceable in law or non est
in the eye of law;
(d) A direction to the 3rd and 4th Respondents to
forthwith issue the original certificates and documents
required for the registration of the petitioners as doctors
with the Karnataka Medical Council, and a direction to the
KMC and RGUHS to forthwith register the petitioners on
the rolls of the respective Medical Registers.”
IMPUGNED ORDER
26. The learned Single Judge allowed the writ petitions by the
impugned order. The learned Single Judge examined the matter
under several heads and arrived at the following conclusions:
(a) As to competence of ESI Corporation/College
to prescribe compulsory service: The learned Single
Judge held that Section 59-B of the ESI Act, which
enables the Corporation to establish medical colleges,
cannot be construed so as to include the power to
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WA No. 312 of 2020
prescribe compulsory service to candidates seeking
admission. The learned Single Judge further held that
Section 92 of the Act, which empowers the Central
Government to issue directions for the efficient
administration of the Act, did not avail the Corporation
inasmuch as no such direction providing for compulsory
medical service had been issued. The learned Single
Judge noted that no provision in the Act, Rules or
Regulations was brought to the notice of the Court which
authorised the Corporation to prescribe compulsory
service.
(b) As to the legality of the bond: The learned
Single Judge held that the Corporation, being a statutory
body, can do only that which is provided by law,
expressly or by necessary implication; that no provision in
the Act authorises the Corporation to enter into a contract
of the kind or extract a service bond from candidates as a
pre-condition for admission; that the text of the instrument
showed the Corporation/College was not a party to the
bond although the Dean signed as a witness; and that the
instrument could not be treated as an agreement
enforceable by law.
(c) As to Fundamental Rights: The learned Single
Judge held that the prescription of compulsory service
robbed the citizens’ choice in the matter of employment
or practice of profession under Article 19(1)(g) of the
Constitution, and that such a restriction could be imposed
only by the authority of law; and that enforcing the service
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bonds virtually amounted to enforcing bonded labour
prohibited by Article 23 of the Constitution.
(d) As to Government Quota seats: The learned
Single Judge held that since the petitioners were allottees
of Government Quota seats allotted by KEA, the colleges
did not have competence to super-add any condition to
the admission; that the petitioners had already executed
three year service bonds in favour of the State
Government; and that if the ESIC bonds were also
enforced, the total compulsory service period would be
nine years, rendering the petitioners ‘captive doctors’.
(e) As to delay and laches: The learned Single
Judge rejected the Corporation’s contention of delay and
laches, holding that the choate cause of action accrued to
the petitioners only when the unlawful bond was sought
to be enforced, and that the contention of delay and
laches was an ‘unsubstantial technical plea’.
27. In the aforesaid circumstances, the learned Single Judge
quashed the impugned posting orders; restrained ESIC and its
colleges from enforcing the five year service bond against the
petitioners; and directed the ESIC to relieve the petitioners from the
obligation of compulsory service.
28. The Corporation, being aggrieved by the aforesaid order, has
filed the present appeal.
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REASONS AND CONCLUSIONS
29. We may at the outset note that the ESI Act was enacted by
Parliament to provide for certain benefits to employees in case of
sickness, maternity and employment injury, and to make provision
for certain other matters in relation thereto. ESIC is a statutory
body constituted under Section 3 of the ESI Act for the
administration of the Employees’ State Insurance Scheme. The
ESIC Act comes under the aegis of the Ministry of Labour and
Employment, Government of India. ESIC is funded by contributions
received from employees and employers of factories and
establishments covered under the ESI Scheme and does not
receive any funding from the State or Central Government.
30. One of the principal objectives of the ESI Act is to provide
medical care to insured persons and their families. To this end,
ESIC operates a large network of hospitals and dispensaries
across the country. It is stated on behalf of ESIC that there was a
felt need to upgrade the medical facilities in ESIC institutions and to
create a dedicated pool of medical professionals to serve the
insured persons.
31. In this backdrop, the ESIC, in its 145th meeting held on
05.12.2008, deliberated and decided to establish medical colleges
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WA No. 312 of 2020
with a view to having its own pool of doctors who would work in
ESIC hospitals to provide the much-needed medical service to the
insured employees. The Corporation envisaged that by imparting
medical education and thereafter utilising the services of the
students, who qualify as medical professionals, in ESIC institutions,
the quality of medical benefits provided to the beneficiaries of the
Scheme would be improved.
32. Thereafter, Bill No.66 of 2009 was introduced in the Lok
Sabha. The said Bill was passed and was enacted as the
Employees’ State Insurance (Amendment) Act, 2010 (Act No.18 of
2010). The said Act received the President’s assent on 24.05.2010
and came into force on 01.06.2010. By virtue of the said
Amendment, Section 59-B was introduced in the ESI Act. The said
provision reads as under:
“59-B. Medical and para-medical education.–The
Corporation may establish medical colleges,
nursing colleges and training institutes for its
para-medical staff and other employees with a
view to improve the quality of services provided
under the Employees’ State Insurance Scheme.”
33. It is material to note that the Statement of Objects and
Reasons accompanying the said Amendment Bill stated, inter alia,
that the provision was intended to improve the quality of service
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WA No. 312 of 2020
delivery and raise infrastructural facilities by opening medical
colleges and training facilities in order to increase the Corporation’s
medical and para-medical staff.
34. It is clear from the above background that ESIC had
commenced medical courses with a view to improve quality of
service provided under the ESI scheme.
35. ESIC is established under Section 3 of the ESI Act as a Body
Corporate. One of the ESIC’s functions is to promote measures for
the health and other matters affecting insured persons under
Section 19 of the ESI Act.
36. Section 19 of the ESI Act provides that ESIC may, in addition
to the scheme of benefits specified in the ESI Act, promote
measures for the improvement of the health and welfare of insured
persons and for the rehabilitation and re-employment of insured
persons.
37. Section 56 of the ESI Act contains provisions regarding
medical benefits to be provided to an insured person. Under Sub-
section (2) of Section 56 of the ESI Act, such medical benefit may
be given either in the form of out-patient treatment and attendance
in a hospital or dispensary, clinic or other institution or by visits to
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WA No. 312 of 2020
the home of the insured person or treatment as in-patient in a
hospital or other institution.
38. Section 59 of the ESI Act provides for the establishment and
maintenance of hospitals, etc. by ESIC. It would be apposite to
refer to the said Section. The same is reproduced below:
59. Establishment and maintenance of
hospitals, etc., by Corporation.-(1) The
Corporation may, with the approval of the State
Government, establish and maintain in a State
such hospitals, dispensaries and other medical
and surgical services as it may think fit for the
benefit of insured persons and (where such
medical benefit is extended to their families) their
families.
(2) The Corporation may enter into agreement
with any 2[***] local authority, private body or
individual in regard to the provision of medical
treatment and attendance for insured persons
and (where such medical benefit extended to their
families) their families, in any area and sharing
the cost thereof.
[(3) The Corporation may also enter into
agreement with any local authority, local body or
private body for commissioning and running
Employees’ State Insurance hospitals through
third party participation for providing medical
treatment and attendance to insured persons and
where such medical benefit has been extended to
their families, to their families.]
39. The establishment of maintenance of hospitals by ESIC
would clearly entail entering into agreements with medical
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professionals, engaging staff for operating and maintaining
hospitals. There can be no cavil that ESIC has the necessary
powers to enter into contractual agreements for the said purpose.
40. Under Section 59B of the ESI Act, ESIC is also empowered
to establish medical colleges, nursing colleges and training
institutions, with a view to improve the quality of services under the
Employees’ State Insurance Scheme.
41. A conjoint reading of Sections 59 and 59B of the ESI Act
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, which may be through the
hospitals and medical institutions established and maintained by
ESIC.
42. In view of the above, the contention that there is no power
granted to ESIC to insist on a service bond from students admitted
to MBBS cannot be accepted. Since ESIC established the College
to improve the quality of services provided under the Employees’
State Insurance Scheme, it is apparent that it could enter into
contractual agreements with students to render services at its
hospitals. This is clearly in aid of its object.
– 24 –
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43. The contention that the ESI Act or Rules must provide a
specific power to enter into a particular kind of contractual
agreement, which entails a student providing a service bond, is
without merit. ESIC is fully empowered to enter into contractual
arrangements. The petitioners’ admission to the College is also a
contractual arrangement under which medical education and
training is imparted to the petitioners. In consideration of the same,
the students are obligated to pay the fees as fixed, as well as to
serve ESIC hospitals for a period as agreed in terms of the Service
Bond.
44. The decision of the learned Single Judge to set aside the
service bond on the ground that ESIC did not have any power for
insisting on such bond, is erroneous. The learned Single Judge
had concluded that the service bond executed by the petitioners is
not a contract. The learned Single Judge reasoned that under
Section 2(h) of the Indian Contract Act, 1872, a contract is an
agreement enforceable by law and the same requires two parties –
an offeror and an acceptor. The learned Single Judge noted that
the bond is signed by the Dean of the College as a witness, but
nothing has been placed on record to indicate that the Dean is the
– 25 –
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delegate of the Director General of ESIC. Thus, the bond executed
cannot be termed as an agreement.
45. In our view, the said reasoning is flawed. The petitioners
contend that they were granted admission to the College
contingent on their executing the service bond. The requirement to
execute the Service Bond is also stipulated in the College’s
prospectus. Once it is acknowledged that the execution of the bond
was a condition for the petitioners’ admission to the College, it
follows that the service bond was executed as consideration for
providing of educational services. It is also undisputed that ESIC
has borne much of the cost of education. ESIC had funded the
establishment and the operations of the College. Plainly, the
petitioners cannot be heard to claim that they are entitled to receive
education but have no obligation to pay even a fraction of its cost.
46. We may at this stage refer to the terms and conditions of the
bond:
“The bond proforma required the student (referred to as
‘the Bounden’) and a parent or guardian (referred to as
‘the Surety’) to bind themselves jointly and severally to
pay to the Corporation on demand the total amount of
Rs.7,50,000/- (Rupees Seven Lakhs Fifty Thousand
only), stated to be the amount spent by the Corporation
for their studies, with 15% interest as fixed by the
Corporation. The operative recitals of the bond, as
executed by the petitioner No. 1, are set out below:
– 26 –
WA No. 312 of 2020
” WHEREAS the bounden ABHISHEK P
CHOUDHARI has been selected to
Undergo MBBS in Corporation Medical
College in the merit quota for the duration
of the course prescribed by Medical Council
of India.
AND WHEREAS the Corporation have
agreed to incur the expenses on condition
that after Successful completion of the
course of study within the prescribed period
the bounden shall serve the ESI
Corporation/ESI scheme for a period of five
years in any Institution of the
Corporation/Scheme anywhere in India, if
the corporation requires and also subject to
the terms and conditions hereinafter
appearing and the bounden and the
sureties have agreed to the same.
NOW the condition of the above written
obligation is that in the event the Bounden
after successful completion of the Graduate
Course of study to which he/she was
selected fails to serve. The Corporation for
period of five years, if required by the
Corporation, the Bounden and sureties
shall forthwith pay to the Corporation for
violation of Condition, on demand the total
amount of Rs.7,50,000/- (Rupees Seven
Lakh Fifty Thousand only) the amount
spent by the Corporation for their studies
along with 15% interest as fixed by the
Corporation.On the quantum of amount
payable by the Bounden and the Sureties
the decision of the Corporation shall be final
and legally binding on the bounden and
sureties and upon the payment of such sum
of the above written obligation shall be
discharged.
PROVIDED further that the bounden and
the sureties do hereby agree that if the
Bounden fails to serve the Corporation for a
period of five years, if Corporation requires,
it may be construed as ‘professional
misconduct’ and the fact reported to the
– 27 –
WA No. 312 of 2020
Medical Council of India for suitable action
including cancellation of Registration by the
Council. being in force or in such other
manner as the Corporation may deem fit.
The liabilities of the sureties under the this
Bond is Co-extensive with that of the
bounden and shall not be affected by the
Corporation given time or any indigence to
the bounden or by the Corporation varying
of the terms and conditions herein
contained.
Signed this 30th Day of JULY in the year
20l2 by the bounden Shri.ABHISHEK P
CHOUDHARI”
The bond contained a clause providing that failure to
serve the Corporation for five years, if required, may be
construed as ‘professional misconduct’ and the fact
reported to the Medical Council of India for suitable
action including cancellation of registration.”
47. As noted above, the Memorandum dated 09.03.2010
specifies the tuition structure and also provides for the furnishing of
a service bond. As observed earlier, there is no cavil that the fee
paid by the petitioners for availing the education is below the cost
incurred by ESIC. Thus, the Memorandum also provided that if the
student ceases to be in the service of ESIC before completion of
the bond period, the cost of the entire course could be recovered.
48. Having acknowledged that the execution of the bond was a
condition of admission to the college, there is no ground to accept
– 28 –
WA No. 312 of 2020
that the bond was not an agreement between the parties, as held
by the learned Single Judge.
49. Next, we may address the contention that, the prescription of
compulsory service violates Article 19(1)(g) or Article 23 of the
Constitution of India.
50. It is necessary to note that there is no compulsion for a
student to necessarily serve ESIC. However, it is always open for
the students to pay the amount as agreed under the service bond.
We may note that there is no allegation that a sum of `7,50,000/-,
which is mentioned in the bond, is in the nature of a penalty or
in terrorem. Undisputedly, the said amount would barely cover the
costs of education availed by the students. Thus, we are unable to
accept that the terms of the bond violate Article 19(1)(g) of the
Constitution of India.
51. The petitioners may agree to serve the ESIC Institutions by
rendering service for a stipulated period or pay the costs incurred
by ESIC for their education.
52. We may now refer to Article 23 of the Constitution of India
which reads as under:
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“23. Prohibition of traffic in human beings and
forced labour. – (1) Traffic in human beings and begar
and other similar forms of forced labour are prohibited
and any contravention of this provision shall be an
offence punishable in accordance with law.
(2) Nothing in this article shall prevent the State from
imposing compulsory service for public purposes, and
in imposing such service the State shall not make any
discrimination on grounds only of religion, race, caste or
class or any of them.”
53. A plain reading of the Sub-Article (1) of Article 23 of the
Constitution indicates that it prohibits traffic in human beings and
forced labour and other forms of exploitation. 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. They cannot be heard to state that their
obligation to repay the loan after attaining the qualifications is
bonded labour, even though a substantial part of their income may
be used to service the student loan. The agreement to serve a
minimum period, as consideration for having received subsidised
medical education and being trained, cannot be conflated with
human trafficking, forced labour and other kinds of exploitation.
54. As noted above, the petitioners are not compelled to render
their service to ESIC. It is always open for them to pay the amount
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WA No. 312 of 2020
of `7,50,000/- (subsequently relaxed to `5,00,000/-), which is
essentially a compensation for the costs incurred by ESIC for
providing medical education.
55. In Niranjan Shankar Golikari v. Century Spinning and
Manufacturing Company Limited [(1967) 2 SCR 378], the
Supreme Court considered the challenge to the terms of an
agreement, which provided that the employee would devote his
entire time and energy exclusively to the business and affairs of the
employer and would not engage directly or indirectly in any other
business. The agreement also provided that in the event the
employee leaves the services of the employer in breach of the
terms of the agreement, before the expiry of a period of five years,
he would be liable to pay salary, that he would have received
during the period of 6 months and further reimburse the employer
an amount that the company may have spent on his training.
Paragraph 3 of the said decision, which sets out the clauses under
challenge in that case, is reproduced below:
“3. Clause 6 of the agreement provided:
“The employee shall, during the period of his
employment and any renewal thereof, honestly,
faithfully, diligently and efficiently to the utmost of his
power and skill
(a) * * *
– 31 –
WA No. 312 of 2020
(b) devote the whole of his time and energy
exclusively to the business and affairs of the
company and shall not engage directly or indirectly in
any business or serve whether as principal, agent,
partner or employee, or in any other capacity either full
time or part time in any business whatsoever other than
that of the company.”
Clause 9 provided that during the continuance of his
employment as well as thereafter the employee shall
keep confidential and prevent divulgence of any and all
information, instruments, documents, etc., of the
company that might come to his knowledge. Clause 14
provided that if the company were to close its business
or curtail its activities due to circumstances beyond its
control and if it found that it was no longer possible to
employ the employee any further it should have option
to terminate his services by giving him three months’
notice or three months’ salary in lieu thereof. Clause 17
provided as follows:
“In the event of the employee leaving, abandoning
or resigning the service of the company in breach of the
terms of the agreement before the expiry of the said
period of five years he shall not directly or indirectly
engage in or carry on of his own accord or in
partnership with others the business at present being
carried on by the company and he shall not serve in
any capacity, whatsoever or be associated with any
person, firm or company carrying on such business for
the remainder of the said period and in addition pay to
the company as liquidated damages an amount equal
to the salaries the employee would have received
during the period of six months thereafter and shall
further reimburse to the company any amount that the
company may have spent on the employee’s training.”
56. The Supreme Court rejected the contention that clauses
such as those above would offend Section 27 of the Indian
Contract Act, 1872 [hereinafter, ‘Contract Act‘]. The relevant
extract of the said decision is reproduced below:
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WA No. 312 of 2020
“14. A similar distinction has also been drawn by courts
in India and a restraint by which a person binds himself
during the term of his agreement directly or indirectly
not to take service with any other employer or be
engaged by a third party has been held not to be void
and not against Section 27 of the Contract Act. In
Brahmaputra Tea Co.Ltd. v. Scarth the condition under
which the covenantee was partially restrained from
competing after the term of his engagement was over
with his former employer was held to be bad but the
condition by which he bound himself during the term of
his agreement, not, directly or indirectly, to compete
with his employer was held good. At p. 550 of the report
the court observed that an agreement of service by
which a person binds himself during the term of the
agreement not to take service with any one else, or
directly or indirectly take part in, promote or aid any
business in direct competition with that of his employer
was not hit by Section 27. The Court observed:
“An agreement to serve a person exclusively for a
definite term is a lawful agreement, and it is difficult to
see how that can be unlawful which is essential to its
fulfilment, and to the due protection of the interests of
the employer, while the agreement is in force.”
In Deshpande v. Arbind Mills Co. an agreement of
service contained both a positive covenant viz. that the
employee shall devote his whole-time attention to the
service of the employers and also a negative covenant
preventing the employee from
working elsewhere during the term of the agreement.
Relying on Pragji V. Pranjiwan Charlesworth v.
MacDonald, Madras Railway Company v. Rust, Subba
Naidu v. Haji Badsha Sahib and Burn & Co. v.
MacDonald as instances where such a negative
covenant was enforced, the learned Judges observed
that Illustrations (c) and (d) to Section 57 of the Specific
Relief Act in terms recognised such contracts and the
existence of negative covenants therein and that
therefore the contention that the existence of such a
negative covenant in a service agreement made the
agreement void on the ground that it was in restraint of
trade and contrary to Section 27 of the Contract Act had
no validity.
– 33 –
WA No. 312 of 2020
17. The result of the above discussion is that
considerations against restrictive covenants are
different in cases where the restriction is to apply during
the period after the termination of the contract than
those in cases where it is to operate during the period
of the contract.
Negative covenants operative during the period of the
contract of employment when the employee is bound to
serve his employer exclusively are generally not
regarded as restraint of trade and therefore do not fall
under Section 27 of the Contract Act. A negative
covenant that the employee would not engage himself
in a trade or business or would not get himself
employed by any other master for whom he would
perform similar or substantially similar duties is not
therefore a restraint of trade unless the contract as
aforesaid is unconscionable or excessively harsh or
unreasonable or one-sided as in the case of W.H.
Milsted & Son Ltd. Both the trial court and the High
Court have found, and in our view, rightly, that the
negative covenant in the present case restricted as it is
to the period of employment and to work similar or
substantially similar to the one carried on by the
appellant when he was in the employ of the respondent
Company was reasonable and necessary for the
protection of the company’s interests and not such as
the court would refuse to enforce. There is therefore no
validity in the contention that the negative covenant
contained in clause 17 amounted to a restraint of trade
and therefore against public policy.
18. The next question is whether the injunction in the
terms in which it is framed should have been granted.
There is no doubt that the courts have a wide discretion
to enforce by injunction a negative covenant. Both the
courts below have concurrently found that the
apprehension of the respondent Company that
information regarding the special processes and the
special machinery imparted to and acquired by the
appellant during the period of training and thereafter
might be divulged was justified; that the information and
knowledge disclosed to him during this period was
different from the general knowledge and experience
that he might have gained while in the service of the
respondent Company and that it was against his
– 34 –
WA No. 312 of 2020
disclosing the former to the rival company which
required protection. It was argued however that the
terms of clause 17 were too wide and that the court
cannot sever the good from the bad and issue an
injunction to the extent that was good. But the rule
against severance applies to cases where the covenant
is bad in law and it is in such cases that the court is
precluded from severing the good from the bad. But
there is nothing to prevent the court from granting a
limited injunction to the extent that is necessary to
protect the employer’s interests where the negative
stipulation is not void. There is also nothing to show
that if the negative covenant is enforced the appellant
would be driven to idleness or would be compelled to
go back to the respondent Company. It may be that if
he is not permitted to get himself employed in another
similar employment he might perhaps get a lesser
remuneration than the one agreed to by Rajasthan
Rayon. But that is no consideration against enforcing
the covenant. The evidence is clear that the appellant
has torn the agreement to pieces only because he was
offered a higher remuneration. Obviously he cannot be
heard to say that no injunction should be granted
against him to enforce the negative covenant which is
not opposed to public policy. The injunction issued
against him is restricted as to time, the nature of
employment and as to area and cannot therefore be
said to be too wide or unreasonable or unnecessary for
the protection of the interests of the respondent
Company.”
57. In Subri Ghosh v. Indian Iron and Steel Company1, a
Division Bench of the High Court of Calcutta, considered the
appeal of an employee who had tendered his resignation after
undergoing six months and few days of training. Under the
employment agreement, the said employee agreed to serve for a
period of five years. He had also agreed that in the event that he
1
(1976) SCC OnLine Cal 377
– 35 –
WA No. 312 of 2020
left the employment, he would repay the costs of his training in a
graded manner. If he left during the first year, he would pay the
entire amount of `500 per month for the period during which he had
received training. This amount would successively reduce if he left
the employment in subsequent years. The Court rejected the
contention that the employment agreement was null and void. The
Court also found that the liquidated damages were reasonable and
the agreement to pay the same was binding.
58. We may also refer to the decision of Division Bench of the
High Court of Kerala in Dr.Ayisha Beegam Devasya House v.
State of Kerala and others2. In the said case, the Court had
considered a challenge of students who had joined postgraduate
medical courses. The parents of those students had, at the time of
joining, executed bonds with the college/management that the
certificates of the students would be withheld till they complete “1
year compulsory employment or on payment of compensation”.
The execution of the said bonds was challenged on several
grounds, including the doctrine of public policy. In this regard, the
Division Bench held as under:
2
(2018) SCC OnLine Ker 1287
– 36 –
WA No. 312 of 2020
“So we compel ourselves to conclude that the doctrine
of public policy is highly subjective, shifting, and even
changing. Statutorily examined, the compulsion of the
students’ fulfilling the bond-obligation does not seem to
fall foul of any public policy. The Central Government,
through Ext.P1, permitted the college, university, or the
State Government to impose its own conditions for
admission. The students, consciously, consented to the
conditions, executed the bonds, and never challenged
them–until they completed their course. True, students
have a weak bargaining power in a contract vis-Ã -vis
the college or the establishment. So they may have
signed on the dotted lines, without demur. That said,
still their conduct while they continued the course is
inexplicable. They could have challenged the bond
obligations. They did not.
43. Granted, education occupies the pride of place, and
the students deserve every sympathy. But let us look at
what underlines this transaction : the State or the
college insisting on compulsory service or
compensation. The State acted in its permissible limits
and imposed an eligibility criterion; the student agreed
and got admitted. The State compels the student to
serve one year in the State where she had honed her
medical skills and acquired a higher qualification. After
all the State invests and subsidizes medical education.
In the scenario of limited resources, spending
somewhere amounts to not spending somewhere else.
So those who get benefited must repay their debt–of
gratitude.
44. Viewed differently, the doors are not shut on the
students. They may serve the State and be paid or
sever their relation and leave it; it comes at a price :
paying liquidated damages. If the students leave for
greener pastures, they must be prepared to pay, to
compensate. Medical profession–tough as it is and,
perhaps, lucrative as it may be–is not all about money;
it has still an element of service.
45. About the State’s retaining the documents, we may
observe that most students are from other states. After
their leaving the place, it is well neigh impossible for the
State or the colleges to enforce recovery. So, as is
permissible under law, and as agreed in Clause 2.2 of
– 37 –
WA No. 312 of 2020
the State prospectus, it can enforce its contractual right,
by retaining the documents.
The Options:
46. So the options for the student are two-fold : (1) The
students must serve the bond period; or (2) they may,
instead, pay the liquidated damages. For the college or
Government, the options are these : (a) it can insist on
the student’s serving the bond period; (2) it can, on the
student’s refusal, recover the liquidated damages; (3)
till such recovery, it can withhold the documents, as a
matter of particular lien.”
59. In Dr. Aditya Kumar v. State of Uttarakhand and others3,
the Division Bench of the High Court of Uttarakhand, in the context
of a similar challenge, observed as under:
“It is, indeed, trite to state that the parties to a contract
are bound by the terms of the contract. A bare perusal
of the bond executed by the petitioner on 26.08.2013
clearly reveals that “a duty has been imposed upon the
petitioner to serve the State of Uttarakhand as a
Medical Officer/Specialist on contract basis at least for
a minimum period of two years in any government
hospital or health centre situated in hilly region of the
State, failing which they shall be liable severally or
jointly to pay the Government full tuition fees of the
entire M.D./M.S. course calculated at prevailing rate
along with such interest as may be determined by the
Government.” This condition contained in the contract
requires the petitioner to serve for a minimum period of
two years in the “hilly region”.”
60. The issues raised in the present appeal are no longer res
integra in view of the Supreme Court’s authoritative decision in
Association of Medical Superspecialty Aspirants and
3
(2021) SCC OnLine Utt 433
– 38 –
WA No. 312 of 2020
Residents and others v. Union of India and others4. In the said
case, the Supreme Court considered a batch of appeals and
petitions challenging the imposition of compulsory bonds for
undertaking super-speciality courses in various States. The said
batch of petitions also included appeals against the decision of the
Division Bench of the High Court of Calcutta arising from a writ
petition challenging the notification dated 10.06.2014 whereby,
every post graduate trainee was directed to execute a bond to
serve the State Government for a period of three years after
successful completion of post-doctoral/MD/MS course and for a
period of two years after successful completion of the PG diploma
course. On failure to serve the State Government, the doctors were
required to pay a sum of `30,00,000/-. The said notification partially
modified the earlier notification dated 31.07.2013, where the period
of service was stipulated as one year, and the failure to complete
the service entailed the liability to pay compensation of
`10,00,000/-.
61. The learned Single Judge upheld the earlier notification
dated 31.07.2013. However, set aside the notification dated
10.06.2014, which had enhanced the term of the compulsory
4
(2019) 8 SCC 607
– 39 –
WA No. 312 of 2020
service and the amount of compensation. Both the State
Government of West Bengal and the doctors had challenged the
decision of the learned Single Judge before the Division Bench of
the Calcutta High Court. The Division Bench upheld the
notifications. The following issues were framed by the Division
Bench for consideration:
“(i) Could the State Government have introduced the
bond system by issuing the notifications which are
under challenge in the present proceeding or was
legislation necessary for that purpose?
(ii) Do the notifications impinge upon the freedom of the
petitioners to practice any profession, or to carry on any
occupation, trade or business guaranteed under Article
19(1)(g) of the Constitution?
(iii) Were the writ petitioners aware of the bond system
before opting for West Bengal as their academic
destination for postgraduate medical studies?
(iv) Is the bond system in restraint of a lawful
profession, trade or business and is thus violative of
Section 27 of the Contract Act?
(v) Is there any such infirmity in the judgment and order
impugned before us as would warrant interference by
this Court?”
62. The Division Bench held that the impugned notification did
not violate Article 19(1)(g) of the Constitution of India or Section 27
of the Contract Act.
– 40 –
WA No. 312 of 2020
63. The Supreme Court upheld the said conclusion. In regard to
the challenge to the service bond as falling foul of Article 19(1)(g)
of the Constitution of India, the Supreme Court held as under:
“20. According to the appellants, the right to carry on
their profession which is guaranteed by Article 19(1)(g)
is violated by the compulsory bonds. They contend that
the compulsory bonds place a restriction on their right
to carry on their profession on completion of their
course. It is also submitted that any restriction on their
right to carry on their profession by the State
Government can be made only by a “law” as per Article
19(6) of the Constitution. Consequently, the
notifications that were issued by the State Governments
fall foul of Article 19(1)(g). The compulsory bond
executed by the appellants is at the time of their
admissions into postgraduate and superspeciality
courses. Conditions imposed for admission to a medical
college will not directly violate the right of an individual
to carry on his profession. The right to carry on the
profession would start on the completion of the course.
At the outset, there is no doubt that no right inheres in
an individual to receive higher education. Violation of a
right guaranteed under Article 19(1)(g) does not arise in
a case pertaining to admission to a college. There is no
doubt, that the condition that is imposed has a
connection with the professional activity of a doctor on
completion of the course. However, the appellants
have, without any protest, accepted the admissions and
executed the compulsory bonds. Execution of bonds is
part of a composite package. We are in agreement with
the judgment of the Calcutta High Court that the
appellants have not been able to succeed in their
attempt of assailing the notifications for being violative
of Article 19(1)(g) of the Constitution. We uphold the
said finding of the Division Bench.”
– 41 –
WA No. 312 of 2020
64. The Supreme Court also rejected the contention that the
bond for compulsory service violated Article 23 of the Constitution
of India. The relevant extract of the decision of is set out below:
“35. The submission of Mr Huzefa Ahmadi, learned
Senior Counsel for the appellants is that the conditions
of the bond per se amount to “forced labour” and thus
are violative of Article 23(1) of the Constitution. Mr
Dwivedi expostulated the said submission by referring
to Article 23(2) which confers power on the State to
impose compulsory service for public purpose. Reliance
was placed upon the Constituent Assembly Debates by
Mr Dwivedi explaining the scope of compulsory
employment for public purpose under Article 23(2) of
the Constitution of India. The appellants who are
required to work for a short period on a decent stipend
cannot complain that they are made to perform “forced
labour”, especially after the appellants have taken an
informed decision to avail the benefits of admission in
government medical colleges and received subsidised
education. By no means, the service rendered by the
appellants in government hospitals would fall under the
expression of “forced labour”.
36. The 13th Amendment to the US Constitution
prohibits slavery and involuntary servitude. The
Supreme Court of the United States held that
compulsory employment for public purpose does not
amount to “involuntary servitude” in Robertson v.
Baldwin and Butler v. Perry. Article 23(2) of the
Constitution enables the State Governments to require
the appellants to do compulsory service in the
government hospitals which is undoubtedly for the
benefit of the public.”
65. In regard to the question whether a compulsory bond fell foul
of Section 27 of the Contract Act, the Supreme Court concurred
with the decision of the Division Bench and rejected the contention
– 42 –
WA No. 312 of 2020
that the bonds in question violated Section 27 of the Contract Act.
The relevant extract of the said decision reads as under:
“39.The argument advanced on behalf of the appellants
that compulsory bonds placed a restraint on their
profession and thus, would be contrary to Section 27 of
the Contract Act, 1872. The High Court of Calcutta
repelled this submission by holding that the compulsory
bond does not amount to any restraint on the
professional activity of the appellants. The High Court
observed that the appellants are offered the job of
Medical Officer in the State of West Bengal and that the
covenant in the compulsory bond operates only during
the period of such employment. Relying upon the
dictum of Lord Morris in Esso Petroleum Co. Ltd. v.
Harper’s Garage (Stourport) Ltd. that:
“if A made a contract under which he willingly
agreed to serve B on reasonable terms for a few
years and to give his whole working time to B, it
would be surprising indeed, if it were sought to
describe the contract as being in restraint of
trade; in fact, such a contract would very likely
be for the advancement of trade.”
The High Court concluded that a contract entered into
by appellants to serve the Government for a few years
under reasonable terms cannot be described as one in
restraint of trade. We are in agreement with the findings
recorded by the High Court of Calcutta. Therefore, we
are of the considered opinion that the conditions of
compulsory bonds for admission to postgraduate and
superspeciality courses in government medical colleges
are not in violation of Section 27 of the Contract Act,
1872.
40. The upshot of the above discussion is that the writ
petitions and the appeals deserve to be dismissed.
Consequently, all the doctors who have executed
compulsory bonds shall be bound by the conditions
contained therein.”
– 43 –
WA No. 312 of 2020
66. In view of the aforesaid, we are unable to accept that the
petitioners are not liable to perform the bond executed by them.
67. The petitioners had also contended that they had already
executed a bond to provide service for a period of one year with the
State of Karnataka, and therefore, imposing a condition to provide
additional service for a period of five years would be highly onerous
and unreasonable. In addition, the petitioners had also raised the
contention that they were not aware of any condition to furnish a
service bond at the time of opting for counselling for admission to
the College. It was also contended that the College had
surrendered its seats to the State and therefore, could not impose
any additional conditions.
68. As noticed at the outset, ESIC had reduced the requirement
for rendering compulsory service to only one year, and it had
further reduced the amount payable by the students, if they failed
to render the said service to `5,00,000/-. Thus, even if the service
required to be rendered by the petitioners to the State Government
is taken into consideration, the total period of compulsory service is
now confined to only two years. We are unable to accept that the
period of two years’ compulsory service or the payment of
`5,00,000/- in lieu thereof is in any way onerous, as contended. We
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WA No. 312 of 2020
may also note that ESIC had, during the proceedings in the writ
petition, readily accepted that the period of compulsory service with
the State be reduced from the term of five years as stipulated
under the bond. This period is further reduced to one year
prospectively from the date of the memorandum, that is, from
28.07.2020. Thus, in the case of the petitioners, they are required
to serve only one year with the ESIC hospitals as of that date.
69. The contention that the petitioners were unaware of the
requirement of furnishing a compulsory bond is seriously
contested. ESIC claims that it had uploaded the prospectus on the
website of ESIC, PGIMSR, Rajajinagar, Bengaluru
(www.esipgirnr.kar.nic.in). ESIC further claimed that the website of
the Ministry of Health and Family Welfare (www.mohfw.nic.in) also
mentions the ‘Bond applicable after completion of the course’ in the
‘Other Information’ row under the list of colleges listed for
undergraduate counselling in the year 2012.
70. The learned counsel appearing for the ESIC also submitted
that the conditions for providing service bonds were already in
place for post-graduate courses, which was well known and the
students were fully aware of the same.
– 45 –
WA No. 312 of 2020
71. In our view, the said controversy may not be of much
significance. This is because there is no dispute that the petitioners
were called upon to furnish the service bond at the material time,
and there is no dispute that at the time of the admission, they had
done so. Thus, concededly, they had taken admission to the
college on furnishing the service bond as required. They had not
challenged the same either at the time of taking admission or
immediately thereafter.
72. More importantly, the petitioners had undergone the course
at subsidised costs on the basis of a compulsory bond. Plainly,
they 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, which may not have been
available to them, if they had not furnished the service bond. The
petitioners cannot now be heard to make a grievance of not being
aware of the condition of furnishing a bond at the time of
counselling.
73. It is contended on behalf of the petitioners that the petitioners
did not raise any objection at that stage because raising the same
would amount to forfeiting the right to admission to the College,
given the tight schedule of counselling. However, even if we accept
– 46 –
WA No. 312 of 2020
the same, it did not prevent the petitioners from raising the dispute
immediately thereafter and availing themselves of the remedies at
that stage.
74. We may note that the only protest that is placed on record
and which is also disputed by the learned counsel for the ESIC are
the letters written by petitioner No.1 and his father. It is stated that
petitioner No.1, had addressed a letter dated 30.07.2012 to the
Executive Director, KEA, requesting for a change in College and
his father had sent a letter on the same date to the Dean of the
College complaining that there was no specific condition in the
website of CET or ESIC Medical College regarding furnishing of a
bond and requested that his son be absolved of furnishing of the
service bond. However, there is nothing on record to indicate that
petitioner No. 1 thereafter followed up with the said request. He
had certainly not taken any steps to challenge the same at the
material time.
75. In the given facts, we are unable to accept that the delay in
availing the remedies ought to be countenanced.
76. The learned Single Judge had rejected the objections raised
by ESIC in this regard on the ground that it is an unsubstantial
– 47 –
WA No. 312 of 2020
technical plea. We are unable to concur with the said view. Once it
is accepted that execution of the service bond is an integral part of
the consideration for the education provided to the petitioners, it
cannot be stated that availing of the educational services/training
unreservedly over a period of over five and a half years to
challenge the consideration for the same is a mere technical plea.
77. ESIC established the College, and it subsidised the cost at
which the education was imparted to the petitioners with the object
that they, on completion of their education, would render quality
service at their hospital. It is difficult to accept that the petitioners
could be permitted to challenge the condition of furnishing a bond
after they had availed the benefit of receiving education, the cost of
which was subsidised by ESIC.
78. The contention that the ESIC could not impose a condition of
service, as the petitioners were admitted against seats released to
the State Government, is also not persuasive. ESIC/College is
entitled to fix the fees for providing the course and, as noted above,
execution of the service bond is a part of the consideration for
provision of education and training.
– 48 –
WA No. 312 of 2020
79. In view of the above, the present appeal is allowed and the
impugned order is set aside.
80. We may note that during the course of the submissions, it
was pointed out that some of the petitioners may have already
taken up employment elsewhere and may not be in a position to
render the services. It is also contended that some of the
petitioners may have acquired further qualifications and therefore, if
they are called upon to render any service at ESIC hospital, it
should be commensurate with their experience.
81. Those petitioners who are unable to join would necessarily
be obliged to pay the reduced amount of `5,00,000/- with interest.
This Court is informed that some of the petitioners have paid the
bond amount. It is also open for the petitioners to approach ESIC
to grant them a reasonable time to join the services, and needless
to state, ESIC would consider reasonable requests sympathetically.
Illustratively, if a student is midway through another course, it
would be open for the student to request that the commencement
of the period of compulsory service be deferred and he be given
appropriate time to join the services.
– 49 –
WA No. 312 of 2020
82. Insofar as those petitioners who are willing to render the
service (which is now confined to a period of one year), ESIC is at
liberty to avail the services of those petitioners at any of the ESIC
hospitals. However, ESIC would also consider placing the
petitioners in positions commensurate with their experience and
further qualifications.
83. The appeal is allowed in the aforesaid terms.
Sd/-
(VIBHU BAKHRU)
CHIEF JUSTICE
Sd/-
(C.M. POONACHA)
JUDGE
KPS
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