Legality of One-Sided Contracts That Make Artists and Employees “Bonded-Labour”:

The recent reports and #investigations about the #suicide by filmstar #Sushant Singh #Rajput, apparently a victim of one-sided #contract by the film producer Yash Raj Films, has disturbed the citizens and points out the #atrocities being perpetrated by the powerful ones against budding artists/performers. Followed by that was a news about a girl who was a Chartered Accountant in Surat who when harassed by her previous employer, was compelled to commit suicide.

Let us view it in the background of the #legal #Court #decisions which might help in bringing the culprits to justice. Are #negative #covenants in #employment or #service contracts legal? Let's find out...

1.     Section 27 of the Indian Contract Act, 1872 clearly prohibits every agreement which restrains any person from exercising lawful profession, as void. The Supreme Court of India in Superintendence Company of India Pvt. Ltd. vs. Shri Krishan Murgai (1981-2 SCC 246) examined the case and held that a restraint of trade by an employer against an employee is void under Section 27 of the Indian Contract Act, and therefore, such contract would be inapplicable and not enforceable against the employee. Justice A.P. Sen, in this case, also said that to put a restraint on the part of the Respondent, even though partial, it is void and therefore the contract must be treated as one which cannot be enforced. Section 27 of the Indian Contract Act has been enacted as a matter of public policy of India and cannot be waived off by entering into any agreement to the contrary. The principles of English law also cannot be imported once the Parliament has codified the aforesaid principle in the Indian Contract Act.

2.     The Supreme Court also analysed the inequality of bargaining power between the parties and observed that indeed, no bargaining power may occur because an employee is presented with a standard form of contract that he/she has to accept or reject even though the contract may contain a lot of restrictive conditions not conducive to the welfare of the employee concerned.

3.     With regard to preventing performing artists from leaving the producer, the Calcutta High Court in SVF Entertainment Pvt. Ltd. vs. Anupriyo Sengupta (A.P. 1160 of 2017) has held that an artist cannot be bound and cannot be threatened from breaking away from a fixed-period contract on the garb of negative covenants contained in the agreement which the artist entertained into with the producer company. The Court held that at best the producer company may claim damages against the defendant for committing any breach of contract but the Court will not pass any restraint order injuncting the artist from performing at any other place. References were also made to Supreme Court’s decision in Percept D'Mark (India) (P) Ltd.- vs.- Zaheer Khan & Anr. reported in (2006)4-SCC-227 and Bombay High Court decision in Percept Talent Management vs. Yuvraj Singh (2008 (2) ARBLR 49 Bom).

4.     Further, after amendment in 2018, Section 14(c) of Specific Relief Act, 1963, prohibits specific performance of any contractual personal service and it would also treated as void under Section 27 of Indian Contract Act.

5.     Besides, the provisions of the Bonded Labour System (Abolition) Act, 1976, prevents infringement of the basic human rights and destruction of the dignity of human labour enshrined in Articles 21 of the Constitution of India and derives its life breath from the Directive Principles of State Policy, particularly clauses E and F of Article 39, Articles 41 and 42 as it includes protection of the health and safety of the workers and prevents any abuse thereof.

6.     Also, on a broader note, the provisions of the Competition Act, 2002, prohibits any agreement or practices which have or are likely to have an appreciable adverse effect on competition in India which limits the control, production, supply and marketing of any goods and services. What the employees or artists perform falls under “services”.

There are numerous other Court cases which support action against erring, dominating companies which misuse their position by compelling employees/artists through one-sided or restrictive contracts that prevent such artists from exercising better professional options elsewhere. 

I feel it is very important to share these legal points with people who are at the receiving end of such abuse because of the so-called "bonded contracts". No one has the legal right to harass a person to be unreasonably and illegally bound by such one-sided contracts in restraint of trade or profession.

Hope all concerned will find the above information useful and share-worthy!

-Anirrud Goswami, Advocate, Goswami & Goswami Advocates & Legal Consultants