Legal Opinion Regarding Executing of Surety Bonds by Probationary Officers

Mr. Z

Address….

Dear Sir,

Re:      LEGAL OPINION REGARDING EXECUTION OF SURETY BONDS BY PROBATIONARY OFFICERS.

We refer to your letter dated February 19, 2008 on the above subject.

 

From perusal of your letter and the provided documents it appears that, Bank 1 (‘Bank 1’) recruits Probationary Officers from time to time and spends substantial amount of money for their training. Therefore, Bank 1 expects the Probationary Officers to continue their job for a period of at least four years.

In this regard Bank 1 wants to obtain a Surety Bond executed by the Probationary Officer and two other sureties to the effect that the officers shall serve Bank 1 for at least four years from the date of joining or pay compensation to Bank 1 at the rate of ½ (half) of the amount drawn by him during the probation period and 1/3 (one third) of the total emoluments drawn during remaining period of his service with Bank 1. A copy of such draft Surety Bond has been provided to us.

In the circumstances stated above you require our legal opinion as to how to make the surety bond legally binding upon the parties and to suggest ways to further develop the same.

Our Opinion

Section 27 of the Contract Act, 1882 states as follows:

“Every agreement by which any one is restrained from exercising a lawful profession, trade, or business of any kind, is to that extent void.”

In strict interpretation of the provision of law mentioned above, Bank 1 cannot bind any of its employees to work for Bank 1 for a fixed period as such any binding may be regarded as ‘restraint from exercising a lawful profession’. Moreover, execution of surety bonds whereby the employees agrees to compensate Bank 1 at the rate of ½ (half) of the amount drawn by him during the probation period and 1/3 (one third) of the total emoluments drawn during remaining period of his service with Bank 1 may also be regarded as ‘restraint from exercising a lawful profession’ because such punitive compensation may be unreasonable under Section 27 of the Contract Act. And therefore, the draft surety bond provided to us may be regarded as void.

However, since Bank 1 invests a lot of money for training and grooming up of the Probationary Officers, Bank may obtain Indemnity Bonds from the Probationary Officers at the time of joining that if they want to leave Bank 1 before three years, they will return the costs of such training and every other money which have been expended by Bank 1 for such Probationary Officers. Again, Bank 1 may obtain Surety Bonds for payment of all costs and expenses of the training of the Probationary Officer from two other sureties of the Probationary Officer.

We are enclosing herewith a draft Indemnity Bond to be obtained by Bank 1 from the Probationary Officers and a draft Surety Bond to be obtained by Bank 1 from the sureties at the time of joining of the Probationary Officers. Instead of the Surety Bond provided by you, we advise you to execute the attached Indemnity Bond and Surety Bond.

Should you have any further query please do not hesitate to revert back to us.

All papers and documents referred to us are returned herewith.

Thanking you.

 

Yours faithfully,

 

………………….

For: “The Lawyers & Jurists”
 

INDEMNITY BOND

To

National Credit and Commerce Bank Ltd.

____________________________

____________________________

____________________________

____________________________

Dear Sirs

I, _______________________________ , son of _____________________________ , of ____________________________ , do hereby declare, confirm, undertake and indemnify you as follows:

01.          That I have been appointed by National Credit and Commerce Bank Ltd. (the ‘Bank’) as _______________________ vide Appointment Letter dated _____________.

02.          That Bank 1 may arrange and provide training for me in Bangladesh or abroad at the cost and expenses of Bank 1 on condition that I shall serve Bank 1 at least 4 (four) years after completion of the training failing which I shall reimburse the full cost and expenses incurred by Bank 1 in providing such training to me.

03.          That I do hereby irrevocably declare, confirm and undertake that in the event I intend to leave Bank 1, whether by resignation, termination or dismissal, before expiry of 4 (four) years after completion of the training, I shall be responsible to reimburse Bank 1 the full cost and expenses incurred by Bank 1 in providing training to me upon first written demand of Bank 1.

04.          That the payment under this bond shall be made without failure and within ____ (_____) days of making the demand. I hereby acknowledge and declare that my obligation under this bond shall be independent from the obligations of any other person.

05.          That this bond shall remain valid for a period of 4 (four) years from the date of issuance and expiring on _____________________.

06.          That this bond shall be binding upon my heirs, successors, administrators and assigns.

IN WITNESS WHEREOF I execute this Indemnity Bond on this the __th day of _________, 2___.

 

Witnesses: 1.

Indemnifier
2.  

 

SURETY BOND

To

National Credit and Commerce Bank Ltd.

____________________________

____________________________

____________________________

____________________________

 

Dear Sirs

I, ____________________, son of _______________________, ______________________________________________, do hereby declare, confirm, undertake and indemnify you as follows:

01.         That Mr. _____________________, son/daughter/wife of _______________________ of ______________________ (the “Employee”) has been appointed by National Credit and Commerce Bank Ltd. (the ‘Bank’) as ___________ vide Appointment Letter dated _____________.

02.         That the Employee may be provided training in Bangladesh or abroad at the cost and expenses of Bank 1 on condition that the Employee will serve Bank 1 at least 4 (four) years after completion of the training failing which he/she will reimburse the full cost and expenses incurred by Bank 1 in providing such training to the Employee.

03.         That in terms of the service contract between Bank 1 and the Employee, the Employee is required to provide Surety Bonds in favour of Bank 1 from 2 (two) persons.

04.         That I, __________(relationship)_________ of the Employee, do hereby irrevocably declare, confirm and undertake that in the event the Employee leaves Bank 1, whether by resignation, termination or dismissal, before expiry of 4 (four) years after completion of the training and fails to reimburse the cost and expenses incurred by Bank 1 in providing training to the Employee, I shall be responsible to reimburse Bank 1 the full cost and expenses incurred by Bank 1 in providing training to the Employee upon first written demand of Bank 1.

05.         That the payment under this bond shall be made without failure and within ____ (_____) days of making the demand. I hereby acknowledge and declare that my obligation under this bond shall be independent from the obligations of the Employee under the service contract and Bank 1 is at liberty to have recourse against me at its discretion without taking any recourse against the Employee.

06.         That this bond shall remain valid for a period of 4 (four) years from the date of issuance and expiring on _____________________.

07.         That this bond shall be binding upon my heirs, successors, administrators and assigns.

IN WITNESS WHEREOF we execute this Surety Bond on this the __th day of ______, 2___.

Witnesses: 1.

Surety
   
2.  

 

 

 

 

 

 

 

 

 

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