Service Bonds Can Be Enforced On Students Who Avail Subsidised Education, Doesn't Constitute 'Bonded Labour': Karnataka High Court

The Karnataka High Court has recently held that service bonds can be enforced on medical students who avail subsidised education, noting that the same cannot be termed as "bonded labour" as it was common for students to avail study loans to defer the cost of education.In doing so the court allowed an appeal by Employees' State Insurance Corporation (ESIC) on mandatory service in its medical colleges, and set aside a 2020 single-judge's order that had done away with the compulsory service bonds for medical students.The Division Bench of Chief Justice Vibhu Bakhru and Justice C.M Poonacha held that the 5-year bond, later converted into a 1-year mandate prospectively from 2020, wouldn't violate the rights of MBBS students under Article 19(1)(g) [Right to practise a profession of choice] or Article 23 [prohibition against bonded labour].“….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 court observed.The court opined that ESIC could rightly demand that the students who secured admission in its colleges and to whom they provide subsidised education should serve a minimum period as 'consideration'. It is pertinent to note here that if the students were to fail in rendering their service for one year, ESIC has fixed the liquidated damages to be paid by such students at Rs 5 lakhs. The official memorandum was published by the ESIC after the pronouncement of the impugned single judge bench order in this case.“…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”, the court further clarified, not convinced by the arguments of the respondent students. The court also underscored that the respondent students, who completed their course in 2018, will be bound by the new mandate of one year mandatory service or Rs 5,00,000/- as damages.The MBBS students were pursuing their education at the ESIC Medical College & PGIMSR, Rajajinagar, Bengaluru, for the academic year 2012-13 under Government quota seats allotted by the Karnataka Examinations Authority (KEA). They had executed service bonds at the time of admission that they would serve a five year bond at a ESIC hospital in India upon the completion of their education. If the students were to fail in fulfilling the terms of the bond, they would be bound to pay Rs 7,50,000/-(amount reduced as aforementioned from 2020) with interest.The medical students completed their education in 2018 post which they were allotted different hospitals for meeting their obligations under the service bond with ESIC. Citing that they only acceded to the bond for not losing their medical seats and that they weren't fully aware of the terms of the service bond, the students approached the High Court.The single judge bench had held that ESIC could not enforce its own service bonds on its students in addition to the one-year rural service mandated by the state government. However, not agreeing with the single judge bench order, the Division bench noted as follows:“…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….”,the court laid down in unequivocal terms while allowing the writ appeal filed by ESIC against the single judge bench order.Noting Sections 59 and 59-B of the ESI Act, which grant ESIC the power to establish and maintain hospitals and medical colleges, the court inferred that such powers also include ESIC's ability to enter into contractual agreements with students for rendering their service at its hospitals. The court added that the execution of the bond was a precondition for getting admitted to its colleges, and the young doctors cannot now take the stand that they weren't aware of the bond conditions.“…"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 court said.The High Court also placed reliance on the apex court judgment in Association of Medical Super Speciality...

Service Bonds Can Be Enforced On Students Who Avail Subsidised Education, Doesn't Constitute 'Bonded Labour': Karnataka High Court

Sebin James

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