While setting aside a single-judge order restraining the Employees’ State Insurance Corporation (ESIC) and its colleges from enforcing the five-year compulsory service bond furnished by medical students, the Karnataka High Court on Monday held that an agreement to serve a minimum period as a consideration for receiving subsidised medical education cannot be conflated with human trafficking, forced labour, and other kinds of exploitation.
A bench of Chief Justice Vibhu Bakhru and Justice C M Poonacha allowed an appeal filed by the ESIC and said, “ESIC/College is entitled to fix the fees for providing course and execution of the service bond is a part of the consideration for provision of education and training.”
The ESIC filed the appeal challenging the single-judge order dated February 14, 2020, whereby the court held that no provision in the ESI Act authorised the ESIC to enter into a contract or extract a service bond from candidates as a precondition for admission. Moreover, the prescription of compulsory service robbed citizens of their choice in employment or the practice of a profession under Article 19(1)(g) of the Constitution, the single-judge bench had held, adding that enforcing the service bonds virtually amounted to enforcing bonded labour prohibited by Article 23 of the Constitution.
The impugned order was passed on a petition filed by Abhishek Choudhari and other students admitted to the MBBS course at the ESIC Medical College & PGIMSR, Rajajinagar, Bengaluru, in 2012-13 on government-quota seats.
At the time of admission, they had furnished service bonds undertaking to serve at the ESIC’s hospitals for five years after completing their course and were liable to pay Rs 7,50,000 on failure to do so. After completing their education and when the ESIC issued posting orders, the students approached the court.
In its appeal, the ESIC contended that it has the necessary powers to enter into contracts, as the service bond was intended to ensure the provision of medical services to ESIC subscribers. Moreover, the service bond is a contract voluntarily entered into by the parties and the students are thus bound by it, they contended.
‘ESIC has power to enter into contractual agreements’
The division bench noted in the order that ESIC had commenced medical courses to improve the quality of service provided under the ESI scheme, referring to section 59 of the ESI Act, which provides for establishing and maintaining hospitals.
“The establishment of maintenance of hospitals by ESIC would clearly entail entering into agreements with medical 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,” the order said.
Further, the order said, “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 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. The decision of the Single Judge is erroneous.”
The court emphasised that executing the bond was a condition for the petitioners’ admission to the college.
“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,” the court said.
Article 19(1)(g) of the Constitution
The court said there was no compulsion for a student to necessarily serve the ESIC and that students could always leave after paying the amount as agreed upon in the service bond. This is not in the nature of a penalty, it added.
“Undisputedly, the 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. 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,” the order read.
Belated challenge
The court also noted that the students had secured admission after furnishing a service bond as required. They had not challenged the bond either at the time of admission or immediately thereafter. They had undergone the course at subsidised costs on the basis of a compulsory bond.
The court said, “They (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, 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.”
One-year-service bond with government
The students contended that since they had been admitted on government-quota seats and executed a bond to provide service for one year with the Karnataka Government, additional conditions to provide service by the college for a period of five years would be highly onerous and unreasonable.
Noting that the ESIC had, by a 2020 notification, reduced the compulsory service period to one year and cut the amount payable if students failed to render the service to Rs 5,00,000, the court said, “We are unable to accept that the period of two years’ compulsory service or the payment of Rs 5,00,000 in lieu thereof is in any way onerous.”
The court directed that students unable to join the service would necessarily be obliged to pay Rs 5,00,000 with interest. As some of the petitioners sought a reasonable time to join the service, the court directed them to approach ESIC.
In cases where 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 that he be given appropriate time to join the service.
The Karnataka High Court emphasised that executing the bond was a condition for the students' admission to the ESIC medical college. (Representational image created using AI) 
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