As per case facts a Senior Manager in a public sector bank resigned before completing the stipulated minimum service period of three years triggering a clause in his appointment letter ... and indemnity bond that required him to pay a fixed sum as liquidated damages to the bank He paid the amount under protest and subsequently challenged the clause in the High Court as an illegal restraint of trade and opposed to public policy due to unequal bargaining power which the High Court accepted The question arose whether a restrictive covenant in a public sector employment contract requiring an employee to pay a stipulated sum as liquidated damages for resigning before a minimum three-year term is void under Section restraint of trade or Section opposed to public policy of the Contract Act Finally the Supreme Court allowed the appeal upholding the validity of the clause It reasoned that a restriction during the subsistence of a contract is generally not a restraint of trade under Section and the clause served a legitimate public policy interest for the Bank a PSU in retaining specialized talent and compensating for the prolix and expensive recruitment process necessitated by untimely resignations thereby preventing the resignation from being entirely illusory