Privileged and Confidential

Draft for Discussion Purposes

July 25, 2021

KSA| INDIAN EMPLOYMENT LAW ADVICE

_____________________________________________________________________________________________

1. BACKGROUND

1.1. We have been given to understand that the employer, a Saudi based governmental agency
(“Employer”) had made a verbal offer of employment vide an email 1to the employee (“Employee”),
an Indian resident. In this regard, the Employer and the Employee entered into an employment
contract dated May 03, 2020 (“Employment Contract”), which was executed electronically (i.e.,
printed, signed and then scanned and shared by each party with the other party).

1.2. The commencement of employment was subject to fulfilment of certain conditions i.e., procurement of
requisite work and residency permits by the Employer; and the Employee clearing the medical check-
up as required under the applicable laws of Kingdom of Saudi Arabia. We have been given to
understand that the said pre-conditions have not been fulfilled post signing of the Employment
Contract.

1.3. We have been further given to understand that the Employee is currently residing in India and the
Employee has not performed any work for the Employer. Furthermore, the Employee has not been
paid any salary yet by the Employer.

1.4. On perusal of the Employment Contract, we have noted the following:

1.4.1. the term of the employment is for 3 (three) years;

1.4.2. primary location of the employment is Riyadh;
1.4.3. the Employment Contract is governed by the laws including the labour laws of Kingdom of
Saudi Arabia;
1.4.4. if the Employer fails to obtain the required permits because of Employee’s ineligibility then
the Employment Contract will be terminated with immediate effect without any liability to
either parties2;
1.4.5. the Employee, as a Manager F&B will be reporting to the Executive Chef in Riyadh;
1.4.6. amongst various reasons the Employment Contract can be terminated before the expiry of
the term either by way of a mutual written agreement by both the parties, or by either party
without cause;
1.4.7. specific termination provision as mentioned in the Employment Contract has to be
mentioned in the notice of termination;
1.4.8. in case of termination of employment by either party without cause, the Employer is required
to pay the Employee wages for 2 (two) months 3in addition to the other applicable payments 4;
and

1
We have not been provided with the email of the Employee accepting the verbal offer. However, for the purpose of this
memorandum we have assumed that the said offer was accepted by the Employee. Furthermore, we have assumed that the Employee
has left his prior employment after successfully being security cleared.
2 Clause 2 (a) of the Employment Contract.

3 Clause 5 (c) of the Employment Contract.

4 Clauses 5 (a) and (b) of the Employment Contract.

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1.4.9. any dispute in relation to the Employment Contract is subject to the exclusive jurisdiction of
the competent judicial authorities in the Kingdom of Saudi Arabia.

1.5. In light of the aforesaid facts, the Employer now intends to rescind the offer of employment and
terminate the Employment Contract and has sought our advice 5on the same. However, we have not
been provided with any reasons for such rescindment.

2. QUERIES

Based on the aforesaid background, the Company has sought our advice on the following queries,
reproduced in-verbatim:

1. What are the potential risks if the Employer cancels the Offer and the Employment Contract?
2. Will the Candidate be able to file a claim before a court in his country or the court will immediately/
automatically reject/dismiss his claim since the Employment Contract is governed Saudi Labor Law?
Or the court will not reject/dismiss the claim unless the Employer (or its representative) attends to the
court and request that the claim to be dismissed? We will need a brief explanation for all scenarios and
the possibilities for each one.
3. Would the documents that the Candidate will submit to the court be in a public domain (i.e., everyone
will have access to the claim even if its rejected)?
4. We also need your suggestion regarding the notice of cancellation which the Employer will send (what
to include and what to avoid).

3. ANALYSIS OF INDIAN LAWS

3.1. Please note that Indian labour and employment laws do not prohibit an Indian resident being hired
as an employee by a foreign entity without having a place of business in India, either to work in
India or outside India.

3.2. Under Indian labour and employment laws, the applicability of the statutes is dependent on the
existence of an establishment in India and a minimum threshold of employees. In cases where a
foreign entity does not have a place of business in India and hires employees directly on its own
payroll, the Indian labour and employment laws will not become applicable as the employer would
not be Indian and there would be no established place of business in existence in India.

3.3. In the case at hand, we have noted that the Employer does not have a place of business in India and
the Employee has been directly hired on the payroll of the Employer. Furthermore, the place of work
of the Employee is outside the jurisdiction of India and the Employee will not perform any work
within India for the Employer. Keeping in view the said facts and circumstances, Indian labour and
employment laws will not be applicable to the parties.

3.4. As per the Indian Contract Act, 1872, essential ingredients of a contract are:
i. offer/proposal,

5For the purpose of this memorandum, we have only examined Indian laws and the issues may be independently examined under
the laws of Kingdom of Saudi Arabia.
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ii. unqualified acceptance of offer/proposal resulting into promise,

iii. consideration for promise, and
iv. legally enforceable agreement.

Under the Indian Contract Act, 1872, contingent contracts6 cannot be enforced by law unless and
until the event upon which the performance of the contract is dependent has occurred or happened.
However, if said the event becomes impossible, such contracts become void.

3.5. It is a settled position of law that if a condition is precedent then such condition must happen
(satisfied) before either party becomes bound by a contract. The High Court of Punjab in Laxmi
Insurance Co. Ltd. v. Bibi Padma Wati, AIR1961P&H253, has held that if a condition has been made
part to a contract, then such condition must be considered material to the contract as the parties
would not have made such condition as a part of the contract if they did not think of such condition
as material. Further, while relying upon a foreign judgement it has been held by the Allahabad High Court
in Sri Satya Prakash Goel Vs. Ram Krishan Mission and Ors., AIR1991All343 that if there is a qualified
acceptance subject to a condition, then until that condition is fulfilled, no contract is to arise and there
can be no concluded contract between the parties.

3.6. In the present case, neither the Employee has performed any work for the Employer (promise), nor
the Employer has paid any salary (consideration) to the Employee till date. Accordingly, the essential
ingredients of a contract have not been fulfilled and thus it can be safely said that the Employment
Contract has not concluded between the parties.

3.7. Furthermore, the Employment Contract is contingent upon the two preconditions as mentioned
aforesaid in para 1.2. In view of the provisions of the Indian Contract Act, 1872 and judicial
pronouncements discussed in paragraph 3.5, the Employment Contract cannot be enforced under
Indian laws unless the events take place.

3.8. Under the Civil Procedure Code, 1908, a suit (claim/case) can be instituted in a court within the local
limits of whose jurisdiction the cause of action has arisen, either wholly or partially. However, as per
the settled position of law in India 7where parties by way of a contract have agreed to the jurisdiction
of a particular court, then only such court shall have the jurisdiction to deal with the matter and the
parties must intend to exclude all other courts.

3.9. Further, Section 86 of Civil Procedure Code, 1908 provides immunity to the ruler, an ambassador or
envoy of a foreign state, High Commissioner of a Commonwealth Country and any other such
member of staff of the previous category, as the Central Government may specify. The conditions
under which the Central Government may give permission to any person to sue a foreign state or
entity are:
i. Institution of a suit by the foreign state against the applicant.
ii. If a foreign state locates or trades within the local limits of the Indian Court.

6 Section 31 A "contingent contract is a contract to do or not to do something, if some event, collateral to such contract, does or does
not happen.
7
A.B.C. Laminart Pvt. Ltd. and Ors. vs. A.P. Agencies, Salem, AIR1989SC1239
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iii. If there is a dispute with the property of the foreign state under which the Applicant
wants to sue it.

3.10. In the present case, the Employer has no place of business in India. Accordingly, no claim/case can
be filed against the Employer in the courts of India. 8

3.11. Furthermore, in the Employment Contract the parties have agreed to the exclusive jurisdiction of the
judicial authorities of Kingdom of Saudi Arabia and have conclusively excluded the jurisdiction of
Indian courts. Even though the Employment Contract was executed electronically partly in India,
the Indian courts will still not have jurisdiction to entertain any dispute pertaining to the
Employment Contract as the parties have agreed to the exclusive jurisdiction 9of Kingdom of Saudi
Arabia.

3.12. Additionally, as the termination order will be executed by the Employer within the jurisdiction of
Kingdom of Saudi Arabia, there will be no cause of action arising within the territory of India to
invoke the jurisdiction of Indian Courts.

4. RESPONSES TO THE QUERIES

Query No.1 What are the potential risks if the Employer cancels the Offer and the Employment Contract?

4.1. As discussed above in paragraph 3, under Indian laws there will be no potential risks if the Employer
cancels the offer and the Employment Contract within the jurisdiction of the Kingdom of Saudi
Arabia.

Query No.2 Will the Candidate be able to file a claim before a court in his country or the court will
immediately/ automatically reject/dismiss his claim since the Employment Contract is governed Saudi
Labor Law? Or the court will not reject/dismiss the claim unless the Employer (or its representative)
attends to the court and request that the claim to be dismissed? We will need a brief explanation for all
scenarios and the possibilities for each one.

4.2. Please note that there is no such provision which stops any person from filing a claim/case in a court.
However, the claim/case is required to mention the specific provision of the applicable statute(s) for
being admitted by the registry (administrative department) of any court even at the filing stage. In
case a claim/case is filed and listed for hearing by a registry, thereafter the courts must be satisfied
about jurisdiction and cause of action for the claim/case to be admitted and notice be issued to other
parties by the court.

4.3. In the present case, as discussed aforesaid in paragraphs 3.8, 3.9 and 3.10, even if the Employee files
a claim/case in Indian courts, it may not be admitted for filing at the threshold by the registry itself
on the ground that no cause of action has arisen within the jurisdiction of India and the Employer

8
Kenya Airways v. Jinibai B. Kheshwala, (2000)6CompLJ208(Bom) and Babulall Choukhani v. Caltex (India) Ltd., AIR1967Cal205
9 Brahmani River Pellets Limited Vs. Kamachi Industries Limited, AIR2019SC3658
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has no place of business in India. Assuming, the Employee succeeds in filing the claim/case and get
past the registry, the courts will not try the claim/case due to lack of jurisdiction as the parties have
agreed to the exclusive jurisdiction of the Kingdom of Saudi Arabia and the claim/case may be
dismissed without even issuing notice to the Employer.

4.4. However, in a rare situation if the court, acting on the grounds of principal of natural justice, issues
notice to the Employer, the Employer may represent itself through its counsels in India and need not
have to appear in person in the concerned court. In view of the settled position of law on the issue
of exclusive jurisdiction, the claim/case will be liable to be dismissed at the threshold.

Query No.3 Would the documents that the Candidate will submit to the court be in a public domain (i.e.,
everyone will have access to the claim even if its rejected)?

4.5. Please note that the documents filed in the court will not be in the public domain.

Query No.4 We also need your suggestion regarding the notice of cancellation which the Employer will
send (what to include and what to avoid).

4.6. Please note that under the Indian laws the Employment Contract has not concluded and thus void
ab initio. However, the said position must be independently reviewed as per the laws of Kingdom
of Saudi Arabia.

4.7. Having said so, subject to clause 2 (a) that the Employer may terminate the Employment Contract as
per clause 4(a)(v) of the Employment Contract. Further, in accordance with the clauses of the
Employment Contract, the notice of termination should include the specific termination provision
mentioned in the Employment Contract. It is advisable to avoid any kind of stigmatic orders and
allegations. As a matter of abundant of caution and practical approach to the situation, the Employer
may terminate the Employment Contract by paying 2 (two) months wages to the Employees. The
Employee will not be eligible to benefits as mentioned in clause 5 of the Employment Contract since
the contract has not concluded between the parties, salary has not been paid to the Employee and
the pre-conditions have not been fulfilled.

Hope the above would suffice. Please feel free to revert for any clarification(s).

Sincerely,

Vaibhav Bhardwaj

Partner

IndusLaw

Email: vaibhav.bhardwaj@induslaw.com
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DISCLAIMER

We are relying upon relevant provisions of Indian laws including judicial and statutory interpretations thereof, which
are subject to change or modification by subsequent legislative, regulatory, administrative, or judicial decisions. Any
such changes could have an effect on the validity of our views herein. Further, we can give no assurance that Indian
laws, or judicial and administrative interpretations thereof, will not be subject to any change or that Indian regulatory
authorities / courts will agree with our views specified herein.

No opinion may be inferred or implied beyond the matters expressly stated herein and no portion of this document
may be quoted or in any other way published without our specific prior written consent. This opinion has been issued
by us only for the benefit of the Company and its legal advisors. This opinion may not be relied upon by any other
person for any other purpose, nor is it to be quoted or referred to in any public document or shown, or filed with any
government authority, agency or other official body without our specific prior written consent. We disavow any
obligation to update this opinion or advise you of any changes to this document in the event of changes in applicable
or facts, or if additional or newly discovered information is brought to our attention after the date of this opinion.

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