The most common executive compensation dispute GP handles is the bonus dispute — where the executive's contract provides for a performance bonus but the employer declines to pay it, citing either poor performance or the exercise of 'absolute discretion'. Indian courts have held that an employer's contractual discretion to determine bonus amounts must be exercised honestly and in good faith — it is not a discretion to act arbitrarily or capriciously. Where the employer has awarded bonuses to peer-level executives but withheld the claimant's bonus without a principled performance differentiation, the courts have found the employer's exercise of discretion to be improper.
For ESOP and RSU disputes, the key question is whether the forfeiture clause in the scheme applies to the specific circumstances of the executive's departure. Forfeiture clauses are typically drafted to apply to termination 'for cause' — but employers frequently invoke them for 'performance' or 'restructuring' terminations that are not genuinely for cause. GP examines the scheme document, the grant letter, and the termination letter — and challenges forfeitures where the scheme's own definitions do not support the employer's characterisation of the departure.
Analysis of the executive's compensation contract and company bonus policy to determine whether the bonus is legally guaranteed (payable upon achievement of specified KPIs) or truly discretionary (employer's absolute discretion). Where the bonus is effectively guaranteed — because the KPIs have been met and the employer has paid peer-level bonuses — GP files a civil suit before the High Court for the unpaid bonus, framing the claim as breach of contract. Where the bonus is discretionary, GP challenges the employer's exercise of discretion on grounds of bad faith, inconsistency, or failure to follow the company's own performance review process.
Challenge to the forfeiture of unvested ESOPs, RSUs, or other long-term incentive awards on termination — analysing the scheme document, the grant letter, and the termination letter to determine whether the forfeiture clause is correctly applied to the facts of the departure. GP challenges forfeitures where: the scheme defines 'cause' narrowly and the termination is for 'performance'; the termination is characterised as 'for cause' without a domestic enquiry; the forfeiture is applied to vested but unexercised options; or the scheme itself is ambiguous on the treatment of the departing executive's awards.
Recovery of deferred compensation — retention bonuses, long-term incentive plan (LTIP) payments, deferred annual bonus, and other amounts earned during service but payable after departure — that the employer withholds after the executive's departure. Where the deferred compensation is contractually owed, GP files a civil claim before the High Court for the recovery of the amounts due. Where the employer seeks to set off deferred compensation against alleged losses or breach of duties, GP defends the setoff claim while pursuing the recovery.
Negotiation of separation agreements for departing executives — securing the maximum payment available under the employment contract and company policy, including notice pay, pro-rated bonus, ESOP acceleration, outplacement support, and the waiver of restrictive covenants. Where a severance agreement has been executed and the employer subsequently fails to pay, GP enforces the agreement through civil proceedings. GP also advises executives on the legal effect of releasing claims under a separation agreement — particularly where the release is expressed in broad terms that may cover claims the executive does not intend to waive.
Advisory on the enforceability of post-employment non-compete and non-solicitation covenants in India — where Section 27 of the Indian Contract Act renders agreements in restraint of trade void. Indian courts have consistently held that post-employment non-compete clauses are unenforceable as a restraint of trade — subject to limited exceptions for highly confidential information and trade secrets. GP advises executives on the non-enforceability of their non-compete obligations and advises companies on structuring non-competes in ways that, while unlikely to be fully enforceable, provide some practical protection.
Advisory on director remuneration under the Companies Act 2013 — the approval requirements for managerial remuneration (shareholder approval for amounts above the statutory caps), the recovery of excess remuneration paid in contravention of the Act, and the liability of directors who approved excess payments. GP advises both companies (on the approval process) and directors (on their entitlements and the recovery of remuneration withheld in breach of the approved terms).
An executive who departs mid-year — whether by resignation or termination — is typically entitled to a pro-rated bonus for the period of service if the bonus clause is not restricted to employees 'in service at the date of payment'. Many companies seek to avoid this by including such a restriction — but courts have found that a restriction that deprives the employee of a bonus already substantially earned through full-year performance is an unreasonable and unenforceable clause. GP analyses the specific language of the bonus clause before advising on the recoverability of a pro-rated payment.
Many executive employment contracts include a sign-on bonus repayment clause — requiring the executive to repay the sign-on bonus if they resign within a specified period. GP advises both executives who have received repayment demands (analysing whether the clause is enforceable as a genuine pre-estimate of loss or an unenforceable penalty) and companies seeking to recover sign-on bonuses from early-departing executives. The enforceability of the repayment clause depends on its characterisation — liquidated damages (enforceable) vs. penalty (unenforceable) — under the Contract Act.
For NRI executives or executives who hold options in a foreign parent company, the repatriation of proceeds from exercised options is subject to FEMA and RBI regulations. The proceeds must be remitted to an Indian bank account through proper banking channels, and there may be reporting obligations depending on the quantum of the proceeds. GP advises NRI executives on the FEMA position of their overseas equity compensation — integrating the employment law advice with the FEMA compliance advisory.
Executive compensation disputes are simultaneously contract law problems (the employment agreement, the ESOP scheme, the bonus policy) and employment law problems (the termination procedure, the workman status question, the wrongful dismissal analysis). GP analyses both layers simultaneously — ensuring the client's claim is structured to maximise the available remedies across both legal frameworks.
Most executive compensation disputes are resolved through negotiation — a well-positioned demand letter with a complete legal analysis of the employer's exposure typically produces a negotiated settlement without the time and cost of High Court proceedings. GP's standard approach is to prepare a comprehensive legal analysis and a demand letter before any proceedings are filed — and to negotiate a settlement on that basis. Litigation follows only where the employer refuses to negotiate reasonably.
GP acts for both executives pursuing compensation claims and companies defending them. Advising companies on the design of compensation structures, the drafting of ESOP scheme documents, and the correct process for disputing a bonus entitlement gives GP's executive-side advice a depth of understanding of the employer's perspective that makes the negotiation and litigation strategy more effective.
Acted for a senior executive at a Mumbai financial services company whose annual performance bonus of ₹2.1 crore was withheld by the employer — who cited 'performance below expectations'. GP reviewed the executive's KPI achievement record (all key metrics met, two exceeded), the company's bonus payout data for peer executives (all received between 80% and 100% of target), and the timing of the bonus decision (made two weeks after the executive raised concerns about a compliance issue). GP sent a demand letter setting out the bad faith analysis and the inconsistency with the peer payout data, and noting that the proximity of the bonus decision to the compliance concern raised a retaliation issue that would be raised with SEBI if not resolved. The company paid the full bonus within 30 days.
Represented a Bangalore technology company's Vice President whose unvested RSUs (valued at ₹3.4 crore at the date of termination) were forfeited by the employer on retrenchment. The ESOP scheme's forfeiture clause applied to termination 'for cause' — which the scheme defined as misconduct, fraud, or gross negligence. The VP's termination was for 'restructuring' — explicitly not for cause in the termination letter. GP filed a civil suit before the Karnataka High Court claiming the RSU value as a breach of the ESOP scheme terms — the forfeiture clause was not triggered by the restructuring retrenchment. The company settled before the first hearing, paying the full RSU value as a compensation and settlement payment.
Advised the Managing Director of a Delhi-based FMCG company who resigned to join a direct competitor, subject to a 12-month non-compete clause in his employment contract. The employer threatened to file an injunction restraining the executive from joining the competitor. GP sent a legal opinion to the executive — and, with the executive's authority, shared it with the employer — setting out the established position under Section 27 of the Indian Contract Act that post-employment non-competes are void and unenforceable, and noting the High Court costs risk of filing an injunction application that had no realistic prospect of success. The employer did not file the injunction. The executive joined the competitor on the first day of his new employment.
GP's executive compensation disputes practice combines employment contract expertise, ESOP scheme analysis, and High Court civil litigation — acting for both senior executives pursuing compensation claims and companies defending them across every component of the executive pay package.
The practice handles the full spectrum from pre-departure negotiation (extracting the maximum severance and equity treatment on exit) through to contested High Court proceedings for bonus recovery and RSU value claims — with the majority of matters resolved through negotiated settlement before trial.
When courts have found discretionary bonus withholding to be an improper exercise of discretion — and the evidence that supports a good faith challenge.
Read Insight →The forfeiture clause analysis, the 'cause' definition in ESOP schemes, and the cases where courts have found forfeitures contractually unjustified.
Read Insight →Whether you need advice before taking action or are already in dispute — speak to GP today.