Its Legal to Holding a passport of any employee by any company

Passport is a document issued by a national government

identifying a traveler as a citizen with a right to protection while abroad and a right to return to the country of citizenship.

As such, it goes without saying that this official document should be in the possession of the person to whom it is issued by the national government of his/her country identifying the holder to be its citizen.

Indian Passport

As in the case of Passports of most countries, the Indian Passports contain a message purportedly by order of the President of the Republic of India as follows:

passport law also provided that :-

“This Passport is the property of the Government of India, any communication received by holder from the Passport Authority regarding this Passport, including demand for its surrender, should be complied with immediately. Passport should not be sent out of any country by post. It should be in the custody either of the holder or of a person authorized by the holder. It must not be altered or mutilated in any way. Loss, theft or destruction of Passports should be immediately reported to the nearest Passport Authority in India or (if the holder is abroad) to the nearest Indian Mission and to the Local Police. Only after exhaustive inquiries shall a replacement Passport be issued.”

No one can hold anyone’s passport against his or her will until or unless it was asked to surrender by the Court’s order. Retention of Passport is illegal. Send them a legal notice ,followed by a Criminal Complaint with Police. They will either say they will give it back or say they don’t have it. If so, you can apply for Duplicate with the same FIR.

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" I think the first duty of society is justice"       

 "No man is above the law and no man is below it; Nor do we ask any man's permission when we ask them to obey it. Obedience to the law is demanded as a right, not asked as a favor" ~Theodore Roosevelt

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