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Issues Involved:
1. Validity of post-service restrictive covenant under Section 27 of the Indian Contract Act. 2. Enforceability of the restrictive covenant against the respondent. Detailed Analysis: 1. Validity of Post-Service Restrictive Covenant: The primary issue in this case was whether a post-service restrictive covenant in restraint of trade, as contained in Clause 10 of the service agreement, is void under Section 27 of the Indian Contract Act. The appellant company contended that the restrictive covenant was reasonable and necessary to protect its trade secrets and business interests. Counsel for the appellant argued that the interpretation of Section 27 by various High Courts, including the decision in Madhub Chunder v. Rajcoomar Doss, required reconsideration by the Supreme Court. They asserted that not all post-service restrictions are void and that reasonable restrictions, limited in time and area, should be valid. On the other hand, the respondent's counsel maintained that Section 27 of the Indian Contract Act is absolute and does not distinguish between partial and general restraints. They argued that all post-service restrictive covenants are prima facie void, and the only exceptions are those explicitly provided in the statute. The Division Bench of the High Court held that the negative covenant operating beyond the period of employment was in restraint of trade and, therefore, void under Section 27 of the Contract Act. The Supreme Court, however, chose not to express an opinion on this issue, as the appeal could be disposed of based on the second issue. 2. Enforceability of the Restrictive Covenant: The second issue was whether the restrictive covenant, assuming it to be valid, was enforceable against the respondent. Clause 10 of the service agreement stated that the restriction would come into operation "after you leave the company." The respondent's services were terminated by the appellant company, and the question was whether the term "leave" included termination by the employer. The Division Bench of the High Court interpreted the term "leave" to mean voluntary departure by the employee and not termination by the employer. The Supreme Court agreed with this interpretation, stating that the word "leave" in its plain grammatical sense implies voluntary action by the employee. The Court emphasized that the appellant company should have used clear language to include all cases of cessation of employment, including termination by the employer. As a result, the Supreme Court held that the restrictive covenant in Clause 10 was not enforceable against the respondent, as his services were terminated by the appellant company. Separate Judgment Analysis: A.P. Sen, J.: Justice A.P. Sen expressed regret that his colleagues chose not to express an opinion on the first issue, which he believed was crucial for deciding the appeal. He argued that the appeal could not be decided without addressing whether a post-service restrictive covenant is in restraint of trade and void under Section 27 of the Contract Act. Justice Sen emphasized that Section 27 is exhaustive and does not permit the importation of English common law principles. He stated that agreements in restraint of trade are prima facie void unless they fall within the statutory exception. Justice Sen highlighted that the distinction between general and partial restraints, as recognized in English law, does not apply under Section 27 of the Indian Contract Act. He cited various Indian decisions supporting this view and concluded that the restrictive covenant in Clause 10 was void and unenforceable. He also agreed with the interpretation that the term "leave" in Clause 10 referred to voluntary departure by the employee and not termination by the employer. In conclusion, Justice Sen dismissed the appeal, emphasizing that Section 27 of the Contract Act renders the restrictive covenant void and unenforceable. He also noted that the drafting of such covenants should be clear and precise to avoid ambiguity. Conclusion: The Supreme Court dismissed the appeal, holding that the restrictive covenant in Clause 10 of the service agreement was not enforceable against the respondent, as his services were terminated by the appellant company. The Court emphasized the importance of clear and precise language in drafting restrictive covenants and upheld the interpretation that the term "leave" referred to voluntary departure by the employee. Justice A.P. Sen, in a separate judgment, reiterated the absolute nature of Section 27 of the Indian Contract Act and concluded that the restrictive covenant was void and unenforceable.
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