2002 (5) TMI 876 - HC - Companies Law

Summary

Issues Involved:
1. Allegations of Conspiracy and Misappropriation of Trade Secrets
2. Suppression and Concealment of Material Facts
3. Lack of Specificity in Allegations
4. Restraint on Lawful Trade or Business
5. Originality and Copyright of Industrial Drawings and Designs

Detailed Analysis:

1. Allegations of Conspiracy and Misappropriation of Trade Secrets:
The plaintiffs, M/s. Polymer Papers Limited, alleged that Defendants No. 1 to 3 conspired with Defendants No. 4 to 10 to hijack the business of the engineering division by photocopying industrial drawings and designs, and taking customer and supplier lists. They claimed these actions paralyzed the engineering division, causing significant losses. The plaintiffs sought various injunctions to restrain the defendants from exploiting their trade secrets and to return all documents and records.

2. Suppression and Concealment of Material Facts:
The defendants argued that the plaintiffs were guilty of suppressing and concealing material facts, such as the existence of a "Memorandum of Understanding" (MOU) from 1974 and a partnership deed from 1996, which indicated a business relationship between the parties. The court agreed with the defendants, noting that the plaintiffs had not disclosed these documents, which were crucial to the case. The court cited precedents where suppression of material facts led to the dismissal of the suit, emphasizing that the plaintiffs had not come to the court with clean hands.

3. Lack of Specificity in Allegations:
The defendants contended that the plaintiffs' allegations were vague and lacked material particulars. The court found that the plaintiffs had not specified which industrial drawings or designs were allegedly taken by the defendants. The court emphasized that detailed particulars must be mentioned in the plaint, especially in cases involving allegations of fraud or breach of trust. The court agreed with the defendants that the additional affidavit filed by the plaintiffs could not substitute for the lack of details in the original plaint.

4. Restraint on Lawful Trade or Business:
The defendants argued that the plaintiffs could not restrain them from carrying on a lawful trade or business, citing Section 27 of the Indian Contract Act, which bars any restraint on trade. The court noted that there was no agreement or service contract between the plaintiffs and the defendants imposing any terms or conditions for doing similar business. The court referred to precedents where service covenants extending beyond the termination of service were held void, and concluded that the plaintiffs could not claim any restraint against the defendants from carrying on any trade or business similar to that of the plaintiffs.

5. Originality and Copyright of Industrial Drawings and Designs:
The defendants challenged the plaintiffs' claim of copyright in the industrial drawings and designs, arguing that the plaintiffs were not the originators of these works. The court found that the plaintiffs had not registered the alleged designs under the Designs Act, 2000, which was necessary to claim copyright. The court referred to the provisions of the Designs Act and the Copyright Act, concluding that the plaintiffs could not claim copyright in the unregistered designs. The court noted that the plaintiffs had failed to establish their right to the alleged designs and drawings and dismissed the application for injunction.

Conclusion:
The court dismissed the plaintiffs' application for an interim injunction, finding that the plaintiffs had suppressed material facts, failed to provide specific details of the alleged misappropriated designs, and could not claim restraint against the defendants' lawful trade. The court also concluded that the plaintiffs had not established their copyright in the industrial drawings and designs as they were not registered under the Designs Act. The balance of convenience was found to be in favor of the defendants.