1965 (4) TMI 134 - HC - Indian Laws

Summary

Issues Involved:
1. Enforceability of negative stipulations in a contract of personal service through an injunction.
2. Validity of negative stipulations under Section 27 of the Contract Act.
3. Applicability of Section 14(1)(d) and Section 38(2) of the Specific Relief Act, 1963.
4. Discretion of the Court in granting injunctions.
5. Public policy considerations in enforcing contracts of personal service.
6. Reasonableness of restraints in contracts of personal service.
7. Constitutional validity under Article 19(1)(g) of the Constitution.

Detailed Analysis:

1. Enforceability of Negative Stipulations in a Contract of Personal Service Through an Injunction:
The primary issue in this appeal was whether the negative stipulations in Clauses 7 and 9 of the contract between the plaintiffs and the defendant could be enforced by the Court through an injunction. The Court observed that negative stipulations in contracts of personal service are not inherently void under Section 27 of the Contract Act as they do not constitute a restraint of trade. The Court referenced several precedents, including Gaumont British Picture Corporation Ltd. v. Alexander and Warner Bros v. Nelson, to establish that such stipulations are valid when they operate only during the period of the contract.

2. Validity of Negative Stipulations Under Section 27 of the Contract Act:
The Court held that negative stipulations in the present contract could not be considered void under Section 27 of the Contract Act. It cited the decision in Charlesworth v. MacDonald, which clarified that agreements for personal service for a fixed period do not restrain a person from exercising their lawful profession and thus are not in restraint of trade.

3. Applicability of Section 14(1)(d) and Section 38(2) of the Specific Relief Act, 1963:
The defendant argued that the negative stipulations imposed a continuous duty that the Court could not supervise, invoking Section 14(1)(d) of the Specific Relief Act, 1963. The Court clarified that this rule applies to positive duties to do something, not to negative duties to abstain from doing something. Therefore, the enforcement of a negative stipulation does not fall within the inhibition of this rule.

4. Discretion of the Court in Granting Injunctions:
The Court emphasized that granting an injunction is a discretionary remedy. This discretion is guided by judicial principles and is not arbitrary. The Court referred to Section 36 and Section 38 of the Specific Relief Act, 1963, which provide that the Court may grant a perpetual injunction to prevent the breach of an obligation arising from a contract, subject to its discretion.

5. Public Policy Considerations in Enforcing Contracts of Personal Service:
The Court discussed the public policy considerations against compelling an employee to work for a particular employer against their will, likening it to a form of slavery. This principle is rooted in the historical context of English law, which consistently opposed all forms of slavery. The Court cited Fry L.J. in De Franceses v. Barnum and Lindlay L.J. in Whitwood Chemical Co. v. Hardman to support this view.

6. Reasonableness of Restraints in Contracts of Personal Service:
The Court held that the reasonableness of a restraint in a contract of personal service must be evaluated in reference to the interests of the contracting parties and the public. The restraint must afford no more than adequate protection to the employer and must not be injurious to the public. The Court adopted the principle laid down by Lord Macnaghten in the Nordenfelt Case, which reconciles the freedom of contract with the freedom of occupation.

7. Constitutional Validity Under Article 19(1)(g) of the Constitution:
The defendant contended that Section 42 of the Specific Relief Act, 1963, violated the fundamental right under Article 19(1)(g) of the Constitution. The Court rejected this contention, stating that Section 42 merely confers discretion on the Court to decide whether to grant an injunction. The Court emphasized that a judicial tribunal's decision cannot be an unreasonable restriction on fundamental rights, as it involves an adjudication of the reasonableness of the restriction.

Conclusion:
The Court concluded that an injunction in the wide terms sought by the plaintiffs could not be granted, as it would effectively compel the defendant to specifically perform the contract of personal service. The Court also found that there was no material on record to show that enforcing the negative stipulation was necessary for the protection of the plaintiffs' legitimate interests. Therefore, the appeal was dismissed with costs.