9911796707
TMI Blog2006 (7) TMI 702X X X X Extracts X X X X X X X X Extracts X X X X ..... presentative Agreement entered into in January, 2002. This agreement is said to have taken effect on 01.01.2002 and was to operate till 31.12.2002. It is alleged by the petitioner that subsequently, by virtue of a letter dated 24.05.2004 (Annexure-P-3), the terms and conditions of the said agreement of 2002 were extended by another two year period commencing from 01.01.2004 and ending with 31.12.2005. Therefore, according to the petitioner, the said Canvassing Representative Agreement of January, 2002 was to continue to operate till 31.12.2005 and this governed the relationship between the parties. The said agreement contained a document entitled 'Exhibit-D' and and forms part thereof. Clause 5 of the said agreement which is the bone of contention between the parties, reads as under: 5. Non-Solicitation of Employees: Both parties agree that for a period of two (2) years from the date of termination of the agreement to which this appendix is attached, including termination by either party with or without cause, either directly or indirectly solicit, induce or encourage any employee(s) to terminate their employment with or to accept employment with any competitor, suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hitherto being exclusively maintained by the petitioner. Some proposed transition documents, which were not finalised by the parties, are annexed as Annexure-P-6. It is in this background that in the month of October, 2005 an advertisement was issued by the respondent in leading English newspapers of India with, inter alia, the following text: For all Sales and Marketing and Service and Support positions experience of working with or having handled Beckman Coulter products and or similar products would be a distinct advantage. 4. A copy of one such advertisement is annexed as Annexure-P-7 and is at page 218 of the paper book. It is the petitioner's case that the aforesaid statement in the said advertisement amounted to solicitation and was in violation of the non-solicitation of employees clause referred to above. The counsel for the petitioner submitted that this amounted to solicitation because reference to experience of working with or having handled Beckman Coulter Products had reference solely to the employees of the petitioner, who had hitherto been the exclusive distributors insofar as the respondent's products in India were concerned. Clearly, Therefore, acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyed with the petitioner had already left, being allured by the advertisement of the respondent. The learned Counsel for the petitioner had also stated on instructions that the orders which they are seeking would not be to the disadvantage of those employees who had tendered their resignation and that the petitioner would be willing to accommodate them in its organisation without any penalty. Under these circumstances, this Court had arrived at the prima facie view that the petitioner was entitled to the reliefs prayed for in this petition and, accordingly, till further orders, the court restrained the respondent from employing any person who is presently employed with the plaintiff or who was employed with the plaintiff up to 01.10.2005. Shortly thereafter, an application being is No.623/2006 was moved on behalf of the respondent. On 19.01.2006, notice was issued and it was directed that this application be heard Along with the present petition. The learned Counsel appearing for the respondent had sought clarification of the order passed on 19.12.2005. The clarification which he sought was that the said order would not apply to those employees which the petitioner had overtly rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued by the respondent to the petitioner, the respondent confirmed that the petitioner was its exclusive agent for its products and related accessories in the whole of India as per the product list (Annexure-1 thereto). It was also indicated in the letter of 21.03.2003 that the effective period of the agreement was from 01.01.2003 to 31.12.2003 unless the termination notice is given by the respondent 60 days prior to the expiry of the said period from either side and that this appointment shall be extended for another one year. This letter of 21.01.2003 also contained the following clauses: Competitor's Product Wipro Ltd (Biomed Division) shall not import nor sell any related products of other manufacturers, which they are already dealing with. Confidentiality All information about sales activities, technical or scientific details, especially those resulting from product registrations, remain the property of Beckman Coulter and have to be treated as confidential, even after termination of this agreement. Arbitration: All disputes arising in connection with the present agreement shall be finally settled under the Rules of Conciliation and Arbitration of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uded contract had been arrived at, then the same reasoning would apply to the agreement of 2002 which also does not contain the signatures of the petitioner. Therefore, according to Mr Arun Mohan, apart from signatures, which according to him are not essential, no other essential features of a contract are missing from the said two documents dated 21.01.2003 and 10.12.2003. He also submitted that it could surely not be the petitioners argument that these documents, namely, letters dated 21.01.2003 and 10.12.2003 were false documents prepared only to deceive DGS D. 9. Mr Arun Mohan then submitted that after these documents dated 21.01.2003 and 10.12.2003, on 03.02.2004 the respondent sent a detailed draft agreement for the period 01.01.2004 to 31.12.2006. This draft agreement did not contain any non-solicitation clause. It was then contended by Mr Arun Mohan that while this draft was under consideration of the petitioner, on 06.04.2004, the respondent wrote to the petitioner informing that the distributor agreement was currently under process for renewal and till such time, the existing terms and conditions would be binding on both the parties. According to him, the reference to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5, the respondent may make it, if necessary, 2008, as the petitioner had sought, or at least 2006, as the respondent itself had proposed. According to him, the fact that no communication was sent by the petitioner asking for signing a formal contract on the same terms and conditions as the original contract of 2002 was a significant fact. 10. Mr Raju Ramachandran, the learned senior counsel who appeared on behalf of the petitioner, submitted that the letter dated 21.01.2003 issued by the respondent was in response to the e-mail sent by the petitioner to the respondent (at page 210 of the paper book) on 21.01.2003 itself. As per the letter dated 21.01.2003 sent by the petitioner, it was indicated that the petitioner's registration with DGS D had expired on 31.12.2002 as approved suppliers to Government customers under CSIR/ICMR. All these customers like CDRI, NCL, CPCRI etc. insist on the D.G.S. D. Registration certificate for placing orders through the petitioner for Beckman Coulter Products. It was further indicated that there was a change in the format of Letter of Authorisation/Agreement which was enclosed with the letter. Further, since all the clauses were standard as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement with the submissions made by the learned Counsel for the petitioner that it was in operation. The reason being that the letters dated 21.01.2003 and 10.12.2003 were for the purposes of obtaining the DGS D Registration certificate and cannot be regarded as exhaustive agreements dealing with the entire relationship between the parties. Secondly, the letter dated 24.05.2004 was subsequent in time to these letters and at this juncture, it would be instructive to set out the first paragraph of the said letter which is addressed by the respondent to the petitioner: In line with my communication to you last week and our subsequent conversation, I am writing to you to confirm that Wipro Biomed will continue to be the authorised distributor of Beckman Coulter products in the Indian market through until the end of 2005. This represents an extension of the normal one-year agreement which Beckman Coulter has habitually contracted with both Wipro Biomed and the vast majority of its other distributors in the BCISA area. Effectively, this is a two-year extension to the original canvassing agreement between our companies and covers the period of 1st January 2004 to 31st December 2005. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at Mumbai. Its registered office, bank accounts, premises and establishment are all at Mumbai. The all-India advertisement was also issued from Mumbai. Therefore, according to Mr Arun Mohan, this Court did not have territorial jurisdiction to entertain the present petition. He further submitted that the purported letters dated 21.01.2003 and 10.12.2003 referred to above have reference to arbitration being carried on in Delhi, but because those purported letters do not contain any non-solicitation clause, no cause of action under those letters could have accrued in favor of the petitioner. He submitted that as the petitioner places reliance on the 2002 agreement, the arbitration clause of that agreement will have to be examined. According to him, clause 22 of the agreement of January 2002, which refers to arbitration, excludes the jurisdiction of this Court. In other words, according to him, if it is the 2002 contract that is sought to be relied on, then this Court has no territorial jurisdiction and if reliance is placed on the contracts of 21.01.2003 and 10.12.2003, then they have no clause for non-solicitation. Therefore, according to him, in any event, this Court does not have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dispute, or disagreement which may arise concerning the interpretation, performance, or breach of this Agreement. Clause 22.2, reproduced hereinabove, clearly provides that the parties have expressly consented to and accepted the exclusive jurisdiction of the courts of Switzerland and of the Territory.... It is well-settled that the parties by agreement can limit jurisdiction to a court or courts which would otherwise have jurisdiction. However, the parties by consent cannot confer jurisdiction on a court or courts which otherwise do not have jurisdiction. The above clause makes it clear that the courts of Switzerland as well as the courts of the 'Territory' would have exclusive jurisdiction. Therefore, jurisdiction was not limited to the courts of Switzerland, but also extended to the courts of the 'Territory'. The expression 'Territory' has been used in clause 2.1 whereby the Canvassing Representative Agreement has been shown to extend, inter alia, throughout the Territory described in Exhibit-A [Territory]. In Exhibit-A to the Canvassing Representative Agreement, 'Territory' has been defined as under: TERRITORY:--India, Maldive Islands, Bhut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the petitioner respectively was not referred to. He, Therefore, submitted that in view of these concealments, the petitioner disentitled itself to any relief in this petition. 17. On behalf of the petitioner, it was contended that there was no concealment or suppression of the material facts. The learned Counsel for the petitioner submitted that the letters dated 21.01.2003 and 10.12.2003 were merely letters issued by the respondent at the request of the petitioner for DGS D Registration purposes. They were not agreements, as alleged by the respondent. The learned Counsel submitted that since the pleadings of the petitioner did not revolve around DGS D Registration of the respondents products, it was not deemed necessary to specifically refer to the said letters in the pleadings. It was further submitted by the learned Counsel for the petitioner that the exchange of drafts for the proposed contract in the early part of 2004 was not material inasmuch as it did not fructify into a contract and the letter dated 24.05.2004 extending the original Canvassing Representative Agreement of 2002 till 31.12.2005 was the material document which superseded all these efforts at arriving at a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rable expertise, and who were very experienced in their respective areas of specialisation, had submitted their resignations to the petitioner. Annexure-P-8 is a statement setting out the relevant details of the employees who had submitted their resignations. The details included the date of joining, date of tendering resignation, level of experience, area of specialisation and location, etc. Annexure-P-8 pertains to 21 employees who had tendered resignation from the employment of the petitioner in November, December, 2005 and, according to the learned Counsel for the petitioner, these resignations were all pursuant to the advertisement in question. Similar averments with regard to the resignation of the employees are also contained in paragraphs 25 and 26 of the petition. Therefore, the learned Counsel for the petitioner submitted that the petitioner has not concealed and/or suppressed any material fact from this Court. 18. Considering the arguments advanced by the counsel for the parties, I am of the opinion that it would not be possible to hold that the petitioner has been guilty of concealment and/or suppression of material facts. Though there is some substance in what Mr Ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t must also be noted that after the advertisement was issued, as indicated in the reply filed on behalf of the respondent in paragraphs 124 onwards, over 10,000 applications were received. These were shortlisted, candidates were interviewed and ultimately 48 candidates were accepted. Out of these 48 persons, 24 were those who had resigned from Wipro (the petitioner company). Four have returned to Wipro after the grant of ex parte injunction dated 19.12.2005 leaving 20 employees from Wipro. These facts also disclose that the employees of the petitioner responded to the advertisement and were granted employment. Of course, there were others persons who had nothing to do with the petitioner, who had also responded and some of them were also employed. The position is clear that on a plain interpretation of the advertisement in the background of the exclusivity of the agreement between the petitioner and the respondent the advertisement was a clear solicitation of the employees of the petitioner. 21. I now come to the key question, as to whether clause 5 of Exhibit-D to the Canvassing Representative Agreement of January, 2002 which has been styled as non-solicitation of employees' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of non-solicitation clause had become a necessity. By virtue of the same, the parties intended, in effect, that the petitioner would be given a fair chance to develop its business interest for a period of two years after termination of the agreement with the aid of its specially trained, highly skilled, very valuable sales, marketing, service and support personnel. In these circumstances, it was further submitted that the reasonable restriction set out in the non-solicitation clause, which does not seek to impose a restriction on the petitioner's employees, has to be enforced. According to Mr Ramachandran, if the same is not done and the petitioner loses its most valuable resources, i.e., its sales and marketing and service and support personnel, its business in the bio-med segment would come to an end. Quite dramatically, he had submitted that the petitioner would be 'wiped out' from the market and thereby suffer damage and irreparable harm. It was also submitted that the petitioner had relieved the employees who had resigned and has not tried to hold them back. Such employees are free to join any other company besides the respondent because the respondent is barred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... schaft MBH v. IAEC India Ltd: AIR1988Bom157 ; x) Shri Raj Chopra and Anr. v. Shri Narendra Anand and Ors . 1991(21)DRJ53 . 25. Before considering the case law on the subject of Section 27 of the Indian Contract Act, 1872, it would be instructive to have another look at the said non-solicitation clause. A reading of the clause indicates that it has two components. The first component deals with the aspect of solicitation and the second component saves general advertising from the purview of solicitation. The latter component reads as under: General advertising of positions and other general means of recruitment shall not be considered solicitation; and neither party shall be restricted from responding to unsolicited applicants who are employees of the other party. 26. The underlined portion indicated above gives us a key to understanding the ambit of the clause. Firstly, solicitation of an employee by the other party is not permitted for a period of two years from the date of termination of the agreement. Secondly, there is no restriction on either party employing erstwhile employees of the other party provided such employees have approached the other party either in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s any opinion on the first question. By virtue of the said opinion which considered only the second question, the court had come to the view that the clause would not operate because the termination on the part of the appellant of the services of the respondent would not fall within the expression 'after you leave the company'. However, A.P. Sen, J, in his opinion also took up the first question for consideration. He observed that: Agreements of service, containing a negative covenant preventing the employee from working elsewhere during the term covered by the agreement, are not void under Section 27 of the Contract Act, on the ground that they are in restraint of trade. Such agreements are enforceable. The reason is obvious. The doctrine of restraint of trade never applies during the continuance of a contract of employment; it applies only when the contract comes to an end. While during the period of employment, the courts undoubtedly would not grant any specific performance of a contract of personal service... It was also noted that in Niranjan Shankar Golikari v. Century Spinning and Mfg. Co. Ltd: (1967)ILLJ740SC , the Supreme Court drew a distinction between a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority when it intends to speak of an absolute restraint and not a partial one, has introduced the word 'absolutely'.... The use of this word in Section 28 supports the view that in Section 27 it was intended to prevent not merely a total restraint from carrying on trade or business, but a partial one. We have nothing to do with the policy of such a law. All we have to do is to take the words of the Contract Act, and put upon them the meaning which they appear plainly to bear. 29. In Superintendence Co. Ltd (supra), it was held that the aforesaid test laid down in Madhub Chunder (supra), had stood the test of time and had invariably been followed by all the High Courts in India. Therefore, the conclusion arrived at was that the agreement in question was not a 'good will of business' type of contract and, Therefore, did not fall within the exception. If the agreement on the part of the respondent puts a restraint even though partial, it was void, and, Therefore, the contract must be treated as one which cannot be enforced. A.P. Sen, J also observed, with reference to a number of English cases which were cited in the context of partial restraint and the test of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal and important right of an employee, which cannot be restricted or curtailed by a court injunction'. However, it must be noted that this decision was not one based on contract and was a fight between two soft drink giants, Pepsi Foods on the one hand and Coca Cola on the other who were allegedly involved in a battle over their employees. There was no agreement between the two parties and the entire scope of the decision fell within the parameters of law of torts, not under the law of contract and definitely not relating to restrictive covenants of the nature contemplated under Section 27 of the Indian Contract Act, 1872. Therefore, this decision, as rightly pointed out by Mr Ramachandran, would have no impact on the present case. The decision in Kores Manufacturing Co. (supra) has been cited by Mr Arun Mohan for explaining as to what is an agreement in restraint of trade. The said decision is of the Court of Appeal and is an English case and deals with the question of reasonableness with regard to the restriction on employees' freedom of choice of employment as also the question of public policy. However, I need not spend any further time on this decision inasmuch as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is in restraint of trade would depend upon whether the contract was unreasonable, unfair or unconscionable. A contract imposing a general restraint would, in all probability, be void. Partial restraint would prima facie be valid and, Therefore, enforceable. In order for the negative covenant to be valid, even the partial restraint would have to be reasonable in the interest of the parties and of the public. In the case of covenants of restraint between master and servant two question necessarily arise. First what are the interests of the employer that are to be protected. Second what is the remedy available to the employer to protect the interest.... 35. In Ambience India Pvt Ltd (supra), a learned single Judge of this Court observed: 6. The law is well-settled that all contracts in restraint of trade are void and hit by Section 27 of the Contract Act. A Judgment of this Court in Krishan Muragai v. Superintendence Co. of India, reported in AIR1979Delhi232 succinctly deals with the law on this point. An employee, particularly, after the cessation of his relationship with his employer is free to pursue his own business or seek employment with someone else. However, during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sell the defendants own products. Disputes arose and the contract was rescinded. The plaintiff claimed an injunction restraining the defendants from recommending, offering or selling any of the covered products for a period of five years after the contract was rescinded. The defendant took the plea that the negative covenant embodied in the clause was in restraint of trade and Therefore void under Section 27 of the Contract Act. The court held that the negative covenant embodied in the clause of the contract between the parties to the suit could not be enforced in India. Therefore, it refused to grant injunction in favor of the plaintiff. The court observed as under: The distinction between the restraints imposed by a Contract, operative during the subsistence of the contract and those operative after the lifetime of the contract is of a fundamental character. The purpose, incidents and consequences of the two types of restraints need to be borne in mind before proceeding to determine the validity of the restraint sought to be enforced in this notice of motion. While guarding jealously the freedom of contract to engage in any trade, business or profession as one wills, the law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Niranjan Shankar Golikari (supra) and Krishan Murgai (supra), the learned single Judge observed as under: ...The judgment of Supreme Court in Niranjan Golikari was in respect of of the period covered by the contract of employment. The Judgment in Krishan Murgai arose, on the other hand, out of the facts which show that it applied to the period after the termination of the contract. The two decisions apply in different spheres and to different situations. There is no conflict at all between the two decisions. In Niranjan Golikari's case the Supreme Court did not hold that the post-employment restrictive covenant was valid. All that it was concerned was whether the implied negative covenant which applied during the term of employment could be enforced. Since there is no conflict at all, the question of choosing one of the two judgments by the subordinate courts does not arise.... 37. In Raj Chopra (supra), a learned single Judge of this could held as under: 16. Under Section 27 of the Contract Act every agreement by which any person is restrained from exercising a lawful profession, trade or business of any kind is to that extent void. The 8 kms. restrain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... First of all, I take up the discussion with regard to two decisions of the Supreme Court in the case of Niranjan Shankar Golikari (supra) and Gujarat Bottling Company Ltd and Ors. v. Coca Cola Co. and Ors . AIR1995SC2372 . In Niranjan Shankar Golikari (supra), the Supreme Court, referring to Halsbury's Laws of England (3rd ed.) Vol. 38, at page 15 observed, in the context of what constitutes restraint of trade, that it is a general principle of the common law that a person is entitled to exercise his lawful trade or calling as and when he wills and the law has always guarded jealously any interference with trade, even at the risk of interference with freedom of contract as it is public policy to oppose all restraints upon liberty of individual action which are injurious to the interests of the State'. It was further observed that this principle is not confined to restraint of trade in the ordinary meaning of the word 'trade' and includes restraints on the right of being employed'. The court further observed that 'courts take a far stricter view of the covenants between master and servants than it does of similar covenants between vendor and purchaser o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pportunity to instruct them in his trade and its secrets without fear of their becoming his competitors'. As noted above, a distinction has been drawn by the courts in England as well as in India between cases which deal with restrictive covenants during the term of the agreement and those cases which pertain to the period post termination. The Supreme Court in Niranjan Shankar Golikari (supra) observed as under: A similar distinction has also been drawn by courts in India and a restraint by which a person binds himself during the term of his agreement directly or indirectly not to take service with any other employer or be engaged by a third party has been held not to be void and not against Section 27 of the Contract Act. 40. The Supreme Court then referred to the decision in Brahmaputra Tea Co. Ltd. v. Scarth 1885 11 Cal 545 and observed that the conditions under which the covenantee was partially restrained from competing after the term of his engagement was over with his former employer was held to be bad but the condition by which he bound himself during the term, of his agreement, not, directly or indirectly, to complete with his employer was held good. 41. Afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. 43. Coming now to the decision of the Supreme Court, i.e. of the Gujarat Bottling (supra), one finds that the Supreme Court embarked upon an extensive survey to consider whether and, if so, to what extent the law in India differs from the common law in England. With regard to the position in England, the court observed as under: 21. Under the common law in England a man is entitled to exercise any lawful trade or calling as and where he wills. The law has always regarded zealously any interference with trade, even at the risk of interference with freedom of contract, as it is public policy to oppose all restraints upon liberty of individual action which are injurious to the interests of the State. A person may be restrained from carrying on his trade by reason of an agreement voluntarily entered into by him with that object and in such a case the general principle of freedom of trade must be applied with due regard to the principles that public policy requires for persons of full age and understanding the utmost freedom to contract. Traditionally the doctrine of restraint of trade applied to covenants whereby an employee undertakes not to compete with his employer after le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greements, and accordingly a restraint may be reasonable as between employer and employee which would be reasonable as between the vendor and purchaser of a business. [See: Halsbury's Laws of England, 4th Edn., Vol. 47, paragraphs 9 to 26; Niranjan Shankar Golikari v. Century Spg. and Mfg. Co. Ltd. (1967)ILLJ740SC ]. Instead of segregating two questions, (i) whether the contract is in restraint of trade, (ii) whether, if so, it is 'reasonable', the courts have often fused the two by asking whether the contract is in 'undue restraint of trade' or by a compound finding that it is not satisfied that this contract is really in restraint of trade at all but, if if is, it is reasonable. [See: Esso Petroleum Co. Ltd. v. Harper's Garage (Stourport) Ltd.: 1968 AC 269 : (1967) 1 All ER 699 : (1967) 2 WLR 871 per Lord Wilberforce.] With regard to the position in India, the Supreme Court observed that agreements in restraint of trade are governed by Section 27 of the Indian Contract Act. It was noted that the said provision (i.e., Section 27 of the Indian Contract Act) was lifted from Hon. David D. Field's Draft Code for New York which was based upon the old En ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, necessary to examine whether the negative stipulation contained in paragraph 14 of the 1993 Agreement can be regarded as in restraint of trade. This involves the question, what is meant by a contract in restraint of trade ? 44. Although the Supreme Court in Gujarat Bottling (supra) had refrained from entering into the question whether reasonable restraint is outside the purview of Section 27 of the Contract Act, in my view, this issue has already been settled in Superintendence Co. Ltd (supra) wherein A.P. Sen, J categorically observed that 'neither the test of reasonableness nor the principle that the restraint being partial or reasonable are applicable to a case governed by Section 27 of the Contract Act, unless it falls within exception I. We, Therefore feel that no useful purpose will be served in discussing the several English decisions cited at the bar'. It would be fruitful to reiterate that in that decision [Superintendence Co. Ltd (supra)], A.P. Sen, J also observed that 'under Section 27 of the Contract, a service covenant extending beyond the termination of the service is void'. It was also observed that not a single decision had been broug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of trade is the same and as a matter of fact the courts take a more restricted and less favorable view in respect of a covenant entered into between an employer and an employee as compared to a covenant between a vendor and a purchaser or partnership agreements. 45. As regards the courts' power to grant an injunction in the case of a negative covenant, the Supreme Court observed as under: In India, Section 42 of the Specific Relief Act, 1963 prescribes that notwithstanding anything contained in clause (e) of Section 41, where a contract comprises an affirmative agreement to do a certain act, coupled with a negative agreement shall not preclude it from granting an injunction to perform the negative agreement. This is subject to the proviso that the plaintiff has not failed to perform the contract so far as it is binding on him. The Court is, however, not bound to grant an injunction in every case and an injunction to enforce a negative covenant would be refused if it would indirectly compel the employee either to idleness or to serve the employer. [See: Ehrman v. Bartholomew: 1898 (1) Ch 671: 1895 99 All ER 1680; N.S. Golikari : (1967)ILLJ740SC ]. This concludes the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age in a business similar to or competitive with that of the employer after termination of contract of his employment. [See Superintendence Company of India (P) Ltd. v. Krishan Murgai (supra) Pr. 62] 47. After a review of all the decisions of the Supreme Court and the High Courts, including this Court, the following points become clear: 1) Negative covenants tied up with positive covenants during the subsistence of a contact be it of employment, partnership, commerce, agency or the like, would not normally be regarded as being in restraint of trade, business of profession unless the same are unconscionable or wholly one-sided; 2) Negative covenants between employer and employee contracts pertaining to the period post termination and restricting an employee's right to seek employment and/or to do business in the same field as the employer would be in restraint of trade and, Therefore, a stipulation to this effect in the contract would be void. In other words, no employee can be confronted with the situation where he has to either work for the present employer or be forced to idleness; 3) While construing a restrictive or negative covenant and for determining whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner leaving its employment and joining the respondent and vice versa. The bar or restriction is on the petitioner and the respondent from offering inducements to the other's employees to give up employment and join them. Therefore, the clause by itself does not put any restriction on the employees. The restriction is put on the petitioner and the respondent and, Therefore, has to be viewed more liberally than a restriction in an employer-employee contract. In my view, Therefore, the non-solicitation clause does not amount to a restraint of trade, business or profession and would not be hit by Section 27 of the Indian Contract Act, 1872 as being void. 49. However, the question that arises is what happens when the respondent has solicited and/or induced or encouraged employees of the petitioner to leave and/or resign from such employment and join the respondent. Can an injunction be granted restraining the respondent from giving employment to such employees ? There are only two possible situations. The first is that an injunction is granted and, the second is that an injunction is not granted. If an injunction is granted, it would imply that the respondent cannot employ such ..... X X X X Extracts X X X X X X X X Extracts X X X X
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