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TMI Blog1965 (4) TMI 134X X X X Extracts X X X X X X X X Extracts X X X X ..... Ahmedabad On the expiration of the period of three months specified in the letter of appointment the probation was extended for a further period of three months and on the expiration of the said period, the defendant's appointment as an Assistant Engineer was confirmed and a contract dated 25th June 1963 was executed by and between the plaintiffs and the defendant The contract provided that the defendant will diligently, faithfully and to the best of his ability and capacity serve as an Assistant in the Engineering Department for a period of three years from 1st May 1963 During the period of the contract the defendant was to receive monthly basic salary of ₹ 230 per month for the first year. ₹ 270 per month for the second year and ₹ 310 per month for the third year After the expiration of the period of the contract each party was at liberty to terminate the service by giving one month's notice to the other Clauses 7 and 9 of the contract contained what may be termed negative stipulations and since the entire controversy between the parties has centered round these stipulations, it would be desirable to set them out in extenso. Clauses 7 and 9 of the contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s revealed to him or received by him in connection with his work as an Assistant in the Engineering Department of the Ashok Mills Limited Ahmedabad, until the explication of the period of the contract. but since that injunction has been granted by the City Civil Court and no complaint in regard to the injunction has been made before us by way of appeal or cross objections on behalf of the defendant. we are not concerned with it Immediately after filing the suit, the plaintiffs took out a Notice of Motion for interim injunction pending the hearing and final disposal of the suit and obtained ex parte injunction against the defendant The defendant appeared to contest the Notice of Motion and filed an affidavit in reply showing cause why injunction should not be granted against him. The Notice of Motion was thereafter heard by Judge V.V. Mehta of the City Civil Court and the learned Judge after hearing the parties vacated the ex parte injunction and dismissed the Notice of Motion in so far as it sought to restrain the defendant from serving or engaging himself directly or indirectly for or under any other firm, person or Company in India or elsewhere in any capacity whatever until the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C.J. answered the question in the negative observing in words which have since then been off quoted in various subsequent decisions: ..... is it an agreement which restrains the defendant from exercising his lawful profession? Is it an agreement in restraint of trade? I think not. I do not think that an agreement of this class falls within the section. If it did all agreements for personal service for a fixed period would be void. An agreement to serve exclusively for a week, a day, or even for an hour, necessarily prevents the person so agreeing to serve from exercising his calling during that period for any one else than the person with whom he so agrees. It can hardly be contended that such an agreement is void. In truth. a man who agrees to exercise his calling for a particular wage and for a certain period agrees to exercise his calling, and such an agreement does not restrain him from doing so. To hold otherwise would, I think, be a contradiction in terms..... There is also the dictum of Candy, J., in Callianji v. Narsi Tricum. ILR (1894) Bom 103 and illustration (d) to Section 57 of the Specific Relief Act is what I may call a legislative decision to the same effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y enforced and it is clear from the language and the intendment of the rule that the duty which is referred to there is a positive duty to do something and not a negative duty to abstain from doing something. Where under the contract the defendant is under a continuous duty to do something the performance of which the Court cannot supervise, the rule says that such a contract shall not be specifically enforced since it would not be possible for the Court in such a case to ensure performance of the continuous duly. But where the duty under the contract is merely to abstain from doing something, there would be no question of the Court being called upon to supervise the performance of the duty. The enforcement of a negative stipulation such as the one we have in the present case can, therefore; never be within the inhibition of this rule and we cannot refuse to grant injunction in limine on such ground . 4. Turning to the other contentions it may be pointed out at the outset that the question whether injunction should be granted in the present case or not is governed by the Specific Relief Act, 1963, and not by the Specific Relief Act, 1877, since the latter statute was repealed fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o, in what Lord Justice Fry has said more than once, that cases of this kind are not to be extended, I confess I look upon Lumley v. Wagner. (1852 1. De GM G 604) rather as an anomaly to be followed in cases like it but an anomaly which it would be very dangerous to extend I make that observation for this reason that I think the Court looking at the matter broadly will generally do much more harm by attempting to decree specific performance in cases of personal service than by leaving them alone and whether it is attempted do enforce these con- tracts directly by a decree of specific performance, or indirectly by an injunction, appears to me to be immaterial It is on the ground that mischief will he done to one at all events of the parties that the Court declines in cases of this kind to grant an injunction, and leaves the aggrieved party to such remedy as he may have apart from the extraordinary remedy of an injunction It will therefore be seen that it is on ground of public policy and in the interests of the public that Courts of Equity in England refuse to grant specific performance of a con tract of personal service. This rule of public policy precluding specific performance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 41, Clause (e) it would not have been possible to grant an in-junction to restrain the breach of the negative stipulation. The breach of the negative stipulation would have been a breach of the con-tract and an injunction though limited to pre-venting the breach of the negative stipulation would have been an injunction to prevent the breach of the contract and the contract being one of which performance would not be specifically enforced, Section 41, Clause (e) would have precluded the Court from granting an injunction to prevent the breach of the negative stipulation Section 42 was therefore, enabled and it provided that in such a case even though the contract cannot be specifically enforced, the Court would still be entitled to grant an inhumation restraining the breach of the negative Stipulation, if it otherwise thinks it fit and proper so to do. The bar created against the granting of such an injunction by Section 41, Clause (e) is thus removed by Section 12 but that does not mean that the Court must grant such an injunction eyen if the effect of doing so would be to compel the defendant to specifically perform the contract. The Court has a discretion whether or not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. What then are the rules which should guide the Court in the exercise of this discretion? Now in the matter of exercise of the discretion in such cases there is one rule which has always been recognized by Courts of Equity in England and which has also found favour with Courts in India. The rule is that the Court wilt not grant an injunction to restrain the breach of a negative stipulation in a contract of personal service where the effect of doing so would be to compel the defendant to specifically perform the contract. This rule is based upon the principle that the Court will not do indirectly that which if can not do directly. The Court cannot for reasons which we have pointed out above grant a decree for specific performance of a contract of personal service. But the Court cannot escape that inhibition by granting instead an injunction to restrain the breach of a negative stipulation contained in the contract if the effect of the injunction would be to compel Specific performance of the contract by the defendant. As observed by Lindley L.J., in Whitwood's case 1891 2 Ch 416 (supra) the Court, looking at the matter broadly, will generally do much more harm by attempting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1877 and Section(1)(b) of the Specific Relief Act, 1963, Section 38(2) read with Section 14(1)(b) of the Specific Relief Act, 1968, also supports the applicability of this rule. As a matter of fad. there are decided cases in India where this rule has been applied to guide the Court in the exercise of its discretion Candy, J.. affirmed this rule in ILR (1899) Bom 103 (supra) and observed that the case before him did not come within the mischief of the rule since it was not a case in which the Court was asked to indirectly decree specific performance of the contract of personal service . A Division Bench of the Bombay High Court in ILR (1894) Bom 702 (supra) also recognized, the validity of this rule and we find that in a recent decision given by Shelat, J., as he then was in Sunilchand v. Aryodaya Mills Co. Ltd. (1963) 4 Guj LR 795: (AIR 1964 Guj 115) the correctness of this rule has been accepted in its application to India. It is, therefore, clear both on principle and authority that even where a negative stipulation in a contract of personal service is sought to be enforced, the Court has a discretion in the matter and one of the prince pies which must guide the discretion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciple. The main ground on which the claim of the plaintiffs to an injunction was sought to be sustained was that the defendant having entered into the contract with open eyes and full awareness of its terms should be held bound by the contract and the contract should be enforced against him, for otherwise the Sanctity of the contract would be violated. An appeal was made to what may be termed freedom of contract. Now freedom of contract involves two different aspects, namely, (1) freedom in the matter of entering into the contract: and (2) freedom from interference with the con tract when once it is made. The common law al a time when it was overshadowed by the laissez-faire school of economics accepted the Benthamite utilitarian theory and considered freedom of contract almost as an end by itself Thus evolved the doctrine accepted by the Courts that if there is one thing more than another which public policy requires, it is that men of full age and competent understanding shall have the utmost liberty of contracting and that their contracts, when entered into freely and voluntarily shall be held sacred and shall be enforced by Courts of justice But very soon it was found that to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the stipulation may not be the result of contract between parties on equal bargaining terms. But when the question arises as to whether the Court should enforce such a negative stipulation by means of the extraordinary remedy of injunction, the Court must ask itself Must I interpose at the instance of the employer? If the injunction is granted the effect would be that the employee would not be able to exercise his skill, knowledge and training and earn his livelihood by such exercise. Now if public interest demands that contracts voluntarily entered into should be carried out and that sanctity of contracts should be respected and enforced, public interest equally requires that the employee should be free to exercise his skill, knowledge and experience to the best advantage for the benefit of himself and of all those who desire to employ him The negative stipulation would, to use the words of Lord Shaw of Dunfermline in Herbert Moms Ltd v. Saxelby (1916) AC 688 (714) put an embargo upon the energy and activities and labour of a citizen and the public interest coincides with his own in preventing him on the one band from being deprived of the opportunity of earning his living and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence with individual liberty of action may be justified by the special circumstances of a particular case. It is a sufficient justification, and indeed it is the only justification, if the restriction is reasonable--reasonable, that is, in reference to the interest of the parties concerned and reasonable in reference to the interest of the public. so framed and so guarded as to afford adequate protection to the party in whose favour it is imposed, while at the same time it is in no way injurious to the public. If this principle is to be applied, it is clear that two conditions must be fulfilled before a restraint imposed by a negative covenant can be held enforceable by an injunction in the first place if must be reasonable in reference to the interest of the contracting parties and secondly it must be reasonable in reference to the interest of the public. In the case of each condition the lest of reasonableness must be satisfied. To be reasonable in reference to the interest of the contracting parties the restraint must afford no more than adequate protection to the party in whose favour it is imposed. To be reasonable in reference to the interest of the public, it must be in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est that in such cases sanctity of contract may not be respected or may be violated with impunity. The question is only one of remedy The employee having agreed to the negative stipulation, the negative stipulation must be held binding on him and if there is breach of the negative stipulation the employer would have his remedy in damages, if any, but the Court would not grant the extraordinary remedy by way of an in junction because by doing so beyond a more enforcement of a contractual obligation, the legitimate object or purpose would be advanced The Court would not interfere with the freedom of occupation of the employee unless it is necessary to do so for the protection of the interests of the employer To that extent, freedom of contract must yield to freedom of occupation in public interest We are, therefore, of the view that the principle laid down by Lord Macnaghten in Nordenfell case 1894 AC 535 to be imported in order to guide the discretion of the Court in regard to the question as fit when an injunction should be issued for breach of a negative stipulation in a contract of personal service for that principle effects a happy reconciliation and adjustment of freedom of con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the protection of the interest of the employer. 12. Even if we look at the other decisions of the Bombay High Court where injunction was issued to enforce a negative stipulation, in a contract 6f personal service, it would be observed that in all those cases the true basis of the decision was that the negative stipulation was necessary for the protection of the interests of the employer. It is no doubt true that the Courts did not make articulate the true ground of the decisions but there are glimpses of the true ground to be seen in the observations made in those cases. Take for example ILR (1899) Bom 103 (supra). In that case Farran, C.J., referred at page 113 to the circumstances which led the defendant to throw up his assistantship and to start as the plaintiff's competitor for the medical business of! Zanzibar. The same was the position also in to which we have already referred. Even in (1852) 1 De GM G 604 it was a rival theatre in London where Mrs. Wagner wanted to sing and it was evident that if she was permitted to sing, the plaintiff would have been hurl and that is why an injunction was necessary in order to protect the interests of the plaintiff. As a matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... waived and it is constitutionally impermissible to any one to contract out of it. Notwithstanding the negative stipulation to the contrary the fundamental right of the employee to follow the occupation of his choice would, therefore, remain and if the law provided that every negative stipulation, whatever be its scope of content, must be enforced by an injunction and the employee must be restrained from following the occupation of his choice in breach of the negative stipulation regardless of the consideration whether the imposition of such restraint was reasonable or not in the interest of the general public, the law might be liable to be regarded as being in conflict with the fundamental right of the employee to follow the occupation of his choice. But where the law merely confers authority on a Civil Court which is a Judicial Tribunal to decide in the exercise of its discretion whether to grant in junction or not, it is difficult to see how the law can be regarded as constituting an unreasonable restriction on the freedom to follow the occupation of his choice which belongs to the employee. The matter being left to a judicial Tribunal to be determined would be decided after Riv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be abolished or not would make the definition of industrial matter in so far as it refers to the mode of employment, an unreasonable restriction on the fundamental right of the employer to carry or trade The matter being entrusted to a quasi Judicial tribunal would be decided after giving both parties full opportunity of presenting their case and after considering whether in the Circumstances of a particular case the restriction on the mode of employment is a reason - able restriction or not. The tribunal would always go into the reasonableness of the matter and if it comes to the conclusion that the made of employment desired by labour is not reasonable it will not allow it; it is only when it comes to the conclusion that the mode of employment desired by labour in a particular case is a reasonable restriction that it will insist on that particular mode of employment being used. Take, for example, the case of contract labour itself The tribunal will have to go into the facts of each case If it comes to the conclusion that on the facts the employment of contract labour is reasonable and thus doing away with it would be an unreasonable restriction on the right of the employer to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leness and see whether the constitution reached by the inferior tribunal is correct or must be reversed. Bill the decision cannot be challenged as violative of the fundamental right of the employee to follow the occupation of his choice, for implicit in the decision is an adjudication of the reasonableness of the injunction and so long as the decision stands unreversed, it binds the parties We cannot. therefore, assent to the argument that a decision of a Court of law can be violative of the fundamental rights guaranteed under Part II of the Constitution and that if an injunction is issued by the Court, its validity can be challenged on the ground that it conflicts with any of the fundamental rights it must accordingly be held that the following observations of Raju. J., in Maganlal v. Ambica Mills Ltd. AIR 1961 Guj 215 do not represent the correct law Acts of Courts and acts of Judicial Officers would come within the purview of the expicssion 'Act of the State' If a Court or a judicial officer imposes restrictions on the right given by Article 19 of the Constitution, that would offend the provisions of Article 19 of the Constitution. But we must point out that Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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