Delhi District Court
M/S Lmi India Pvt Ltd vs Mr. Vrijendra Chauhan on 9 June, 2022
IN THE COURT OF SH. DIVYAM LILA: CIVIL JUDGE01:
SOUTH WEST DISTRICT: DWARKA COURT: NEW DELHI
CS SCJ 904/19.
CNR NO.DLSWO30015082019.
IN THE MATTER OF :
M/S LMI INDIA PVT LTD.
Through A.R., Mr. Suresh Choudhary
Office at B95, Sector 8,
Dwarka, New Delhi110075 ............... Plaintiff
Versus
MR. VRIJENDRA CHAUHAN
S/o late Sh. Jagdish Chauhan
R/o Village & Post Kajha 276 129
Police StationRanipur
Mohammadabad, Gohna Distt. Mau, Uttar Pradesh
ALSO AT:
H.no.234, Ward no.24, Near Mahavir Mandir, Bahadurgarh, Haryana
ALSO AT:
485, Kaajha Khurd,
Mau, Uttar Pradesh276129 ................ Defendant
Date of filing : 07.08.2022
Date of Institution : 06.08.2022
Date of pronouncing judgment : 09.06.2022
Digitally
signed by
DIVYAM LILA
DIVYAM Date:
Civil Suit No 904/19 LILA 2022.06.09
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Judgment dated 09.06.2022 Page no. 1 of 31
SUIT FOR RECOVERY OF MONEY.
JUDGMENT.
Brief of the plaint:
1.That the defendant was the employee of the company and the defendant had joined the company of plaintiff on 01.07.2016 as an EngineerTechnical Services & Projects. That the defendant had been given an appointment letter dated 03.07.2016, after the satisfaction of the rules and regulations of the company, after that he joined the company.
2. The defendant had worked with the company of the plaintiff about two and half years and from time to time his salary also increased. Defendant had a salary of Rs.25,548/ and during the period of a year, the plaintiff had provided training from time to time to enhance the efficiency of defendant.
3. During the working period the plaintiff had incurred huge expenditure upon the defendant on training and other facilities. That the defendant had misled or cheated the plaintiff company and given the false and fabricated reasons for the resignation and he had also not fulfilled the terms and conditions of the appointment letter.
4. That the defendant has also violated the terms and conditions of the appointment letter of 6 (v) & 5 and he has joined the Digitally signed by DIVYAM LILA DIVYAM Date:
Civil Suit No 904/19 LILA 2022.06.09 11:25:26 M/s. LMI India Pvt. Ltd.Vs. Mr. Vrijendra Chauhan +0530 Judgment dated 09.06.2022 Page no. 2 of 31 immediate competitor company, which trades the same trade. That the said move was intentional with ulterior motives.
5. The defendant had cheated and misled the plaintiff company and the defendant also misguiding the customers of the Plaintiff company due to the plaintiff company bearing huge losses. and leakage of confidential informations.
6. That the defendant has acted in a dishonest and fraudulent manner due to which the plaintiff suffered huge loss and the defendant's business became hell.
7. That the plaintiff sent a legal notice dated 25.04.2019 by Registered post/Speed Post, through Counsel wherein the defendant was recalled for payment of compensation to the plaintiff a sum of Rs.3,00,000/ within 15 days from the receipts of the demand notice. The aforesaid legal notice of demand was duly received by the defendant. The copy of legal notice is enclosed herewith. That the defendant has given the reply of the said legal notice to the counsel of plaintiff by mentioning the false and frivolous story.
8. Hence, the suit for recovery against the above named defendant to recover the aforesaid amount of Rs.3,00,000/along with pendente lite and future interest from the date of filing the present suit till realization and cost.
Digitally signed by DIVYAM LILA DIVYAM Date:
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9. WRITTEN STATEMENT ON BEHALF OF THE DEFENDANT i. The defendant was/is well qualified and having vast experience for the post in which he was employed, and the defendant does not require any technical or professional training for performing his duties. ii. It is further stated that the plaintiff had never provided any kind of training to the defendant during the course of his employment, in fact the defendant trained the plaintiff's persons.
iii. There has been no cause of action, whatsoever, in favour of the plaintiff and against the defendants which is essential for filling the present suit.
iv. That the defendant had worked with the plaintiff company from 03.07.2016 till 19.01.2019 i.e. around two and half year.
v. At the time of appointment of the defendant, the associate of the plaintiff's company has taken the signature of the defendant on a document namely 'letter of appointment' and the same has been kept with the plaintiff company. It is further submitted that the signature has been taken by the plaintiff company on a immediate and on the spot basis and the same has not been read over to / by the defendant, since Digitally signed by DIVYAM LILA DIVYAM Date:
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M/s. LMI India Pvt. Ltd.Vs. Mr. Vrijendra Chauhan Judgment dated 09.06.2022 Page no. 4 of 31 the defendant was in dire need of a job, he silently signed the said document and the plaintiff company has also taken the original documents pertaining to the qualification and address proof of the defendant at same point of time. vi. That the defendant was not the actual recipient of the said appointment letter as the same has been maintained and got signed by the benefit of the plaintiff only. vii. That the defendant has accepted the resignation letter of the defendant and also issued a relieving letter to the defendant, in which the plaintiff stated that the defendant will be relieved from the plaintiff company at the closing hours on 19.01.2019.
viii. That the clause 6 (v) of the said appointment letter is highly illegal, and it makes the entire appointment letter as Void. That as per section 27 of the Indian Contract Act "every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void.
ix. That it is humbly submitted that the presented suit is not maintainable as no proper board resolution has been passed by the board in relation to the present suit, thus liable to be dismissed in limine.
x. It is denied that the defendant had cheated and misled the Digitally signed by DIVYAM LILA DIVYAM Date:
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M/s. LMI India Pvt. Ltd.Vs. Mr. Vrijendra Chauhan Judgment dated 09.06.2022 Page no. 5 of 31 plaintiff company. It is further denied that the defendant also misguiding the customers of the plaintiff company due to that the plaintiff company bear huge losses and leakage of confidential informations. It is submitted that the present false suit was filed by the plaintiff with bad intention and to extract money from the defendant.
10.Replication on behalf of plaintiff to the WS of defendant:
i. It is submitted that the defendant had given the reason for resignation that "I am going to my reason (my family home due to some personal needs to my help to handle the business)" but it came to know that the defendant join with the immediate competitor company which is the same trade, immediately after the resignation. further submitted is that the it said intentional with ulterior resignation was it is further submitted motive.
11.On the basis of pleadings of the parties, the following issues arise for determination by this court.
a) Whether the defendant has violated the terms and condition of the appointment letter as per which he was employed by the plaintiff? OPP.
b) Whether the suit of the plaintiff is without any cause of action? OPD.
c) Whether the plaintiff is entitled to a decree of recovery of Digitally signed by DIVYAM DIVYAM LILA Civil Suit No 904/19 LILA Date:
2022.06.09 M/s. LMI India Pvt. Ltd.Vs. Mr. Vrijendra Chauhan 11:26:04 +0530 Judgment dated 09.06.2022 Page no. 6 of 31 Rs.3 lacs from the defendant? OPP.
d) If the above issue is answered in affirmative, Whether the plaintiff is entitled to pendentelite and future interest of the decreetal amount and if yes, at what rate? OPP.
e) Whether the plaintiff is entitled to the costs of the suit?
OPP.
12.Plaintiff's evidence:
i. PW1 Statement of Sh. Suresh Chaudhary, S/o. Sh. Bhagwat Chaudhary,Dispatch Supervisor at plaintiff company reiterated the contents of the plaint and relied upon the following documents:
a) Board resolution dt. 05.08.2019 is Ex. PW1/A.
b) Copy of ID card is marked as Mark PW1X.
c) Copy of appointment letter dt. 3.7.2016 is marked as Mark PW1Y.
d) Office copy of Legal notice dt. 25.4.2019 is Ex.PW1/D.
e) Reply to legal notice above mentioned dt. 10.5.2019 is Ex.PW1/E.
f) Copy of Letter of declaration dt. 19.1.2019 is marked as Mark PW1Z. (Ex.PW1/B and Ex.PW1/C and Ex.PW1/F are deexhibited as they are marked).
ii. Significant outcomes and deposition in the cross examination by Ld. Counsel for defendant: Digitally signed by DIVYAM DIVYAM LILA Date:
Civil Suit No 904/19 LILA 2022.06.09 11:26:14 M/s. LMI India Pvt. Ltd.Vs. Mr. Vrijendra Chauhan +0530 Judgment dated 09.06.2022 Page no. 7 of 31
a) I joined the present company in 2008. I do not know about the salary of the defendant Sh. Vrijendra Chauhan which was last drawn by him and also about the salary on which he was appointed.
b) My company gave the appointment letter to the defendant for joining. I do not know whether the company gave the confirmation letter post joining of the defendant in the company.
c) My company gave training to the defendant after joining which was for six months. The trainer which imparted the above mentioned six months training was Mr. Ubaid Ahmed. He is senior engineer in the company and has been working for the last 10 years. I do not know what is the exact amount claimed by the plaintiff company from the defendant but the same is in the file.
d) I am not aware of the calculations which are employed by the company for seeking the amount claimed generally. The calculation is done by a Chartered Accountant of the company.
e) I do not know about the exact nature of the loss which occurred to the company from the job change done by the defendant. The said loss can be explained by the Director and that the defendant was to work for three years in the Digitally signed by DIVYAM LILA DIVYAM Date:
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M/s. LMI India Pvt. Ltd.Vs. Mr. Vrijendra Chauhan Judgment dated 09.06.2022 Page no. 8 of 31 company as per policy but he left the job before completing three years on the pretext of some problems in the family for which he was allowed, but then he joined some other company which is wrong.
f) It is correct that the defendant gave the resignation letter to the company before leaving the company. It is correct that my company did not accept the resignation of the defendant when the same was sent to the company/plaintiff. It is correct that the company must not have issued the relieving letter and NOC to the defendant since they did not accept resignation. (Again said I do not know about the same)
13. Defendant's Evidence:
i. DW1 Statement of Sh. Vrijendra Chauhan S/o. Late Sh.Jagdish Chauhan; reiterated the defense taken in his written statement and didn't file any documents. Significant outcomes and deposition in the cross examination by Ld. Counsel for defendant:
a) I Graduated in BTech (electronic and communication) in 2012 and joined the plaintiff company in 2016.
b) Before that, worked at a company namely Power Gold, Delhi, where, joined in 2014 and left in 2016, having worked as Quality analyst and service engineer which Digitally signed by DIVYAM DIVYAM LILA Civil Suit No 904/19 LILA Date:
2022.06.09 11:26:34 +0530 M/s. LMI India Pvt. Ltd.Vs. Mr. Vrijendra Chauhan Judgment dated 09.06.2022 Page no. 9 of 31 manufactured battery, inverter, stabilizer. Thereafter, joined the plaintiff company immediately after leaving the same company. Admitting that the work nature which was under my scope of work in the plaintiff company is different from the previous employer Power Gold.
c) Admitting signature at point A and B on the document Mark PW1/Y.
d) Denied that all the people who joined the company are under an employment bond of three years.
e) Admitted that it is written in the agreement that I cannot join the competitor company and harm the company in any way.
f) admitted the signature at point A on document Mark PW1Z.
g) Left the plaintiff company on 19.1.2019. Thereafter, joined the company Indo Max Pvt. Ltd after 23 days after leaving the plaintiff company. It is denied that the nature of the plaintiff company is the same as a subsequent employer. The plaintiff company sells industrial marking and coding machines, printers, conveyor and printing consumable items including ink, ribbon, toner, cartridges etc. The company Indo Max Pvt.
Ltd. also sells industrial marking and coding machines, Digitally signed by DIVYAM LILA DIVYAM Date:
Civil Suit No 904/19 LILA 2022.06.09 11:26:43 M/s. LMI India Pvt. Ltd.Vs. Mr. Vrijendra Chauhan +0530 Judgment dated 09.06.2022 Page no. 10 of 31 printers, consumable items including ink, ribbon, toner, cartridges and solvent etc. It is wrong to suggest that your company is a newly established company and before that it used to purchase white labeled goods directly from the plaintiff company.
h) It is denied that he was sent to the Indo Max for the service related matters from the plaintiff company and thus I had acquaintance with their HR team. Denied that Indo Max produced their own goods/products for selling it further in the market, and submitted that they procured the products from the open market and sold it back to the market as trading. Indo Max is not a manufacturing company whereas LMI partly manufactures the products and partly trades the products.
i) Admitted that not mentioned in his declaration that he will join another company after leaving the plaintiff company. (vol I had written this declaration for the purpose of account clearance only).
j) Resigned in November 2018, then at that time he had resigned for family problems but which got sorted out later as my other family members supported the business. Hence, he joined another company.
k) I received the document bearing Mark PW1Y on Digitally signed by DIVYAM LILA DIVYAM Date:
Civil Suit No 904/19 LILA 2022.06.09 11:26:53 M/s. LMI India Pvt. Ltd.Vs. Mr. Vrijendra Chauhan +0530 Judgment dated 09.06.2022 Page no. 11 of 31 04.07.2016 and I had signed the same on the spot on 04.07.2016 at the plaintiff's office.
l) Admitted to have written the document which is marked as Mark PW1Z and I had my sign appearing at point A on the said document which is received by the plaintiff.
m) Denied that the plaintiff company had imparted training for six months after the joining (Vol. When a person joins as a fresher, he is appointed as a trainee engineer; whereas if an experienced engineer joins the company then he is appointed as Service Engineer/Sr. Service Engineer. In the plaintiff's company, I was appointed as Service Engineer).
n) I never read clause 5 and clause 6 (v) of the employment agreement after receiving it. At that time, I was in need of a job.
o) Denied that he had joined the company after resignation, which had a similar work and products and denied working on the commission basis along with the fixed salary (Vol. I have a fixed salary and I am a service engineer not a salesperson and thus my work is not to sell the products).
p) Denied causing harm to the plaintiff company by drawing their clients by using my knowledge and Digitally signed by DIVYAM LILA DIVYAM Date:
Civil Suit No 904/19 LILA 2022.06.09 11:27:01 M/s. LMI India Pvt. Ltd.Vs. Mr. Vrijendra Chauhan +0530 Judgment dated 09.06.2022 Page no. 12 of 31 information while working at the plaintiff company.
q) Denied about the three years bond while joining the company and denied that the plaintiff company has spent an approximate amount of Rs. 3,00,000/ due to training facilities and other ancillary expenditure made upon me (Vol. I have also worked and given my energy to the company for 2.5 years)
14.Issues no. 1,:Whether the defendant has violated the terms and condition of the appointment letter as per which he was employed by the plaintiff?
Issue no. 3: Whether the plaintiff is entitled to a decree of recovery of Rs.3 lacs from the defendant? Issue no. 4: If the above issue is answered in affirmative, Whether the plaintiff is entitled to pendentelite and future interest of the decretal amount and if yes, at what rate? Issue no. 5:Whether the plaintiff is entitled to the costs of the suit?
i. The issue no.3, 4 and 5 are dependent on the decision of issue no. 1, hence, all these issues are interdependent, and are therefore tried together, discussed and decided together. ii. The onus to prove primarily lies upon the plaintiff and plaintiff is seeking relief of damages from the defendant on the ground that the plaintiff has spent a lot of money on the Digitally signed by DIVYAM Civil Suit No 904/19 DIVYAM LILA M/s. LMI India Pvt. Ltd.Vs. Mr. Vrijendra Chauhan LILA Date:
2022.06.09 Judgment dated 09.06.2022 11:27:11 +0530 Page no. 13 of 31 training of the defendant, the defendant has given false and fabricated reasons for resignation and also have not fulfilled the terms and condition clause 6 (v) and 5 in the appointment letter by joining the immediate competitor company, the said move was intentional and with ulterior motives, and the defendant is misappropriating the customers of the plaintiff company and causing loss to the company and leakage of confidential information. The plaintiff has only sought the damages of Rs. 3,00,000/ along with interest pendente lite and future from the defendant, no mandatory and permanent injunction has been sought by the plaintiff against the plaintiff. iii. For proving the issues; the plaintiff has to prove aspects of facts and laws, the respective findings on the same is also written alongwith it:
a) That there was a contract between the parties governing the employeremployee relationship qua the employment and post employment period:The defendant has admitted executing the employment agreement Ex. Mark PW 1/Y dated 03/07/2016, and further admitted the signature on the said agreement in his crossexamination as well as in the written statement. The argument of the defendant is not tenable, that the defendant couldn't read it, having Digitally signed by DIVYAM DIVYAM LILA Date: Civil Suit No 904/19 LILA 2022.06.09 11:28:26 +0530 M/s. LMI India Pvt. Ltd.Vs. Mr. Vrijendra Chauhan Judgment dated 09.06.2022 Page no. 14 of 31 signed it at the spot and in hurry. There is presumption that the said agreement is read and thus signed over, and that too by an educated person. Hence, this aspect is proved by the plaintiff.
b) The said agreement provided for time boundation of three years or any other period: The mutual agreement between the plaintiff and defendant Ex. Mark PW 1/Y being admitted; the contract itself has no recital or covenant binding the employee/ defendant for working at the plaintiff company for three years or any other time period. There is nothing on agreement remotely suggesting the time boundation of the employment period. Further, the plaintiff has not averred in his plaint that there was policy written or oral in the company to work for three years; therefore, what is not pleaded cannot be proved. In any case, no evidence has been produced by the plaintiff to showcase the same except oral testimony of the PW1 about the same, but even that does not suggest that the defendant had agreed to be bound by such policy or terms. Hence, this aspect could not be proved by the plaintiff.
c) The said agreement provided for recovery of liquidated/ unliquidated damages or recovery of the expenditure Digitally signed by DIVYAM LILA DIVYAM Date:
Civil Suit No 904/19 LILA 2022.06.09 11:28:34 M/s. LMI India Pvt. Ltd.Vs. Mr. Vrijendra Chauhan +0530 Judgment dated 09.06.2022 Page no. 15 of 31 made by the plaintiff on defendant: The mutual agreement between the plaintiff and defendant Ex. Mark PW 1/Y being admitted; the contract itself has no recital or covenant providing for recovery of any liquidated/ unliquidated damages or recovery of the expenditure made by the plaintiff on defendant, the contract is wholly silent on any form of damages, let alone provision of damages of Rs. 3,00,000/. Even otherwise, the plaintiff has failed to showcase any documentary record of the expenditure incurred by the plaintiff on the training of the defendant; the only evidence that is produced by the plaintiff is oral testimony of the PW1, who also failed to depose as to what is quantum of money that was spent on the defendant and for what purpose. Hence, this aspect couldn't be proved by the plaintiff.
d) The said agreement provided for the postemployment restriction qua the joining of the competitor company and the disclosure of private, confidential information of the company and their clients to the competitor: The mutual agreement between the plaintiff and defendant Ex. Mark PW 1/Y being admitted; the contract provides for the postemployment restriction in the agreement at Clause 5 (II) "You shall not during the period of your Digitally signed by DIVYAM LILA DIVYAM Date:
Civil Suit No 904/19 LILA 2022.06.09 11:28:42 M/s. LMI India Pvt. Ltd.Vs. Mr. Vrijendra Chauhan +0530 Judgment dated 09.06.2022 Page no. 16 of 31 employment with the Company or at any time thereafter, divulge any information on sales, development and service methods business systems and techniques, customer lists, trade and business records and other confidential, privileged or proprietary information, including without limitations manuals, promotional materials, training courses, software, data files, client lists on materials (the "Confidential Information"), all of which represent the valued and exclusive property of the Company acquired by you as a consequence of your employment with the Company, relating the company's business operations and activities of any of its associate companies or business operations and activities of any of its clients, to any person" and Clause 6 (V) "You shall not for a period of 12 months from the date you have ceased to be an employee of the Company, accept any employment with or solicit any business or work from any organization, which has been either a customer or a competitor of the Company." Hence this aspect is proved by the plaintiff.
e) That the above covenant is not void or violative of the law governing the section 27 of Indian contract act.: the above postemployment covenants can be categorized Digitally signed by DIVYAM LILA DIVYAM Date:
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M/s. LMI India Pvt. Ltd.Vs. Mr. Vrijendra Chauhan Judgment dated 09.06.2022 Page no. 17 of 31 into two parts; first the restriction of the defendant to join the competitor company for a certain period of time and Second, the restriction of the defendant to divulge any confidential or proprietary information to the competitors or otherwise profiteer from the same. In my opinion, the first category of the postemployment restriction is wholly void under sec.27 contract act, if the contract does define time boundation of the employee to work in the company. However, the second category of the post employment covenants are not void under sec. 27 contract act, as the same are held to be reasonable, necessary and protective of the rights of the company.
The detailed discussion on the legality of the same is done in the following portion of judgment. This aspect could not be proved by the plaintiff.
f) That the defendant has in fact joined a competitor,: The plaintiff has not pleaded in his plaint the name of the competitor with whom the defendant has joined the employment; neither did the same was deposed by the plaintiff in his evidence. However, the ld. counsel for the plaintiff was able to bring out the details of the subsequent employment/ current employment of the defendant. The defendant has admitted that immediately, Digitally signed by DIVYAM LILA DIVYAM Date:
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M/s. LMI India Pvt. Ltd.Vs. Mr. Vrijendra Chauhan Judgment dated 09.06.2022 Page no. 18 of 31 after leaving the plaintiff company, the defendant had joined the company M/s Indomax. The defendant has further admitted in his crossexamination that the M/s Indomax also trades in a similar line of product as does the plaintiff company; however he further deposed that the plaintiff company is a manufacturing company whereas the subsequent employer is merely a trading company. There nothing else brought on record by the plaintiff to show that the subsequent employer of the defendant is a competitor. However, having perused the deposition of the DW1/ defendant, it appears that the subsequent employer does deal with similar line of product, and they may or may not be in the direct competition, but they are certainly operating within the same sphere of the mercantile operations and products distribution and selling; essentially making the subsequent employer of the defendant to be a competitor of the plaintiff company. This aspect has been proved by the plaintiff.
g) That the defendant has exposure & Access to the private, confidential and proprietary information during employment tenure with the plaintiff.: The plaintiff has failed to produce any cogent evidence, documentary or Digitally signed by DIVYAM LILA DIVYAM Date:
Civil Suit No 904/19 LILA 2022.06.09 11:37:19 M/s. LMI India Pvt. Ltd.Vs. Mr. Vrijendra Chauhan +0530 Judgment dated 09.06.2022 Page no. 19 of 31 oral, to showcase that the defendant had, due to the nature of his job, position, nature of work, or dealing with the customers/ clients or access to private and confidential documents. There is not an iota of pleadings, evidence or record, suggesting that the defendant has come into the contact of the sensitive, confidential, private, proprietary or copyright/ trademarked information due to the nature of his job. There is deposition made by the plaintiff witness qua this aspect. Hence, this aspect couldn't be proved by the plaintiff.
h) That the defendant has infact divulged the private, confidential and proprietary information so acquired, to the competitor or otherwise, and consequently leading to losses/ damages/ injury to the plaintiff.: it is the logical inference that since the plaintiff couldn't prove the exposure or access of the defendant to the sensitive, confidential or proprietary information of the plaintiff company; the question of divulging the same does not arise. Even otherwise, for argument's sake, the defendant did actually have access to the same; the plaintiff has not brought any material, evidence or oral testimony, that the defendant has actually divulged the same to the competitor company. Further, the plaintiff has miserable Digitally signed by DIVYAM LILA DIVYAM Date:
Civil Suit No 904/19 LILA 2022.06.09 11:37:28 M/s. LMI India Pvt. Ltd.Vs. Mr. Vrijendra Chauhan +0530 Judgment dated 09.06.2022 Page no. 20 of 31 failed to prove that the defendant has infact divulge information has that has led to loss of the company. The PW1 himself admitted that he is not aware of the kind of loss that is suffered by the plaintiff company, how the said loss was calculated, and what calculations have been employed to reach the sum of Rs. 3,00,000/. The plaintiff has also failed to prove that the defendant has poached the clients of the plaintiff, the plaintiff has failed to prove the name, details of any such customers, that has been lost or affected by the actions of the defendant post employment. Even otherwise, admittedly the defendant was on the post of service manager; it is beyond the common sense and regular practise, as to how the service manager is responsible for handling the customers and their data. Hence, this aspect could not be proved by the plaintiff.
iv. The interpretation of Section 27 of the Contract Act is not res integra. The Law on the above mentioned aspect is summed up below:
a) A two Judge Bench of the Hon'ble Supreme Court, as far back as in Niranjan Shankar Golikari Vs. Century Spinning & Manufacturing Co. Ltd. AIR 1967 SC 1098 was concerned with a suit for injunction to restrain the Digitally signed by DIVYAM LILA DIVYAM Civil Suit No 904/19 LILA Date:
2022.06.09 M/s. LMI India Pvt. Ltd.Vs. Mr. Vrijendra Chauhan 11:37:39 +0530 Judgment dated 09.06.2022 Page no. 21 of 31 employee, who had agreed to serve the employer for a fixed period, from during the said period, even after ceasing to be the employee of the plaintiff, joining employment of a competitor of the plaintiff. It was unanimously held that considerations against restrictive covenants are different in cases where the restriction is to apply during the period after the termination of the contract, than those in cases where it is to operate during the period of contract of employment. In the facts of that case, it was found that the employee was privy to the special process invented / adopted by the plaintiff and of which the employee was trained and had acquired knowledge. The employee who had left employment prior to the contracted period was thus restrained from joining employment of a competitor for the remaining period for which he had contracted with the plaintiff in that case.
b) A three Judge Bench of the hon'ble Supreme Court in Superintendence Company of India (P) Ltd. Vs. Krishan Murgai 1981 2 SCC 246 was concerned with a claim for injunction post cessation of employment. It was held by two of the Judges on an interpretation of the restrictive clause in the Employment Contract, that the Digitally signed by DIVYAM LILA DIVYAM Date:
Civil Suit No 904/19 LILA 2022.06.09 11:37:48 M/s. LMI India Pvt. Ltd.Vs. Mr. Vrijendra Chauhan +0530 Judgment dated 09.06.2022 Page no. 22 of 31 same was to apply only when the employee on his / her volition left the employment and not when the employer terminated the employment. The third Hon'ble Judge held that even if the restrictive covenant was to include cessation of employment at the volition of the employee, there could be no postemployment restriction under Section 27 of the Act.
c) A subsequent two Judge Bench of the Supreme Court in Percept D'Mark (India) (P) Ltd. Vs. Zaheer Khan (2006) 4 SCC 227 refused enforcement of a post employment restriction on the grounds of the same being barred by Section 27 of the Act.
d) Navigators Logistics Ltd vs Kashif Qureshi & Ors.; J.
Rajiv Sahai Endlaw, in Hon'ble Delhi High court had held in the Injunction case against the employee, that, "it is found that as per the plaintiff also, there was no fixed term for which either of the defendants no.1 to 8 had agreed to serve the plaintiff. The clause in the Employment Contract claimed by the plaintiff also is to the effect that defendants no.1 to 8, for a period of one year after ceasing to be the employee of the plaintiff, to not compete with the plaintiff. Such a clause in the Employment Contract, as per the judgments aforesaid of Digitally signed by DIVYAM LILA DIVYAM Date:
Civil Suit No 904/19 LILA 2022.06.09 M/s. LMI India Pvt. Ltd.Vs. Mr. Vrijendra Chauhan 11:37:57 +0530 Judgment dated 09.06.2022 Page no. 23 of 31 the Supreme Court, is void under Section 27 of the Contract Act. Once the clause is void, there can be no injunction or damages in lieu of injunction on the basis thereof."
e) Bombay High Court in the case of Tapas Kanti Mandal v. Cosmos Films Ltd, held that negative restrictive covenant post employment period is not enforceable. In this case, the defendant took employment as a manager in the Research and Development department in a multinational company supplier of BOPP, before the employment the defendant entered into a service contract, bond and secrecy agreement. The secrecy agreement provided for a noncompete clause for a period of 3 years. However, the defendant after long years of service abruptly resigned and was to take employment against the noncompete clause. The plaintiff submitted that the defendant, by virtue of his employment, had acquired indepth knowledge of the products of the company and had also come in possession of confidential processes and knowledge of manufacture of its product. He had also been knowledgeable of various projects of the company, formulae, patterns, complexion, programmes, devices, Digitally signed by DIVYAM DIVYAM LILA Civil Suit No 904/19 LILA Date:
2022.06.09 11:38:06 +0530 M/s. LMI India Pvt. Ltd.Vs. Mr. Vrijendra Chauhan Judgment dated 09.06.2022 Page no. 24 of 31 methods, techniques and processes of the plaintiff company. Future plans of the plaintiff company have been known to him and he has also been aware of unique ideas, discoveries and inventions of the plaintiff company. Such knowledge as well as trade secrets, unique ideas, discoveries, inventions, processes, projects are intellectual property of the plaintiff and by virtue of his position in employment, the defendant had come across the same and had been in possession of the same and he is under obligation not to divulge the same to any other person, partnership, company, corporation as per the contractual obligations incurred by him. However, the Court did not consider the argument and held that any clause restraining the right of profession of an employee is nonenforceable.
f) Desiccant Rotors International Pvt. Ltd. Vs. Bappaditya Sarkar and Anr.MANU/DE/1215/2009 Hon'ble Delhi High Court, Decided on 14 July 2009, The Honorable High Court took the view that an employee's right of livelihood must prevail over employer's right to restrict employees from joining competitive business. In other words, the employee had a right to work with the competitor. However, the court opined that the employer Digitally signed by DIVYAM LILA DIVYAM Date:
Civil Suit No 904/19 LILA 2022.06.09 M/s. LMI India Pvt. Ltd.Vs. Mr. Vrijendra Chauhan 11:38:16 +0530 Judgment dated 09.06.2022 Page no. 25 of 31 had a right to refrain employee from approaching its suppliers and customers for soliciting business for a period of two years after cessation as an employee. In other words, the postemployment restriction on joining a competitor was rejected but the restriction of non solicitation for two years after termination was protected. v. Hence, having considered the catena of judgment, I find no hesitation in holding that the Clause 6 (v) of the employment agreement is null and void under sec. 27 of the contract act being the violative clause in form of postemployment restriction on the employee. Thus, I have no hesitation in holding that this issue is decided against the plaintiff and in favour of the defendant.
15.Issue no. 2: Whether the suit of the plaintiff is without any cause of action? OPD.
i. The defendant has not led any evidence with respect to absence of cause of action. However, the ld. Counsel for defendant has made submissions with respect to absence of cause of action in the suit of the plaintiff, and that the said suit has been filed by the plaintiff without having tying the defendant with any contractual obligation and without any merit. That the plaintiff company is habitual litigant and use the litigation to harass the employees who are already Digitally signed by DIVYAM DIVYAM LILA Civil Suit No 904/19 LILA Date:
2022.06.09 M/s. LMI India Pvt. Ltd.Vs. Mr. Vrijendra Chauhan 11:38:26 +0530 Judgment dated 09.06.2022 Page no. 26 of 31 underpaid by them. That the defendant has not committed any wrong to be deserving the litigation harassment for five years by the company. I don't find the strength in the argument of the defendant that the suit is wholly without cause of action, as the suit also contained confidentiality clause, which was required to be proved by the plaintiff, which they have failed to do so. Hence, this issue is decided in favour of the plaintiff and against the defendant.
16. Orders under Section 151 CPC for abuse of process of the court: However, I find strength in the argument of the ld counsel for defendant that the present suit appears to be a calculated ploy for the disadvantage of the defendant, when apparently there was no covenant restricting the defendant for working in the company for three years, that there was no covenant for recovery of salary/ expenditure on employee leaving the job. This litigation is nothing less than a calculated witchhunt, which appears to be filed with biased gamble in the form that either way it is a winwin situation for the plaintiff, viz. The plaintiff succeeds in the suit or the plaintiff can fail in the suit but successfully draggin the litigation and the defendant for years without any consequences. Either way, the defendant would be on the losing pedestal. The judgment of Harish Relan vs Kaushal Kumari Relan And Ors. by hon'ble Delhi Digitally signed by DIVYAM LILA DIVYAM Date:
Civil Suit No 904/19 LILA 2022.06.09 11:38:34 M/s. LMI India Pvt. Ltd.Vs. Mr. Vrijendra Chauhan +0530 Judgment dated 09.06.2022 Page no. 27 of 31 High Court has clearly stated at para 96 "......The spirit, object and intendment of the statutory provisions, as well as statutory scheme shows, that the inherent powers of the court are complementary to the powers specifically conferred on the court by the Code, and are in addition thereto. While Section 35A is confined to award of compensatory costs in respect of ―false or vexatious claims or defences‖, Section 151 takes within its ambit a much wider area of litigation which tantamounts to abuse of process of court. Section 151 therefore, enables a court to pass orders as may be necessary for the ends of justice, or to ―prevent abuse of process of the court‖ which is beyond the "false and vexatious" litigation covered under Section 35A and are wide enough to enable the court to pass orders for full restitution." Padmawati v. Harijan Sewak Sangh & Ors., (2008) 154 DLT 411 at para "9. Before parting with this case, I consider it necessary to pen down that one of the reasons for overflowing of Court dockets is the frivolous litigation in which the Courts are engaged by the litigants and which is dragged as long as possible. Even if these litigants ultimately loose the lis, they become the real victors and have the last laugh. This class of people who perpetuate illegal acts by obtaining stays and injunctions from the Courts must be made to pay the sufferer not only the entire illegal Digitally signed by DIVYAM LILA DIVYAM Civil Suit No 904/19 Date:
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gains made by them as costs to the person deprived of his right and also must be burdened with exemplary costs. Faith of people in judiciary can only be sustained if the persons on the right side of the law do not feel that even if they keep fighting for justice in the Court and ultimately win, they would turn out to be a fool since winning a case after 20 or 30 years would make wrongdoer as real gainer, who had reaped the benefits for all those years. Thus, it becomes the duty of the Courts to see that such wrongdoers are discouraged at every step and even if they succeed in prolonging the litigation due to their money power, ultimately they must suffer the costs of all these years long litigation. Despite settled legal positions, the obvious wrongdoers use one after another tier of judicial review mechanism as a gamble, knowing fully well that dice is always loaded in their favour, since even if they lose, the time gained is the real gain. This situation must be redeemed by the Courts." I therefore find it exigent to award costs to the defendant to be paid by the plaintiff in following manner.: i. Keeping in view the above mandate of Rules, the fees of the defendant's counsel in the suit would be computed in the following manner :Computation on total for the amount of Rs.3,00,000/ [(i)UptoRs.1,00,000/: @Rs.6,500/ and on remainder i.e. Rs.2,00,000/ @ 2%: Rs.4,000/] Total :
Digitally signed by DIVYAM DIVYAM LILA Civil Suit No 904/19 LILA Date:
M/s. LMI India Pvt. Ltd.Vs. Mr. Vrijendra Chauhan 2022.06.09 11:39:00 Judgment dated 09.06.2022 +0530 Page no. 29 of 31 Rs.10,500/. Realistically speaking, counsels would be charging a minimum between Rs.30,000/ to Rs.40,000/ for defending the suit, if not more. However, keeping the stipulation under the Delhi High Court Rules and the caution by the Supreme Court in the above pronouncements, the court is restricting the award of the counsel's fee to Rs.11,000/ as part of the costs to be paid by the plaintiff to the defendant.
ii. In view of pronouncement of Harish Relan (Supra), the litigant is entitled to all reasonable costs of the litigation which would include expenses of transportation, lodging, compensation for loss of work, the typing expenses, photocopying, miscellaneous expenses and incidental costs; expenses of witnesses; drafting and filing expenses; costs of obtaining certified copies; court fee and process fee. However, many of the heads as expenses of transportation; miscellaneous expenses incurred in attending court; costs of preparing written submissions; photocopying (of judicial precedents during hearings); losses due to staying away from work; miscellaneous clerkage etc. would arise and have to be considered while computing costs. Roughly estimated, an amount of Rs.12,000/ towards all these heads deserves to be paid to the defendant towards the Digitally signed by DIVYAM LILA DIVYAM Date:
Civil Suit No 904/19 LILA 2022.06.09 M/s. LMI India Pvt. Ltd.Vs. Mr. Vrijendra Chauhan 11:39:09 +0530 Judgment dated 09.06.2022 Page no. 30 of 31 costs by the plaintiff company.
Conclusion:
17.The suit of the plaintiff is therefore dismissed in view of above discussion on his inability to prove the issue no.1,3,4 and 5 in his favour against the defendant on merit. Further, the plaintiff is burdened with costs of Rs.23,000/ to be paid to the defendant in above terms immediately and interest thereon @ 6% per annum from the date of decree till date of suit.
18.Decree sheet be prepared accordingly.
19.File be consigned to Record Room after compliance with due formalities.
ANNOUNCED IN THE OPEN Digitally signed by DIVYAM COURT ON 09.06.2022 DIVYAM LILA LILA Date: 2022.06.09 11:39:18 +0530 (DIVYAM LILA) CIVIL JUDGE01(SW)/DWARKA COURTS NEW DELHI Civil Suit No 904/19
M/s. LMI India Pvt. Ltd.Vs. Mr. Vrijendra Chauhan Judgment dated 09.06.2022 Page no. 31 of 31