Delhi High Court - Orders
Sheela Foam Limited vs Pmg Distribution Private Limited & Ors on 1 September, 2023
Author: Manoj Kumar Ohri
Bench: Manoj Kumar Ohri
$~51
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P.(I) (COMM.) 270/2023
SHEELA FOAM LIMITED ..... Petitioner
Through: Mr.Gyanendra Kumar, Ms. Anuradha
Mukherjee, Ms.Shreya Som, Mr.Zaid
D. and Mr.Aviral Singhal, Advocates.
versus
PMG DISTRIBUTION PRIVATE LIMITED & ORS......Respondents
Through: Mr Devadatt Kamat, Senior Advocate
(through VC) with Mr Rohit Sharma,
Mr Aditya Narayan, Ms Pratiksha, Mr
Jatin and Mr M.A. Kumar, Advocates
for respondent Nos. 1 and 5.
Mr.Nakul Dewan, Sr. Adv. with
Mr.Nikhil Purohit, Mr.Rounak Nayak
Mr.Atul Agarwal and Mr.S. Sethi,
Advs. for R2,3&4.
CORAM:
HON'BLE MR. JUSTICE MANOJ KUMAR OHRI
ORDER
% 01.09.2023
1. The present petition has been filed under Section 9 of the Arbitration & Conciliation Act, 1996 (hereafter 'A&C').
2. The petitioner claims to be in the business of manufacturing, marketing and selling of a wide range of products in the name of "Sleepwell". It further claims to have entered into an exclusive Distribution Agreement with respondent No.1 on 01.04.2022 for a period of five years for the territories of Bangalore, Mangalore and Hubli. The respondent No.1 vide its email dated 03.08.2023 sent at 10 am, resigned as distributor of the Petitioner thereby terminating the agreement.
O.M.P.(I) (COMM.) 270/2023 Page 1 of 7This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 16/09/2023 at 15:35:29
3. The petitioner claims that the termination of the Agreement was preceded by the resignation of respondent No.2, i.e., petitioner's Senior Area Sales Executive, who was in its employment since the year 2008. The termination was followed by further resignations of respondent Nos. 3 and 4 who were employed with the petitioner as Areas Sales Executives and Territory Sales Manager respectively. While the former was appointed in the year 2020, the latter joined the petitioner company in the year 2014. It is claimed that simultaneous to their resignations, the respondent Nos. 2 to 4 unauthorizedly copied and deleted petitioner's confidential and proprietary data in the official computers. Respondent No.2 also sent an email to respondent No.1 on 03.08.2023 at about 11:38 am thereby sharing data termed as "Rooming List" pertaining to an event organized by the respondent No.1 on 04.08.2023.
Subsequent to the above, the petitioner's exclusive Brand Outlets have also sought to terminate their respective agreements with the petitioner for the reason of becoming Multi-brand Outlets.
4. The petitioner further claims to have carried out a forensic examination of its computers and as per the preliminary forensic report, it is revealed that while the respondent No.3 had reinstalled the entire operating system on 11.08.2023 making it extremely difficult to access his official computer system, respondent No.4 had bit-locked his official computer. The report further reveals that the respondent No.2 also copied and deleted data. Respondent Nos. 2 to 4 had access to the petitioner's confidential and proprietary data relating to his business.
5. It is claimed that the proximity of the aforementioned events when seen in light of the preliminary forensic report indicate that all the O.M.P.(I) (COMM.) 270/2023 Page 2 of 7 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 16/09/2023 at 15:35:29 respondents colluded with each other and systematically hived off to help respondent No.1.
6. The respondents resisted the petition. Mr. Kamat, learned Senior Counsel for the respondent Nos. 1 and 5 stated that the answering respondents vide their reply to the petitioner's notice dated 12.08.2023, and purely as a matter of best practices and on good faith basis, had chosen not to enter any arrangement or take up any competing business for the 30 days' notice period ending on 01.09.2023. The Agreement did not provide for the transfer of any confidential and proprietary information to the respondents and as such no data was ever received or transferred. While denying the petitioner's allegations, it was stated that the respondent Nos. 1 and 5 have no truck with the respondent Nos. 2 to 4. The rooming list that was forwarded by respondent No.2 on 03.08.2023 had no confidential information as the same pertained to only a list of guests who were to participate in the event that was organized by the respondent No.1 in celebration of completion of 30 years in business. Even otherwise, the list of the retailers was in public domain. It was submitted that the answering respondents have repeatedly offered to handover material relating to the sale and advertisement of the petitioner's products. Lastly, it was submitted that respondent Nos. 2 to 4 have not joined the answering respondents' business in any manner.
7. The respondent Nos. 2 to 4 filed their replies wherein it was admitted that they had copied data but submitted that it was not confidential in nature. Regardless of that, respondent 2 and 4 offered to handover the pen drive/external devices in their possession where the data was copied. The respondent No.3 submitted that in the normal course of business, the official O.M.P.(I) (COMM.) 270/2023 Page 3 of 7 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 16/09/2023 at 15:35:29 emails were also marked to his own personal account and to show his bonafide, he offered an inspection of the same to the petitioner. On 29.08.2023, a statement to the aforesaid effect on behalf of all three respondents was also recorded.
8. Indisputably, the Agreement provides for resolution of disputes through arbitration. Clause 27 stipulates that Courts in Delhi alone shall have jurisdiction to try and entertain any and all suits or other proceedings in respect of, relating to or otherwise arising under the Agreement. No submission to the contrary was addressed on behalf of the respondent Nos. 1 and 5.
9. During the course of his submissions, learned counsel, in view of the replies placed on record by the respondent Nos. 2 to 4, pressed only prayers
(a) and (b) against the respondents. Further, learned counsels appearing for the petitioner as well as respondent Nos. 1 and 5 also jointly prayed that this Court may appoint the Arbitral Tribunal comprising of a Sole Arbitrator to adjudicate upon the disputes between the parties.
10. Considering the joint request made on behalf of the petitioner and respondent Nos. 1 and 5 for the appointment of an Arbitral Tribunal, Ms. Justice Asha Menon (Mob:9910384664), former Judge of this Court is appointed as the Sole Arbitrator to adjudicate the disputes between the parties. The arbitration will be held under the aegis of Delhi International Arbitration Centre and will be governed by the Rules of DIAC, including as to the remuneration of the learned Arbitrator in terms of Schedule IV of the A&C Act or as may be agreed by the parties. The learned Arbitrator shall also furnish a declaration in terms of Section 12 of the A&C Act prior to entering upon the reference. The present petition will be treated as an O.M.P.(I) (COMM.) 270/2023 Page 4 of 7 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 16/09/2023 at 15:35:30 application under Section 17 of the A&C Act. The parties shall also be at liberty to raise all such contentions as are available to them in law. The parties shall approach the learned Arbitrator within two weeks from today.
11. Learned counsel for the petitioner has pressed for interim directions regarding the misuse of data in possession of the respondents. Further, an apprehension has been expressed that since the undertaking given by the respondent Nos. 1 and 5 vide its aforementioned reply regarding non- compete commitment, is coming to an end today, the data in question may be compromised by respondent No 1 and 5, which shall cause irreparable loss to the petitioner's business. On a prima facie reading of the forensic report placed on record, it is revealed that data which was deleted/copied from the petitioner's official computers included data relating to petitioner's network policy, pre-seasoned targets, information relating to sales and sales team, salary structure, exchange offers, price lists, business plans, dealer- wise data, State-wise strategy models, etc.
12. Parties have their own divergent views regarding the nature of data. Respondents dispute that the data is confidential in nature and contest that it enjoys any protection. According to the respondent, the data is generic in nature and there is nothing proprietary or unique about the same.
13. There is no denying the fact that respondent 2 to 4 by their conduct of copying the data have shown that the data in question may be of some value to them. This being so, whether the data in question is confidential or not may not be gone into. The respondent No 2 to 4 agree that the data belongs and pertains to the business of the petitioner. At this stage, where the limited concern of the Court is to preserve the subject matter of arbitration, more so when the parties have agreed to refer their disputes to an arbitrator for O.M.P.(I) (COMM.) 270/2023 Page 5 of 7 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 16/09/2023 at 15:35:30 adjudication, it is deemed fit that the data in question is preserved and prevented from being compromised.
14 In view thereof, the present petition is disposed of with the direction that the respondents shall not use the data in their possession or any data that they may be privy to by virtue of being petitioner's erstwhile exclusive distributor relating to the petitioner's business. The respondents shall also not take any steps that may disrupt the supply and distribution of petitioner's goods through its network of distributors and retailers.
15. Needless to state that the aforesaid directions are passed till the time the present application is taken up for consideration by the learned Arbitrator. The parties shall also be at liberty to file additional reply/documents. The parties shall also be at liberty to seek variation/modification of the above interim directions.
16. Insofar as respondent Nos. 2 to 4 are concerned, Mr. Dewan, learned Senior Counsel, on instructions submits that the respondents after filing the replies and giving undertakings before the Court, filed applications seeking modification. However, without prejudice to their rights, and to show their bonafides, they have no objection in reiterating their respective undertakings. Accordingly, with the consent of parties, it is directed that:
(i) The petitioner shall be at liberty to obtain a mirror image/copy of the pen drive and hard disc in possession of the respondent Nos. 2 and 4.
(ii) The aforesaid exercise shall be carried out by a Court Commissioner, and for which purpose, Mr. Abhishek Mahajan.
Advocate (Mob: 9810981062) is appointed who will visit Bangalore and carry out mirror imaging/copying of the aforesaid O.M.P.(I) (COMM.) 270/2023 Page 6 of 7 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 16/09/2023 at 15:35:30 devices that are in possession of respondent Nos. 2 and 4.
(iii) After duly carrying out the mirror imaging/ copying, the original pen drive/hard disc shall be retained by the respondents and the copy will be handed over to the petitioner/his counsel.
(iv) The respondent No.3 shall provide an inspection of his email account at Bangalore and the travel expenses for that shall be borne by the petitioner.
(iv) The remuneration of the Court Commissioner is fixed at Rs.1.5 lacs. All the incidental and out of pocket expenses shall also be borne by the petitioner.
17. The petition alongwith the pending applications is disposed of in the aforesaid terms. It is made clear that the aforesaid arrangement is without prejudice to the rights and contentions of either of the parties.
MANOJ KUMAR OHRI, J.
SEPTEMBER 1, 2023 na O.M.P.(I) (COMM.) 270/2023 Page 7 of 7 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 16/09/2023 at 15:35:30