Delhi District Court
Parmod Kumar Yadav vs M/S Future Soft (India) Pvt. Ltd on 30 November, 2013
In the court of Shri Sandeep Yadav, Additional District Judge02, South
East, Saket Courts, New Delhi
CS45/12
(207/2010)
Parmod Kumar Yadav
s/o Shri Tej Singh
r/o V.PO Simha,
District Mahendra Garh,
Haryana123028 ....... Plaintiff
vs.
M/s Future Soft (India) Pvt. Ltd.
253, Okhla Industrial EstatePhaseIII,
New Delhi110029 ........ Defendant
Suit for recovery of Rs.95,000/ (Rupees Ninety Five Thousand only) and
mandatory injunction
Date of institution of suit : 28.10.2010
Civil Suit No.108/11
M/s Future Soft (India) Pvt. Ltd.
253, Okhla Industrial Estate,
PhaseIII,
New Delhi110020 ........ Plaintiff
vs.
Pramod Kumar
B4, Sultan Apartments,
Saidulazab,
New Delhi110030
Also at
r/o V.PO Simha,
District Mahendra Garh,
Haryana123028 ........ Defendant
2
Suit for recovery of damages amounting to Rs.6,62,000/ (Rupees Six Lacs
and Sixty Two thousand only)
Date of institution of suit : 04.02.2011
JUDGMENT
Date when judgment reserved : 16.11.2013 Date of judgment : 30.11.2013
1. Suit no.207 of 2010 (45/12) titled Pramod Kumar Yadav vs. Future Soft and suit no.108/2011 titled M/s Future Soft vs. Pramod Kumar Yadav are being decided through this common judgment as identical factual and legal issues are involved in both the suits. For the sake of convenience the plaintiff in the suit no.207/2010 Pramod Kumar Yadav vs. Future Soft (India) Pvt. Ltd will be referred to as plaintiff and the plaintiff in M/s Future Soft vs. Pramod Kumar Yadav in suit no.108/11 will be referred to as defendant.
2. Plaintiff case Plaintiff is a qualified Engineer and was employed with the defendant company as Team member Technical Support vide Appointment letter dated 23.08.2005. The last appraisal and promotion of the plaintiff was done vide letter dated 10.12.2008. Plaintiff worked with the defendant company at the post of Analyst Technical Support. Plaintiff sent his resignation on 12.03.2010 through email to the defendant and gave one month notice as per the terms of his 3 appointment letter dated 23.08.2005. Defendant company responded through a letter dated 17.03.2010 addressed to the plaintiff informing the plaintiff that as per the terms and condition of the appraisal letter dated 10.12.2008 plaintiff was required to give 3 months notice for terminating his services with the defendant company. Plaintiff agreed and extended his notice period for terminating his services with the defendant company upto 11.06.2010 which was accepted by the defendant. The plaintiff completed his notice period i.e. 3 months for terminating the services of the defendant company and worked upto 11.06.2010. Plaintiff completed all the formalities before leaving the defendant company. The plaintiff requested defendant company well in advance to prepare his salary of notice period and relieving letter on his last working day with the defendant company i.e. 11.06.2010. Defendant without any reason and ground did not pay the salary of three months and also did not issue the relieving letter when demanded by the plaintiff on 11.06.2010. Defendant company wanted the plaintiff to execute a bond before issuing the relieving letter and paying the salary to the plaintiff which was illegal and unjustified. A total sum of Rs.95,000/ is due to the plaintiff towards the salary for the period from 01.03.2010 to 11.06.2010 totaling to Rs.85,000/ approximately after deducting Rs.10,000/ towards the leave encashment for the period from 01.09.2009 to 11.06.2010. The defendant is thus liable to pay a sum of Rs.95,000/ to the plaintiff. Suit filed by the defendant is hit by Section 27 of the Indian Contract 4 Act. Plaintiff served the defendant in terms of appointment letter dated 23.08.2005. Appraisal letter and promotion letter does not constitute any contract and it cannot override the terms laid down under the appointment letter. The appointment letter constitute a binding contract between the plaintiff and defendant and said contract is never superseded or amended or modified during the tenure of the employment of the defendant with the plaintiff. The plaintiff during his employment with the defendant did not enter into contract with any of its client or customer. Plaintiff has not committed breach of any terms of agreement between the parties. After tendering his resignation the plaintiff served defendant for three months i.e. till 11.06.2010, hence the defendant did not have any right to withhold the three months salary of the plaintiff. Defendant earlier filed a suit against the plaintiff and another person which was withdrawn on 25.11.2010. There is no restrictive covenant against the defendant for rendering services to any employer. The damages claimed by the defendant in its suit is without any basis or scientific calculation.
3. Plaintiff thus prayed for a decree of Rs.95000/ against the defendant. Plaintiff also prayed for a decree of mandatory injunction against the defendant directing the defendant company to issue relieving letter to the plaintiff.
4. Defendant's case Defendant is engaged in the business of development of customized software, support services and providing consultancy to its 5 clients in executing software projects at both client location as well as it its own location. Defendant is providing software, support services through its employees to its client/customer namely Wipro Limited its affiliate/subsidiary/holding companies and others with regard to New Applications Development, Enhancement to existing applications and Application Maintenance and Support since the year 2000. Plaintiff joined the defendant company in 2005 as Team MemberTechnical Support vide Appointment letter dated 23.08.2005. Appraisal of the plaintiff was done lastly vide letter dated 10.12.2008. During his employment with the defendant company, plaintiff has worked on Development and Implementation of many projects at Wipro. Plaintiff has last worked at the post of AnalystTechnical Support and was deputed at the client/customer site i.e. Wipro BPO. As per the terms and conditions of the appointment and appraisal letter issued by the defendant company, the plaintiff cannot enter into any contract/employment directly with any existing clients/customer of Futuresoft (India) Pvt. Ltd./ defendant or with any competing company including Wipro Ltd its affiliates/subsidiary/holding companies, offering or providing similar services to the existing clients or partners of defendant company till after 6 months from leaving the services of the defendant company. Plaintiff left the services of the defendant company on 11.06.2010 without completing the relieving formalities/process and alongwith plaintiff 6 other employees of defendant company working in the same team as that of plaintiff, left 6 the services of the defendant company within a span of two days, without completing the relieving formalities and all them started providing software support services to Wipro BPO within 6 months from leaving the services of defendant company. Plaintiff has given only one month notice in his resignation email dated 12.03.2010 which was totally against the terms and conditions of the employment. The resignation email of the plaintiff was replied by the defendant vide letter dated 17.03.2010 stating therein that resignation of the plaintiff is not accepted by the defendant company. Plaintiff was time and again requested to come forward and complete the relieving formalities vide email dated 14.04.2010, 02.05.2010, 11.06.2010 and 16.06.2010. Defendant has received a request for employment verification of the plaintiff to join Wipro from an agency named Footprints Collateral Services Pvt. Ltd. which is against the terms and conditions of the employment. During the course of the arguments on the application u/o 39 rule 1 and 2 of CPC in suit no.241/2001 titled as Future Soft (India) Pvt.Ltd. vs. Pankaj Bhasin and ors, counsel for the plaintiff has disclosed that plaintiff is working for a company namely INS Enterprise Solutions Pvt. Ltd. which is one of the competitor of the defendant company and the plaintiff thorough INS Enterprises Solutions Pvt. Ltd. is providing software support services to Wipro BPO. The plaintiff has thus breached the terms and conditions of appointment and appraisal letter issued by the defendant company by providing software support services to Wipro BPO an existing 7 customer of the defendant company through a competing company namely INS Enterprise Solutions Pvt. Ltd. within 6 months of relieving services of the defendant company. Due to this act of the plaintiff, defendant has suffered financial loss and damages to the tune of Rs.6,62,000/ alongwith interest @ 24 % per annum against the plaintiff.
5. After completion of the pleadings following issues were framed vide order dated 24.04.2012 : Issues
1. Whether the plaintiff has given a notice of three months as per the terms and conditions of the appointment with the defendant company before resigning his job w.e.f. 11.06.10? OPP
2. Whether the plaintiff has violated the terms and conditions of his employment with the defendant company by providing Software support Services to Wipro BPO, existing customer of the defendant company through INS Enterprise Solutions Pvt. Ltd. within 6 months of leaving the job of defendant company? OPD
3. Whether the plaintiff is entitled to the decree of mandatory injunction against the defendant to issue relieving letter?OPP
4. Whether the plaintiff is entitled to recover a sum of Rs.95,000/ being the salary for 3 months and 10 days from 01.03.10 to 11.06.10? OPP
5. Whether the suit filed by the defendant company against the plaintiff is barred u/s 27 of the Indian Contract Act?OPP
6. Whether the defendant company is entitled to recover a sum of (Rs.6,62,000/ from the plaintiff for Rs.1,60,000/ being the claim for salary for 6 months and Rs.5,00,000/ as damages) from the 8 plaintiff? OPD
7. Whether the defendant company is entitled to claim interest from the plaintiff on the amount found due and if so, at what rate ? OPD
8. Whether the suit filed by the plaintiff is barred u/s 41 (h) of the Specific Relief Act?OPD
9. Whether the plaintiff left the services of the defendant company without being relieved by the defendant company and without completing the formalities required for being relieved?OPD
10. Relief.
6. I have heard Mr.Satyavan, ld. counsel for the plaintiff and Mr. Vishal, ld. counsel for the defendant. The written submissions filed on behalf of defendant have also been perused.
7. Plaintiff led evidence by filing his evidence by way of affidavit. Plaintiff relied upon and proved the appointment letter Ex.PW1/1, appraisal letter Ex.PW1/2, email dated 12.03.2010 Ex.PW1/3, letter dated 17.03.2010 Ex.PW1/4. No other witness was examined by the plaintiff. From the defendant's side, Mandeep Puri, Director/Authorized Representative of the defendant was examined as sole defendant witness, who more or less relied upon the document exhibited in the testimony of PW1.
8. Issuewise findings of the court are as under:
9. Issue no.1 The burden of proof of this issue was on the plaintiff. Plaintiff in his evidence by way of affidavit deposed that he sent his resignation on 9 12.03.2010 through email to the Director of defendant company and gave one month notice as per the appointment letter dated 23.08.2005. Although the email perse is inadmissible in evidence unless the affidavit as required u/s 65B of the Indian Evidence Act is filed; however, since the said email has been admitted by the Defendant in the written statement as well as in the evidence, the court can look into the email dated 12.03.2010. In the said email plaintiff requested the defendant to accept the said email as formal notice of his resignation w.e.f. 12.03.2010. PW1 further deposed that defendant company wrote a letter dated 17.03.2010 to the plaintiff informing the plaintiff that he was required to give three months notice for terminating his services of the defendant company under the terms and conditions of the appraisal letter Ex.PW1/2. PW1 further deposed that he agreed and extended his notice period of terminating the services with defendant company upto 11.06.2010 which the defendant company accepted. PW1 further deposed that he completed the notice period of three months for terminating his services with the defendant company and worked upto 11.06.2010. The contention of the defendant is that the plaintiff has not resigned in accordance with terms and conditions of the appraisal letter dated 23.08.2005 Ex.PW1/2. Clause 9 of the appraisal letter Ex.PW1/2 lays down that services of the plaintiff are liable to be terminated upon giving a three months notice or salary in lieu of, from either side subject to the company's discretion, in the event plaintiff having any incomplete assignment, the company will have the discretion to relieve 10 the plaintiff at the end of three months notice period. The plaintiff through his notice Ex.Pw1/3 notified the defendant that he does not want to continue the employment with the defendant. In the email Ex.PW1/3 the plaintiff submits that the contract of employment requires him to work till 11.06.2010 but he will be grateful if he is released earlier on 16.04.2010, and will assume that this is acceptable unless the plaintiff is informed of the contrary. Plaintiff further states in the email that his last date at work will be 16.04.2010. When the defendant reminded the plaintiff about the terms and conditions of the appraisal letter Ex.PW1/2 regarding three months notice, the plaintiff agreed to work with the defendant till 11.06.2010. The continuance of the plaintiff in the employment of the defendant for a period of three months from the date of notice of his resignation is sufficient compliance with the terms and conditions of appointment requiring three months notice before resigning. Infact even in the document of the defendant i.e. email Ex.PW1/D2, defendant informs the plaintiff as under: "Since you have already made a decision to leave the services of Futuresoft, you are hereby informed that in any case you shall not be relieved from the services of the company before the expiry of three months Notice period starting from the date of your resignation letter''.
10. Plaintiff is further informed vide email Ex.PW1/D2 that plaintiff will not leave the services of defendant company before expiry of three 11 months notice from the date of his resignation.
11. Similarly in email Ex.PW1/D3, defendant writes to the plaintiff as under: "It is once again reiterated that the company is keen and willing to release part of your salary till the time your Notice period expires, provided you give an assurance to the company in the form of an Undertaking stating therein:"
12. It is therefore, obvious that even the defendant has accepted the notice of the resignation of the plaintiff as a notice for three months period and has requested the plaintiff again and again to complete the formalities and was informing the plaintiff that a part salary of the defendant will be released after the notice period expires. The notice period mentioned by the defendant in the email Ex.PW1/D3 is three months. Hence the plaintiff has successfully proved on record that plaintiff has given a three months notice as per the terms and conditions of appointment with the defendant company before resigning his job on 11.03.2010. This issue is accordingly decided in favour of the plaintiff and against the defendant.
13. Issue no.3,4 and 9 The burden of proof of issue no.3 and 4 was on the plaintiff while the burden of proof of issue no.9 was on the defendant. It has come in the deposition of the plaintiff that he has completed the notice period of three months for terminating his services with the defendant company and worked upto 11.06.2010. Plaintiff further deposed that 12 he requested defendant company well in advance to prepare his salary for the notice period and relieving letter on the last working day with the defendant company i.e. 11.06.2010. The correspondence which took place between the plaintiff and the defendant was through email Ex.PW1/5. This email is not disputed by the defendant, hence it need not be proved by filing affidavit as required u/s 65 of the Indian Evidence Act. Plaintiff further deposed that defendant company without any reason or ground did not pay him salary and also did not give relieving letter when demanded by him on 11.06.2010. Plaintiff further deposed that a sum of Rs.95,000/ is due towards him for the monthly salary for the period 01.03.2010 to 11.06.2010 which comes to Rs.85,000/ (approximately) after deductions towards salary and Rs.10,000/ towards leave encashment for the period 01.09.2009 to 11.10.2010. This part of the testimony of the PW1 was sought to be impeached in the cross examination but the plaintiff even in the cross examination held this ground while responding to a specific suggestion that he has not completed the work order. In his reply PW1 deposed that he has completed all his formalities and on his last working day with the Future Soft he was asked to sign an undertaking which he refused.
14. The case of the defendant is that the plaintiff left the services of the defendant company on 11.06.2010 without completing the relieving formality/process. So far as giving notice of three months period is concerned, the issue has already been decided in favour of the 13 plaintiff. For deciding these three issues email Ex.PW1/D1, Ex.PW1/D2, Ex.PW1/D3, Ex.PW1/D4 and Ex.PW1/D5 relied upon by the defendant and admitted by the plaintiff are very relevant. Defendant informed the plaintiff in the email Ex.PW1/D2 that defendant will release only part salary of the plaintiff for the notice period subject to an undertaking given by the plaintiff to the effect that plaintiff will not enter into any contract/employment directly with any existing clients of Futrure Soft or with any competing company offering or providing similar services to the existing clients or partners of Future Soft including Wipro Ltd., its affiliate/subsidiary/holding companies till after six months of termination of the services of the plaintiff. It is once again repeated in email Ex.PW1/D3 that defendant is giving and wiling to release the payment of the plaintiff during notice period provided the undertaking as mentioned above is executed by the plaintiff. In email Ex.PW1/D4 it is stated that the clearance process besides other requirements also included signing of an undertaking by the plaintiff. It, therefore, emerges from the oral as well as documentary evidence adduced by both the parties that plaintiff's salary for three months was due. The defendant refused to release the salary of the plaintiff and to issue a relieving letter to the plaintiff on account of failure of the plaintiff to execute the undertaking mentioned in the email Ex.PW1/D2, Ex.PW1/D3, Ex.PW1/D4 and Ex.PW1/D5.
15. The rights and liability of the parties are governed by the appointment letter Ex.PW1/1 and appraisal letter Ex.PW1/2. There is 14 no clause in either of these two documents stipulating that after an employee has served the defendant for the period of notice, the salary and relieving letter will not be issued by the defendant if the employee fails to execute the undertaking as mentioned above. Therefore, the insistence of the defendant in email Ex.PW1/D5 on the execution of undertaking by the plaintiff was against the terms of appointment letter Ex.PW1/1 and appraisal letter Ex.PW1/2. The plaintiff cannot be compelled to do an act which he never agreed to do at the time of joining of the plaintiff or at the time of his promotion. Even otherwise the undertaking insisted upon by the defendant is against the mandate of Section 27 of the Contract Act. This aspect will be discussed in detail while deciding other issues. The fact remains that the plaintiff has worked for three months for the defendant company after tendering his resignation and defendant has withheld the salary of the plaintiff for the aforesaid three months and also failed to issue the relieving letter to the plaintiff without any justifiable grounds. Therefore, the plaintiff is entitled to recovery of salary and is also entitled to issuance of the relieving letter. Accordingly issue no.3,4 and 9 are decided in favour of the plaintiff and against the defendant.
16. Issue no.2,5,6 and 7 The claim of the defendant against the plaintiff is mainly based on two documents viz appointment letter Ex.PW1/1 and appraisal letter Ex.PW1/2. It is laid down in the appointment letter Ex.PW1/1 that the defendant will not enter into any contract/employment directly with 15 any existing clients/customer of Futuresoft (India) Pvt. Ltd./ defendant or with any competing company including Wipro Ltd its affiliates/subsidiary/holding companies, offering or providing similar services to the existing clients or partners of defendant company till after 6 months from termination of plaintiff service with Future Soft. Clause 7 of the appraisal letter Ex.PW1/2 may be reproduced herein as under: "You will not be entering into any contract/employment contract/employment directly with any existing clients/customer of FutureSoft or competing company providing similar services to the existing clients or partners of FutureSoft till after 6 months from termination of my services with FutureSoft".
17. The grievance of the defendant is that plaintiff despite having agreed not to enter into any contract or employment directly with any existing clients/customer of FutureSoft or any competing company providing similar services to the existing clients or partners of FutureSoft till after 6 months from termination of his services with FutureSoft has provided software services to Wipro an existing customer, through a competing company namely INS Enterprise Consumer Pvt. Ltd within six months of his relieving the services of defendant company and has thus breached the terms and conditions of appointment and appraisal letter Ex.PW1/2.
18. The plaintiff has challenged the validity of the aforesaid clause 16 in the appointment and appraisal letter on the touchstone of Section 27 of the Indian Contract Act. According to 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". The answer to the question as to whether negative covenant in the appointment letter and appraisal letter is void or not is found in the judicial pronouncement rendered in (1981) 2 Supreme Court Cases 246 Superintendence Company of India (P) Ltd. vs. Krishan Murgai , (1967) ILLJ 2740 SC Niranjan Shankar Golikari vs. Century Spinning and Mfq. Com. Ltd., (1983) ILR Delhi 213 High Court High Polymer Labs Pvt. Ltd. vs. R.K.Mutreja and Anr. Hon'ble Apex Court in Niranjan Shankar Golikari (Supra) drew a discretion between a restriction in a contract of employment which is operating during the period of employment and one which is to operate after termination of the employment. Hon'ble Supreme Court in Superintendence Company of India (P) Ltd. vs. Krishan Murgai (Supra) took this distinction to its logical conclusion and held that, "Under Section 27 of the Contract Act, a service covenant extended beyond the termination of the service is void". It was further held that "the court's, therefor, view with disfavour a restrictive covenant by an employee not to engage in a business similar to or competitive with that of the employer after the termination of his contract of employment".
17
19. Hon'ble High Court in High Polymer Labs Pvt. Ltd. vs. R.K.Mutreja and Anr (Supra) laid down in para 14, "To my mind, the law laid down by the Supreme Court clearly is that any contract in restraint of trade after the period of employment of service is void as vocative of Section 27 of the Contract Act but that such restrictive covenant during the period of employment is binding unless it is unconscionable, unreasonable, excessively harsh or one sided". Hon'ble High Court further laid in para 16 as under: "I am, Therefore, of the view that Section 27 of the Contract Act is applicable when there is a contract in rest trait of trade after the cessation of employment whether by resignation or in any other manner and such a restrictive covenant is void and unenforceable. However, such a restrictive covenant is enforceable and is not hit by Section 27 of the Contract Act if the same is during the continuance of service of a wholetime employee provided that such a, covenant or contract is neither unreasonable nor unconscionable nor excessively harsh nor onesided."
20. The crux of the judicial pronouncement on the subject is that any negative covenant which restrains an employee from joining the competitor of an employee after the period of employment of service is void and same is hit by Section 27 of the Contract Act. In the light of these judgments it can be safely concluded that aforesaid two clauses contained in the appointment letter Ex.PW1/1 and appraisal letter 18 Ex.PW1/2 are void as they are hit by Section 27 of the Indian Contract Act and cannot be enforced. It is not in dispute that the plaintiff has completed his notice period as mentioned in the appointment letter and appraisal letter. The plaintiff after having legally terminated his employment with the defendant was free to join any company or organization irrespective of the negative covenant contained in the appointment letter and appraisal letter.
21. The loss or damage which the defendant is claiming to have suffered is not on account of any act of the plaintiff independent of the terms and conditions of the appointment letter Ex.PW1/1 and appraisal letter Ex.PW1/2. DW1 Mr. Mandip Singh Puri deposed that plaintiff has breached the terms and conditions of the appointment letter and appraisal letter by joining and providing services to Wipro an existing customer of the defendant company within six months of his leaving the service of the defendant company. DW1 further deposed that due to this act of the plaintiff defendant company has suffered financial loss and the defendant company has assumed the damages equivalent to six months last drawn salary of the plaintiff. DW1 further deposed that plaintiff is liable to pay damages to the defendant for violation of the terms and conditions of the employment equivalent to six months salary i.e. approximately Rs.1,62,000/ and damages amounting to Rs.5 lacs on account of loss of business and loss of repute of the defendant company in commercial market.
22. Since it has already been held that the negative covenant 19 contained in the appointment letter and appraisal letter cannot be enforced being violative of Section 27 of the Contract Act, any claim of compensation or damages based on the said clause is liable to be rejected. The defendant cannot draw any support from a clause in the appointment letter and appraisal letter which is against the law. Accordingly issue no.5,6 and 7 are decided in favour of the plaintiff and against the defendant. It is held that the suit filed by the defendant against the plaintiff is barred by Section 27 of the Indian Contract Act. Since the Court has come to the conclusion that negative covenant contained in the appointment letter and appraisal letter cannot be enforced, issue no.2 is also decided in favour of the plaintiff and against the defendant.
23. Issue no.8 The burden of proof of this issue was on the defendant. Defendant has not led any sufficient evidence on this issue. Even otherwise it is a legal issue. Section 41 (h) of the Specific Relief Act covenant lays down that an injunction cannot be granted "when equally efficacious relief can certainly be obtained by any other usual mode of proceedings except in case of breach of trust". The plaintiff in the suit has prayed for a decree of injunction against the defendant directing the defendant company to issue relieving letter to the plaintiff. Defendant has not indicated as to what other equally efficacious relief was available to the plaintiff. Defendant is duty bound to issue a relieving letter to the plaintiff when plaintiff has complied with all the 20 terms and conditions of the appointment letter and appraisal letter. The only relief which the plaintiff could have asked for getting a relieving letter was a decree of mandatory injunction. It is therefore, held that suit filed by the plaintiff is not barred u/s 41 (h) of the Specific Relief Act. The issue is accordingly decided in favour of the plaintiff and against the defendant.
24. Issue no.10 Relief.
In view of the findings of issue no.1,3 and 4 the decree for a sum of Rs.95,000/ is passed in favour of the plaintiff and against the defendant. A decree of mandatory injunction is also passed in favour of the plaintiff and against the defendant company and defendant is directed to issue relieving letter to the plaintiff within a period of one month. In view of the findings of the court on issue no.2,5,6 and 7 the suit filed by the defendant is dismissed. Decree sheet be prepared accordingly. File be consigned to record room.
Announced in the open court on (Sandeep Yadav)
30.11.2013 Addl. District Judge02 (South East)
Saket Courts, New Delhi