Rapid Bevtech Pvt Ltd vs Khs Machinery Pvt Ltd on 25 July, 2018

[Cites 18, Cited by 0]

Gujarat High Court

Rapid Bevtech Pvt Ltd vs Khs Machinery Pvt Ltd on 25 July, 2018

1. This Appeal from Order is preferred under Section 13 of the Commercial Courts Act read with Order 43 Rule 1 of the Civil Procedure Code. This Appeal from order is filed challenging the order dated 09.03.2018 passed below Exhibits 6 and 7 of notice of motion in Commercial Trade Mark Civil Suit No.31/2017 by the Commercial Court, Ahmedabad.

2. The parties will be addressed as plaintiff and defendant for the sake of convenience.

3. The appellants are the original defendants in the Commercial Trade Mark Suit filed by the respondents herein contending that the respondent plaintiff is engaged in the business of manufacturing and marketing of filling, packaging and processing machineries for beverage, food and non-food sectors and providing for maintenance and service for the same. The Civil Suit was filed with the prayers as under :-

"(A) The Hon'ble court be pleased to grant an order and decree of permanent injunction restraining the defendants, their directors, partners, successors, servants, agents, dealers and distributors from using intellectual properties including but not limited to know-how, technical knowledge, customized manufacturing machinery as mentioned in ANNEXURE "A" and copyright protected customized computer software, database, drawings, process information and details, circuit diagrams, patent and other copyright protected materials and confidential information of the plaintiff.

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(B) The Hon'ble court be pleased to declare that defendant have no right to use or disclose or divulge confidential information or secret process of manufacturing of machines as mentioned in ANNEXURE "A" and any other information of high degree of confidentiality and trade secrets of plaintiff to any other person.

(C) The defendants, their director, partner, successor, servants, agent, dealers, distributors be restrained by an order of permanent injunction from disclosing confidential information and any other information of high degree of confidentiality and trade secrets of the plaintiff."

4. The notice of motion was filed vide Exhibits 6 and 7 praying, inter-alia as under :-

"(A) The Hon'ble Court be pleased to grant an order of temporary injunction till disposal of suit restraining the defendants, their directors, partners, successors, servant, agent, dealers, and distributors from using intellectual properties including but not limited to knowhow, technical knowledge, customised manufacturing machinery mentioned in ANNEXURE "A" and copyright protected customised computer software, database, drawings, process information and details, circuit diagrams, patents, and other copyright protected materials and confidential information of the plaintiff.

(B) The Hon'ble Court be pleased to grant an ad-

interim order may be passed in terms of Prayer (A).

5. In the impugned order, the Commercial Court has restrained the defendants (appellants), i.e. the directors, partners, successors, servants, agents, dealers and distributors from using the confidential information / knowhow / technical knowledge, customized Page 3 of 27 C/AO/145/2018 CAV JUDGMENT manufacturing machinery of the plaintiff. In the same order, it is also directed that the order of restrain is not to mean to preclude the defendants (appellants), who otherwise are free to carry on their profession by utilizing their own skill and information mentally retained by them, or by soliciting them independently. The impugned order further records directions to the parties to conclude the exercise of admission and denial of documents within a satisfied time.

6. The appellants - original defendants aggrieved by the order passed below Exhibits 6 and 7 - notice of motion in favour of the plaintiff seeks to challenge the same. The impugned order is challenged inter-alia, on the ground that the Commercial Court has no jurisdiction as the dispute raised in the complaint is not a commercial dispute and no cause of action exists. The Suit is barred by law of limitation and that there is no disclosure of any confidential information and as such so-called confidential information was already in public domain. This is also challenged on the ground that the machinery involved or the pattern is not registered in the name of the plaintiff and therefore, cannot claim any right over such machinery more particularly, when such machinery does not form the part of the agreement between the plaintiff and its principal foreign Company.

7. The facts are as under :-

a) It is the case of the plaintiff that the defendant No.1 is a Company incorporated by defendant No.3 and 4 alongwith defendant No.2 of which defendants No.3 and Page 4 of 27 C/AO/145/2018 CAV JUDGMENT 5 are the partners. The defendants No.3 and 4 were the former employees of the plaintiff Company and defendant No.5 being the wife of the defendant No.4. It is the case of the plaintiff with large investment in research and development, the plaintiff in collaboration with its principal foreign company of Germany, were able to develop highly specialized machinery and the plaintiff is using the know-how / confidential information and intellectual property of the principal German company since 1977. It has been selling specialized machinery to leading food and beverage companies. The defendant No.3 was working with the plaintiff company as Service Engineer and had entered into an Agreement in respect of the technical know-how. Similarly, the defendant No.4 was also working as Engineer Technical Service and had also signed three agreements in respect of technical knowhow. The plaintiff company had invested money and confidence in these two employees by imparting them with training and technical knowhow of the special machinery of the plaintiff Company and for the purpose, both the defendants were even sent to Germany.

b) It is the case that while in service, the defendant No.4 had resorted into dishonest activities, as a result of which his service came to be terminated and during the internal investigation, it was also found that the defendant No.4 had colluded with defendant No.3 who had illegally diverted confidential information, knowhow, business secrets and intellectual property while working with the plaintiff.

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c) It was found by the plaintiff company that the defendants were using confidential information, knowhow and business secrets and intellectual properties of the plaintiff to develop their own business and hence, a notice came to be issued upon the defendants by the plaintiff, pursuant to which a tri- partite agreement came to be entered between the plaintiff and the defendant Nos.2 to 5 on 23.10.2012, wherein the defendants agreed to stop unauthorised use of plaintiff's confidential information, business secrets, intellectual properties.

d) Thereafter also, the plaintiffs found that the defendants were not complying with the clauses of the agreement and in fact, converted by using the confidential information, knowhow, business secrets and intellectual property of the plaintiff for their personal gains. The plaintiff therefore, lodged a criminal complaint and also engaged an expert investigator. It was found in the second week of October 2016, that the defendants were still engaged in the design to sell their machineries and equipments which are based on the plaintiff's manufacturing process, technology and knowhow and they were also using the same specifications as the product of the plaintiff, as a result of which, the plaintiffs were constrained to file a Suit.

8. Against this case, it was the case of the defendants that they were dealing in machineries from India and outside manufactured by various companies including the Page 6 of 27 C/AO/145/2018 CAV JUDGMENT plaintiff company and after refurbishing they were reselling them in the market and in such a process, they used to receive technical information, knowhow of such machinery and therefore, the defendants denied that they have committed any unauthorised use of plaintiff's confidential information, knowhow etc. It was also contended that the machineries are not of a exclusive variety or right as the plaintiff have no exclusive license under the Copy Right Act, Patents Act, Designs Act or any other statute so as to claim authority and prevent the defendants from denying a legitimate business.

9. Heard learned Advocates on behalf of the appellant as well as the defendant.

10. It is submitted that the original Suit was filed for prayers as mentioned in the preceding paragraphs but subsequently, a pursis was moved vide Exhibit 118 wherein the plaintiff had limited its Suit to its right under the common law of Torts, breach of confidential information, knowhow and breach of trust. It is submitted that upon filing of such pursis the dispute raised in the Suit no more remained within the definition of Section 2 of the Commercial Courts Act as the dispute had not remained to be a dispute of commercial nature of specified value as contemplated under Section 2(c) (xvii). Learned Advocate submits that the cause of action is beyond the period of limitation and therefore, a contention was raised for dismissal of the Suit under Order 7 Rule 11(d). The Court has not considered the same but proceeded to grant temporary injunction. It is Page 7 of 27 C/AO/145/2018 CAV JUDGMENT submitted that even if the case of the plaintiff is taken as a whole, the same is based upon the tri-partite agreement. The tri-partite agreement specified the period of two years which was over and therefore, there was no bar on the defendants not to use the technical knowhow regarding the machinery. It is submitted on merits, that the claim of the plaintiffs that the defendants are using confidential information cannot be true at all as the defendants No.2 and 3 were engaged as Service Engineers and had no absolute knowledge regarding the business especially the clients information and therefore, there is no question of misusing the same. It is submitted that the period of restraint specified under the tri-partite agreement had expired and therefore, the cause of action to file the Suit was barred by limitation. It is submitted that the terms and conditions of their appointment orders or trainee agreements have all merged into tri-partite agreements and accordingly, the two years restrain would expire on 19.10.2014 and therefore, the allegations for breach of the conditions of the tri-partite agreement beyond 19.04.2014 would be unsubstantiated. It is submitted that the defendants have never used any confidential information, as machinery cannot be manufactured without critical parts which are manufactured by the principal German company of the plaintiff who has issued the license and as per Clause 1.6 of the knowhow License Agreement, the machinery cannot be even manufactured by the plaintiff without the critical parts and therefore, when the plaintiff itself cannot manufacture such machineries, allegations that the Page 8 of 27 C/AO/145/2018 CAV JUDGMENT defendants are manufacturing such machineries is baseless. It is argued that the defendants have indigenously developed the critical parts of the machineries and such development is not based on the confidential information of the plaintiff. Moreover, as such defendants were in the after sale service Department and not in the manufacturing, research, design or quality control department. There is no question of the plaintiff having any accessibility to the so-called confidential information. Learned Counsel has therefore, argued that Section 27 of the Contract Act, 1872 does not recognize the negative covenant and thereafter, argued that on the basis of Section 27 of the Contract Act and submitted that even if the tri-partite agreement is taken at its face value, the same cannot come in the way of the appellant to restrain the lawful profession, trade or business of any kind and therefore, by the interim injunction, the defendants cannot be restrained from carrying out the business activities as they were carrying out earlier.

11. Learned Senior Counsel Mr. Kamal B. Trivedi appearing for the plaintiff Company submits that the plaintiff is a Company registered under the Companies Act, 1956 and is engaged in the business of manufacturing and marketing of filling, packaging and processing machineries for beverages, food and non-food sectors. It is submitted that the plaintiff created and developed the machines with research and by applying hard work, labour and skill in collaboration with KHS GmbH of Germany. The plaintiff entered into a Know-

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how Agreement dated 21/03/2012 with said KHS GmbH of Germany, the plaintiff is using know-how, confidential information and intellectual property of KHS GmbH in India since 1977 and thereby the plaintiff became exclusive user and licencee of know-how, confidential information and intellectual property for India. The plaintiff has further stated that the know-how, confidential information and intellectual property are not accessible to all employees or common man. It is submitted that the defendant No.3 had joined the plaintiff as Service Engineer in August 1998. because of the trustworthy behaviour of defendant No.3, the plaintiff allowed him to know and learn important process of the machines, know-how and confidential information of the plaintiff about manufacturing and service of the machines. The plaintiff also sent defendant No.3 to Germany for specialized training to further enhance his skills. Defendant No.3 had also signed an Agreement dated 30/03/2000 with the plaintiff in respect of technical know-how. The plaintiff has stated that defendant No.3 resigned from the service of the plaintiff on 28/09/2009. It is submitted that the defendant No.4 had joined as Engineer Technical Services with the plaintiff in march 1999. He was also sent to Germany by the plaintiff for specialized training on several occasions. He had also signed three agreements dated 06.09.2009, 02.06.2011 and 05.03.2012 with the plaintiff in respect of technical know-how.

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12. It is submitted that in September 2012, the plaintiff came to know about unfair and dishonest activities undertaken by defendant No.4 during the course of his employment and therefore, the plaintiff had terminated the services of defendant No.4. During internal investigation, the plaintiff found that the defendant No.4, in collusion with defendant No.3, who was also ex- employee of the plaintiff illegally diverted many of plaintiff's confidential information, knowhow, business secret and intellectual property for illegal gain and to start a business venture by riding upon plaintiff's and its German counterpart's know-how and intellectual properties. According to the plaintiff, the defendant Nos.3 and 5 had started a partnership firm, i.e. defendant No.2 when defendant No.4 was working with the plaintiff for their illegal business activities.

13. It is submitted that after becoming aware about the activities of defendant Nos.2 to 5, the plaintiff issued a legal notice to the defendant Nos.2 to 5 for their illegal action, breach of trust, misuse of plaintiff's confidential information and know-how. On receipt of the said notice, the defendant Nos.2 to 5 entered into a Tripartite Agreement with the plaintiff on 23.10.2012. In the said Agreement, defendant Nos.2 to 5, inter alia, agreed that they will stop and will not unauthorizedly use plaintiff's confidential information, know-how, business secret and intellectual property any further. It is submitted that the plaintiff inquired in the market about illegal activities of the defendant Nos.2 to 5 and found that defendant Nos.3 and 4 have incorporated and directors Page 11 of 27 C/AO/145/2018 CAV JUDGMENT of defendant No.1 company and that some of the clients of the plaintiff received the services provided by defendant Nos. 1 to 3. The plaintiff therefore lodged a criminal complaint before GIDC Vatva police Station on 08.06.2016 against the defendants and the said complaint is pending for investigation. The plaintiff engaged an expert, i.e. Esquire Ideation Pvt. Ltd. for investigation into the matter. At the request of the plaintiff, the said independent expert prepared the comparison report of plaintiff's product technical specification and defendant No.1's product technical specification, which clearly shows that the defendants have electronically reproduced and copied the drawings, diagrams, chart, process and technology of the plaintiff. It is submitted that the defendants are still engaged in inducing to sell their machines and equipments, which are based upon the plaintiff's manufacturing process, technology and know-how and also using same specifications in their product brochure as that of the plaintiff. The plaintiff therefore again asked the above named expert to once again prepare a comparison report of the specifications of the plaintiff's product and the one copied therein by defendants. The said expert, after having effected comparative analysis, has given the report dated 17.10.2016, which clearly shows that the defendants are still persisting in the same wrong doing. Hence, the plaintiff had prayed for a temporary injunction against the defendants restraining them from continuing their illegal activities.

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14. With regard to the contention of this case not being a Commercial Suit, it is vehemently submitted that the Suit as it stands after filing of the pursis Exhibit 118 would loose its status as the commercial dispute of a specified value. The language of the Exhibit 118 reads as under :-

"Without prejudice to the rights and contentions of plaintiff, the plaintiff declare that present suit is filed under the Common Law right, Law of Torts, breach of confidential information know-how and breach of trust and not under statutory rights available to the plaintiff under Patents Act, Designs Act, Copyright Act and Trademark Act as raised by the defendants.

The plaintiff reserves its right to file or pursue appropriate action under the above referred Acts and this pursis in the present suit shall not come in way of plaintiff to file and pursue such action."

15. Considering this language which specifically refers to the Acts under which the claim is not pressed would not take the dispute out of the definition of commercial dispute. The perusal of Paragraphs 28, 29 and 30 specifically refers to the Service Agreement at the time of joining service of the plaintiff, the Joining Agreement and the Tripartite Agreement also. On account of this, it cannot be said that the suit could be termed to be a Commercial Suit only on account of Section 2(c)(xvii). The suit even after the pursis at Exhibit 118 still continues to be a 'commercial dispute' as the Suit based on the nature of aforementioned agreements specifically pleaded needs to be treated as a 'commercial dispute'. The finding therefore, given in the impugned order need not be interfered.

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16. The judgment of the High Court of Delhi in the case of Time Warner Entertainment Company, L.P. & Others v. RPG Netcom Globe & Ors. reported in ILR (2007) II Delhi 854 appears to have been rendered in the case of Copy Right Act, 1957. The Delhi High Court was examining specific provisions of Copy Right Act, viz. Section 2(d), Sections 13, 14, 16, 17 and 55 of the Act vis-a-viz Section 31 of the Act. Section 55 provides for civil remedies in cases of infringement and empowers / authorizes owner of a copyright to a remedy of injunction / damages in respect of any 'work'. Section 31 provides for Abrogation of common law rights. Considering both the provision in facts of the case, Delhi High Court did not accept contention of plaintiff that they are entities to injunction under the law of Tort, as the Act itself stipulates and confers statutory rights in respect of a Copyright, however, such Copyright has to exist only under the provisions and in accordance with the Copyright Act. The reliance of the appellant plaintiff (on Paragraphs 10 and 11) of this judgment is not well founded.

17. With regard to the contention of the appellant defendant that there exists no cause of action to file Suit itself, hence, there is no question of injunction. To deal with this contention, it is necessary to appreciate that the Suit is titled as a "Suit for permanent injunction, Damages and Accounts of Profit". The Court fees is paid accordingly.

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18. From the pleadings in the plaint, it appears that the Suit is based on the various clauses of the Appointment / Agreements entered by the plaintiff with defendant No.3 and defendant No.4. The relevant clauses are reproduced hereunder :-

(a) Clauses in Appointment letters of the defendant dated 27.03.1999.

"11. You shall not either during or after the period of employment hereunder divulge to any person whomsoever, and shall use your best endeavours to prevent the publication or disclosure of any trade secret or manufacturing process or any information concerning the business and finances of the Company or dealing and transactions which may come to our knowledge.

12. You shall use your best endeavours to promote the interest and welfare of the Company and shall not be concerned or interested directly or indirectly whatsoever in or in connection with any other business."

(b) Agreement dated 30.03.2000 by the plaintiff with the defendant No.3 :-

"8. The employee shall not, while in the services of the company or after ceasing to be in the services of the Company, disclose or cause to be disclosed any knowledge, information, documents, relating to such training and technology for manufacture of above mentioned Bottling Plants and / or related equipment's and / or advanced management methods to any outsides or will not, unless permitted by the Company in writing make use of such training, knowledge, information, documents for starting or aiding in business of manufacturer of Bottling Plants and other related equipment's. However, if he does not observe this condition, a sum of Rs.50,000/- shall forthwith become payable to the company as liquidated damages, in addition to any other remedies available to Page 15 of 27 C/AO/145/2018 CAV JUDGMENT the Company under the law. This conveniences shall survive the termination of this agreement.

10. The employee hereby confirm that the above terms / restrictions are reasonable and he shall not any time dispute their reasonableness. It is clearly understood and agreed to by both the parties that such restrictions are absolutely necessary for safeguarding the valuable technology proposed to be transferred though such training."

(c) Tripartite Agreement dated 19.10.2012 between One Rapid Engineering represented by defendants No.3, 2 and one Yatindra R. Sharma purportedly representing plaintiff as a third party :-

"AND WHEREAS the party of Second part had as an employee joined the organisation of the party of the Third Part on 8-3-1999 and the concerned persons of the party of the Third Part having learnt about the dishonest activities undertaken by party of the Second Part immediately vide letter dated 10-09-2012 terminated the service of the party of Second Part by issuing two month notice payment.

AND WHEREAS on scrutiny of the detail activities undertaken by the party of the Second Part, it surfaced out glaring illegal activity viz; though the party of the Second Part was in service with the party of the Third Part and despite of two agreement dated 02-06-2011 & 05-03-2012 signed by party of Second part indicating to serve the organisation of the party of third part for the period of 2 years from the date of agreement on account of technical knowhow in respect to Bottling Plants and other related equipment having been obtained from Germany at the expenses of the party of Third Part yet on the other hand the party of the Second Part had connived with Ex. Employee Mr. Vishnu Shukla and in the year 2010 had formed a firm in the name of party of First Part wherein the wife of the party of Second Part namely Smt. Pinky Bhavsar was made partner and to derive wrongful gain to the party of first part, all intrinsic details related to Page 16 of 27 C/AO/145/2018 CAV JUDGMENT Bottling Plants and other related equipment along with customers details of the party of Third part was gradually being transferred to part of First Part whereby the customers of party of Third Part were being converted as customers of party of First Part, details indicated on a separate sheet titled as Schedule-1.

AND WHEREAS on account of such illegal activity, the party of the Third Part not only sustained huge loss to the tune of Rs.1.5 crore but even lost prestigious customers which has impacted to a larger extent its business and repute in the market.

NOW THIS IDENTURE WITNESSEH AND IT IS HEREBY AGREED, UNDERSTOOD, CONFIRMED AND DECLARED BY AND BETWEEN THE PARTIES HERETO AS FOLLOWS

1. That the party of the First Part & Second Part hereby agrees that the services viz: installation, trouble shooting, repairing & commissioning KHS equipment rendered to different customers, details indicated on a separate sheet annexed as Schedule - 1 shall not be extended to said customers henceforth from the date of the present agreement for a period of of two years either in the name of party of First Part or under the guise of any other name.

2. That the party of the First Part & Second Part also agrees that the remaining customers of the party of the Third Part, details indicated on a separate sheet titled as Schedule -2, shall not be approached by whatsoever mean for rendering any services, viz; installation, trouble shooting, repairing & commissioning KHS equipment for a period of two years from the date of the present agreement either in the name of party of First Part or under the guise of any other name.

4. That the party of Second part has volunteered to repay back an amount of Rs.300,000/- (rupees three lakhs only) to the party of the Third part to which the party of the Second Part has received towards dishonest activities done by him against business interest of party three. Accordingly repays back the said amount vide cheque no.257425 drawn on Axis Page 17 of 27 C/AO/145/2018 CAV JUDGMENT Bank, Maninagar Branch, Ahmedabad, in favour of the party of Third Part while signing the present agreement.

5. That the party of the Third Part has agreed of not initiating any action pursuant to the legal notice dated 9-10-2012 against the party of the First & Second part for the acts done so far.

6. That the party of the First & Second Part agrees that any breach of condition agreed upon by way of present agreement in future, shall unconditionally make them liable to pay a sum of Rs.50 lakhs to party of Third Part and party of the Third Part shall be at liberty to initiate all action available and contemplated as per law."

19. At this stage, it is pertinent to record that an Application Exhibit 34 is filed by the defendant u/ or 7 R11(a)2(d) for rejection of plaint. Such application Exhibit 34 came to be disposed of as not pressed by an Order dated 05.08.2018. Such order is now final as not subjected to the challenge even in the present proceedings. In the pleadings, however, a contention is raised that though contention of no cause of action and limitation were raised invoking Order 7 Rule 11, still the Court has simply disposed of by recording as not pressed. The Court finds that in the order below Exhibit 34, Court has recorded some reasons and also referred to Pursis at Exhibit 118 and the endorsement made on behalf of the plaintiff. However, before this Court none of the parties have produced on record Exhibit 118 or the Application Exhibit 34 for perusal of the Court.

20. Be that as it may, this Court having independently perused the Clauses of the Agreements and the Page 18 of 27 C/AO/145/2018 CAV JUDGMENT submissions of the learned Advocate for the plaintiff - respondent on the tripartite agreement that the plaintiff is not party to such agreement, prima-facie there arises a cause of action.

21. For the purpose of the cause of action, the Court has also perused Court Commissioner Report dated 26.10.2016, 27.10.2016 carried out at the separate premises of the defendants; the report of the FSL dated 04.03.2017 which records that total 800 files containing backup, M.S. Word documents, auto cad drawings, images, acrobat reader PDF doc., microsoft excel sheets related to KHS Machinery (plaintiff).

22. The Court has also perused the conclusions drawn by the Technical Expert, Esquire Ideation on the issue whether there exists similarity in the machinery / equipments as displayed by the defendant with that of the plaintiff. The conclusion of the expert after comparing the various technical diagrams of plaint monitoring system.

"The Schematic plant figure is a direct plagiarism from KHS Presentation of Filler Screen Figure"

Similar opinion is on record for other machinery presentation of machinery of 'Bottlewashers'.

23. The contention of the appellant defendant on the ground that life of tripartite agreement was for 2 years only and thereafter, the Department was free to start the Page 19 of 27 C/AO/145/2018 CAV JUDGMENT work for which injunction is sought. The clauses of tripartite agreement nowhere provide for continuing the use of protected softwares, database, drawings, process information, diagram etc. of plaintiff company. The tripartite agreement is an acceptance of misdemeanor by the Department and payment of compensation but certainly not an Agreement to grant license for all time to come. In fact the Court finds that the interim relief granted under the impugned order is properly couched, balancing the equities.

24. Therefore, for the reasons recorded by Commercial Court and for the reasons recorded herein below on this issue. No interference with the impugned order on the ground of "cause of action" or "limitation" is called for. The plaintiffs has rightly relied on the decision of the Hon'ble Supreme Court in the case of Bengal Waterproof Limited v. Bombay Waterproof Manufacturing Company and Another reported in (1997) 1 SCC 99, wherein in paragraph 10, it is observed as under :-

"In cases of continuous causes of action or recurring causes of action bar of order 2, Rule 2, sub-rule (3) cannot be invoked. In this connection it is profitable to have a look at Section 22 of the Limitation Act, 1963. It lays down that "in the case of a continuing breach of contract or in the case of continuing tort, a fresh period of limitation begins to run at every moment of the time during which the breach or the tort, as the case may be, continues." Ass act of passing off is an act of deceit and tort every time when such tortious act or deceit is committed by the defendant the plaintiff gets a fresh cause of action to come to the court by appropriate proceedings. Similarly infringement of a Page 20 of 27 C/AO/145/2018 CAV JUDGMENT registered trade mark would also be a continuing wrong so long as infringement continues. Therefore, whether the earlier infringement has continued or a new infringement has taken place cause of action for filing a fresh suit would obviously arise in favour of the plaintiff who is aggrieved by such fresh infringements of trade mark or fresh passing of action alleged against the defendant."

25. Contention is raised regarding sharing of confidential information and requirement of the law before ordering restraint on divulging of confidential information or the information which is in public domain. In support it is argued that the information i.e. the drawings, designs etc. of the machinery alleged by plaintiff to be used by the applicant-defendant was already in public domain. Moreover, it is also argued that as the defendants were in business of purchasing old machinery, refurbishing and selling it in the market because of which also they came in possession of the drawings, designs etc. of the machinery. It is also argued that the drawings, designs, softwares seized during panchnama and sent to FSL were all such drawings etc. and cannot be said to sharing or divulging of confidential information. This contention though strongly raised is not substantiated with equal vigour by any prima facie evidence. As observed by Commercial Court, nothing is produced on record to demonstrate how the information found in possession of the defendant was available with him through any public domain neither any thing in the form of Bills / Agreements etc. are produced to show that the drawings, designs, etc. were received as a part of the Page 21 of 27 C/AO/145/2018 CAV JUDGMENT purchase of old machinery. Whereas plaintiffs have proved that defendant Nos.3 and 4 were in service with the plaintiff, that too on technical side and had access to the confidential information while on job and during the training.

26. Moreover, the tripartite agreement which is on record and signed by defendants No.3 and 4 clearly accepts the sharing of the confidential information while in service and also providing for making payment to the plaintiff in this connection. In face of these facts, this Court is inclined to believe prima-facie disclosure of the plaintiff company by the defendant.

27. From the material available on the record, the licensing Agreement alongwith the list of machinery appended, the clauses of various agreements and especially the tripartite agreement and the conclusions of the Technical Expert Report, prima-facie Court is of the view that the information used and shared by the defendant was a confidential information within the domain of the plaintiff. The judgment cited in this regard in the case of Polaris Software Lab. Limited rep. by its Company Secretary vs. Suren Khiwadkar reported in (2004) ILLJ 323 Mad and Fairfest Media Ltd. v. ITE Group Plc reported in 2015 (2) CHN (CAL) 704 may not be of any use to the case of the appellant on facts. Hence the detailed discussion is avoided.

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28. It is thereafter, argued that the Right of the defendant to do legitimate business cannot be curtailed by the impugned order, as the defendants have developed machine and design of their own. In support attention was drawn to Clause E and 1.6 of the Licensing Agreement. Both the plaintiff and its principal German company regarding critical parts. It is submitted that when plaintiff itself cannot make such machines on its own it cannot seek injunction. The Court has perused the licensing Agreement which consisted of the list of machinery appended to be covered under the Agreement but also provided for the extension of the range of the Contract product with the written approval of the licensor. It also entitled the licensee to make further development to those products as Contract Product with a provision for Royalty (Annexure 'B'). In this view the argument of the appellant cannot be accepted.

29. It is therefore, argued that the impugned judgment does not refer at all to the 'Balance of Convenience' or 'irreparable injury'. It is also argued that there cannot be any negative covenant as the same would be against Section 27 of the Contract Act. Therefore, the impugned order is also against Section 27 of the Contract Act. Section 27 provides for Contract to be void to the extent to which the Agreement restraints one from exercising lawful profession, trade or business. In this regard, reliance is placed on the decision of the Hon'ble Supreme Court in the case of Superintendence Company of India (P.) Ltd. v. Krishan Murgai reported in AIR 1980 Supreme Court 1717 and in the Page 23 of 27 C/AO/145/2018 CAV JUDGMENT case of Percept D'Mark (India) (P) Ltd. v. Zaheer Khan reported in 2006 (4) Supreme Court Cases

227. Reliance on Krishan Murgai (supra) is misplaced as learned Advocate has relied upon Paragraphs 28, 29, 32 and 59 which is the minority view. Moreover, the judgment only interprets the word 'leave' which appeared in relevant clause of the Agreement vis-a-viz Section 27 of the Contract Act. The Hon'ble Supreme Court went on to decide that word 'leave' to be construed to be voluntary action to invoke the Restrictive covenant of the Agreement. Similarly, in Percept ' D'Mark (supra), the Hon'ble Supreme Court was called upon to interpret Clause 31 of the Agreement with reference to Section 27 and enforceability of such clause. The Supreme Court after considering Section 31 as well as other clauses of Agreement viz. 31(b), 32(g) held that High Court in that case has rightly held that it is impermissible to extent the negative covenant which survived the expiry of contract as the same is void under Section 27. The issue in the present case is quite different. Nowhere it appears that the suit is for an enforcement of the so called restrictive clause of the tripartite agreement. Neither the tripartite agreement which has discussed earlier is in connection with granting permission to design / manufacture the machinery / equipment similar or identical to the machinery / equipments of the plaintiff. Therefore, there does not appear to be any case of enforcing of negative covenant.

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30. Insofar as the balance of convenience is concerned, considering what is observed in the preceding paragraphs more particularly in connection with the clauses of the agreements and the conclusion of the technical expert and the FSL the Court finds that machinery / equipments designs as projected by the defendant are similar to that of the plaintiff. The defendant has failed to produce before the trial Court any evidence of indigenous development as the design etc. of the machinery by the defendant where as plaintiff is able to establish the fact that the defendants No.3 and 4 were in service of the plaintiffs were exposed to technical knowhow on account of the job profile and training abroad and the clauses of the tripartite agreement worked the balance of convenience in favour of the plaintiff.

31. It is relevant to produce from the pleadings following paragraphs :-

"the defendants are using the business process, manufacturing secret, diagrams, drawings, software which is highly confidential and protected which is only known to plaintiff and its German counterpart which are in access to the Defendant Nos.3 and 4 while working with the plaintiff. The Defendants are also trying while negotiating business with third parties explaining the plaintiff's business methods in disparaging manner which is nothing but an attempt to dilute and damage the reputation and goodwill of the plaintiff and their products. The plaintiff further submits that the defendants is approaching the regular and future clients of the plaintiff and offered to supply the identical machine and services in low price, which are provided by the plaintiff.

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Plaintiff submit that the Defendant Nos.3 and 4 are ex- employees of the plaintiff and worked for long time with plaintiff, moreover, the defendants were in access to the confidential information such as drawing of machines, process of manufacturing low-cost productivity machines, researched products and installation process for machines of filling, packaging and processing of Beverages, water, food and non-food products of the plaintiff. The defendants had entered into agreement at the time of joining, training and also by tripartite agreement. Hence, it is express as well as implied obligation of the Defendants, not to use, divulge and/or disclose any confidential information, know-how or trade secret of the plaintiff except for the plaintiff to any person. Therefore, since the defendants are continuing their unlawful activities and misuse of copyright protected confidential information, software, patents, drawing, know-how or trade secret of the plaintiff, they are liable for breach or legal right and confidential information. The illegal use of properties of the plaintiff and with act of unfair competition results in irreparable loss and injury to the reputation of the plaintiff and thereby the defendants are liable for damages for their illegal acts which cannot be compensated in terms of money."

32. The aforementioned pleadings coupled with the facts discussed hereinabove the issue of irreparable loss also is required to be answered in favour of the plaintiff. Accordingly, this Court for its own reasons would hold both these issues in favour the plaintiff.

33. In view of the aforesaid, this Court is of the view that for the reasons stated in the impugned order as well as for the reasons recorded by this Court, no interference is called for in the impugned order dated 03.09.2018 below Exhibits 6 and 7 in Commercial Trade Mark Civil Suit No.31/2017. The Court also finds that the relief granted vide the impugned order is equitable Page 26 of 27 C/AO/145/2018 CAV JUDGMENT and is balancing the respective rights of both the parties. Hence, also no interference is called for.

34. The Appeal from Order is therefore, dismissed.

35. In view of the order passed in the main Appeal from Order, Civil Application does not survive and stands disposed of accordingly.

Sd/-

(M.R. SHAH, J) Sd/-

(A.Y. KOGJE, J) Caroline Page 27 of 27

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Gujarat High Court