Delhi District Court
The Leather Laundry Private Limited vs Kapil Mathur on 4 September, 2023
IN THE COURT OF SHRI SANJAY SHARMAI :
DISTRICT JUDGE (COMMERCIAL COURT01)
EAST DISTRICT
KARKARDOOMA COURTS : DELHI
CS (COMM) No. 305/2022
The Leather Laundry Pvt. Ltd. (TLL)
Through its Authorized Representative
Ms. Roselin George
Office at 30E, Patparganj Village,
Delhi ...... Plaintiff
Versus
1. Mr. Kapil Mathur
S/o Mrs. Neelam
R/o 17A , Friends Club
Friends Colony, West Delhi
Also at :
Property No. 189, 4th Floor,
Bhawat Villa , Hari Nagar, Ashram
New Delhi 110 014
2. Mr. Vinay Prakash Mishra
S/o Shri Rajendra Prashad
R/o F88, Dharm Vihar,
Khora Colony, Ghaziabad, UP ...... Defendants
Date of institution : 06.10.2022
Date of reserving judgment : 07.8.2023
Date of judgment : 04.9.2023
JUDGMENT:
The plaintiff has filed the present suit against the defendants seeking perpetual and mandatory injunction for restraining the defendants from passing off its brand/tradename CS (Comm) No. 305/2022 The Leather Laundry Pvt. Ltd. Vs. Kapil Mathur & anr. Page No.1 of 22 'TLL' or 'The Leather Laundry Private Limited'. The present suit has been filed by its authorized representative Ms. Roselin George who was appointed by the Board of Directors vide Board Resolution dated 29.8.2022. The plaintiff has further sought rendition of accounts of profits illegally earned by the defendant by infringing of trademark and by alluring the customers of the plaintiff company and for delivering up of all material including stolen data of the plaintiff company and from committing any act amounting to unfair trade practices with directions to the defendants to refrain from using the said brand/tradename. The plaintiff has further sought damages from the defendants. 1.1 In brief, the facts as averred in the plaint are that the plaintiff company was incorporated under the trade name of 'TLL The Leather Laundry Private Limited' in February 2015 and since then it has been administering the services of cleaning, repairing and laundering of leather and its products to a large base of customers. The plaintiff company also runs its website with domain address 'www.theleatherlaundry.com' through which it solicit, advertise and attract the customers from the online markets, having its presence throughout India as well as abroad. The plaintiff company is a well known name in the leather industry and it provides services like repairing, laundering relating to the leather products. The plaintiff company is the first in India engaged in the business of such kind which was incorporated by its Director Ms. Mallika Sharma who dedicated her life in researching and developing the business. 1.2 It has been averred that both the defendants were the CS (Comm) No. 305/2022 The Leather Laundry Pvt. Ltd. Vs. Kapil Mathur & anr. Page No.2 of 22 employees of the plaintiff company but they, dishonestly and maliciously, had stolen the data containing trade secrets of the plaintiff company. Subsequently, both the defendants in violation of the terms and conditions of the Employment Agreement executed by them, used the tradename 'TLL' in order to seek the advantage of hard earned reputation and goodwill of the plaintiff's tradename. Due to the act of the defendants, the plaintiff company suffered huge losses and reputation in its business.
1.3 It has been averred that defendant No. 1 worked with the plaintiff company as Management Executive for a period of three years while defendant No. 2 worked with it as Operations Executive w.e.f. 02.12.2020 till January 2022 and subsequently, left the services without any notice. It has been averred that the plaintiff's trade name 'The Leather Laundry', 'TLL' or 'Leather Laundry' has been coined and invented by the Director of the plaintiff and exclusively belongs to it, who has acquired all its trademark rights, website domain etc. by due process. The plaintiff came to know about various complaints/information from various persons through email, whatsapp/text message/phone calls that they were receiving constant calls from the defendants who were luring them by misrepresenting them as employee of the plaintiff company. The plaintiff was shocked when a complaint was received that parallel orders were being taken in the name of the plaintiff company.
1.4 In January 2022, the plaintiff company came to CS (Comm) No. 305/2022 The Leather Laundry Pvt. Ltd. Vs. Kapil Mathur & anr. Page No.3 of 22 know that the defendants had approached 100200 customers by making calls and sought orders from them by calling from different mobile numbers. The plaintiff company filed complaint dated 08.1.2022 before the Cyber Cell, Badarpur, New Delhi and another complaint at PS Pandav Nagar dated 22.1.2022 but no case of data theft or criminal breach of trust was registered. 1.5 The plaintiff sent a legal notice dated 07.3.2022 to the defendants who replied the same vide reply dated 29.3.2022 but they did not stop their act. Hence the present suit.
2. Summons of the suit were issued to the defendants who appeared alongwith Shri H Rehman Advocate and filed a common written statement. A preliminary objection was taken that the plaintiff has concealed and misrepresented the true facts and no cause of action ever arose in favour of the plaintiff. On merits, it was submitted that the defendants used and purchased the website www.luxuryleatherfurniturecare.com which is entirely different from the domain name of the plaintiff. It was further stated that defendant No. 1 joined the plaintiff company in 2019 while defendant No. 2 joined it in 2020, but no Employment Agreement, as alleged, was ever executed between the plaintiff and the defendants, but in October 2021, the plaintiff company got signed the second page from the defendants with assurance that this shall be used for the purpose of audit and other benefits of the labour. It has further been stated that the defendants performed their services with the plaintiff honestly and diligently without any complaint.
2.1 The defendants further submitted that the plaintiff CS (Comm) No. 305/2022 The Leather Laundry Pvt. Ltd. Vs. Kapil Mathur & anr. Page No.4 of 22 had lodged false complaints against them before the Cyber Cell and PS IP Estate as also with PS Pandav Nagar, in order to pressurize them to close their business. The defendants further denied to have ever gained access to trade secrets, customer data/lists, financial data or any type of official information of the plaintiff company or had ever contacted its prospective consumes.
2.2 The defendants further parawise denied the allegations and contentions of the plaintiff made in the plaint and prayed for dismissal of the suit of the plaintiff.
3. The plaintiff also filed replication to the written statement of the defendant, reiterating the contents of the plaint and denying the counter allegations.
4. From the pleadings of the parties, following issues were framed on 15.2.2023 :
1) Whether the plaintiff is entitled for a decree of permanent injunction against the defendants for restraining them to use the identical tradename/trademark TLL or Leather Laundry Pvt. Ltd.? OPP
2) Whether the plaintiff is entitled for a decree of rendition of accounts against the defendants? OPP
3) Whether the plaintiff is entitled for any damages against the defendants and if yes, to what amount? OPP
4) Relief.
CS (Comm) No. 305/2022The Leather Laundry Pvt. Ltd. Vs. Kapil Mathur & anr. Page No.5 of 22 Thereafter, case management hearing was conducted and evidence was led by both the parties.
5. At the trial, the plaintiff company examined its authorized representative Ms. Rosesline George as PW1. She deposed the facts as stated in the plaint, by way of affidavit Ex.PW1/A and also proved various documents which are as under :
Board Resolution dated 29.8.2022 passed in her favour by the plaintiff as Ex.PW1/A (colly.) alongwith her offer letter and copy of Aadhar Card. Employment Agreements as Ex.PW1/B (colly.). (Pages No. 71 to 82) (OSR) Screen shots of the conversation with the plaintiff's customers alongwith transcription thereof, as Ex.PW1/C (colly.). (Pages No.83 to 99) CD of the Video showing defendants copying data from the computers of the plaintiff as Ex.PW1/D. (Affixed at Page No. 140). Transcription of the audio conversation of the said CD is Ex.PW1/D1. (Pages No. 141 to 148).
Complaint forwarded to the SHO, PS Pandav Nagar as well as to the DCP(East) as Mark P1 (colly). (Pages No. 113 to 115).
List of the customers affected due to the acts of the defendants as Ex.PW1/F (colly.), which also depicts the Excel Sheet containing losses and marked as Ex.PW1/G (colly.). (running into 06 pages). Screen shots proving solicitation of the plaintiff's customers as Ex.PW1/H . Same were deexhibited as the said screen shots have already been marked as Ex.PW1/C (colly).
Screen shots showing wrongful edits as Ex.PW1/I. (Pages No. 116 to 125).
List of affected customers as well as losses incurred due to the misdeed of the defendants as Ex.PW1/J. Same was deexhibited as the said list has already been marked as Ex.PW1/F (colly).
CD of the Video and audio showing the defendants having been caught on camera to capture and copy the precious data of the plaintiff as Ex.PW1/K (Witness submitted that the CD Ex.PW1/D contains the said data the same has already been exhibited. Hence, Ex.PW1/K was deexhibited).
CS (Comm) No. 305/2022The Leather Laundry Pvt. Ltd. Vs. Kapil Mathur & anr. Page No.6 of 22 The complaints filed by the plaintiff before SHO Pandav Nagar, Cyber Cell, South East District as well as to the DCP dated 08.1.2022, 22.1.2022 and 22.6.2022 as Mark P2 (colly). (Pages No. 100 to 104, Legal Notices dated 07.3.2022 and its reply dated 29.3.2022 as Ex.PW1/L (colly.). (Pages No. 126 to
139).
CD containing the CCTV footage installed in the premises of the plaintiff as Ex.PW1/M (Witness submitted that the CD Ex.PW1/D contains the said data which has already been exhibited. Hence, Ex.PW1/M was deexhibited).
Affidavit under Section 65B of the Indian Evidence in support of computer generated documents/screen shots and CD as Ex.PW1/2.
5.1 The plaintiff though filed affidavit in evidence of its employees namely Mr. Amardeep Raghav as PW2 and Mr. Inderjit Singh as PW3 but Ld. Counsel for the plaintiff dropped them from the list of witnesses and closed the plaintiff's evidence, vide his separate statement.
6. The defendants examined Shri Kapil Mathur (defendant No. 1) as DW1 who also deposed by way of affidavit Ex.DW1/A, the facts as stated in the written statement. He relied upon the following documents :
Screen shots of whatsapp chat between defendant No. 1 and the plaintiff as Ex.DW1/1. (15 pages, from Page No. 71 to 85) Downloaded copy of the receipt as Ex.DW1/2. (Page No. 86) Google Business profile having the list of articles of defendant No. 1 and defendant No. 2 Vinay Prakash as Ex.DW1/3. (Page No. 87 and 88) Complaint filed before SHO PS Pandav Nagar dated 19.10.2022 by an employee Shri Nagender Kumar Kushwah as Mark D1. (Page 89) Certificate under Section 65B of the Indian Evidence Act in support of computer generated/downloaded documents as Ex.DW1/5.
Certificate of Labour Department as Mark D5.
CS (Comm) No. 305/2022The Leather Laundry Pvt. Ltd. Vs. Kapil Mathur & anr. Page No.7 of 22 6.1 Affidavit of defendant No. 2 was also filed in evidence but Ld. Counsel for the defendant dropped him from the list of witnesses and closed defendant's evidence vide his separate statement.
7. I have heard Shri Suneel Kumar Yadav Ld. Counsel for the plaintiff, Shri H Rehman Ld. Counsel for both the defendants and have also gone through the written submissions filed by both the parties as well as records of the case.
ISSUE No. 1 :
8. Admittedly, the marks claimed by the plaintiff 'TLL' or 'The Leather Laundry' is an unregistered trademark and thus, the plaintiff has approached the Court under the common law of passing off. It has been averred that 'TLL' or 'The Leather Laundry' is the tradename and trademark of the plaintiff company and it started operations under the said trademark in the year 2015 using the same continuously and uninterruptedly since then . It is also stated that the plaintiff is the prior user, adopter and owner of the said trademark 'TLL' as well as the website with the domain name 'www.leatherlaundry.com'. The plaintiff has claimed the intellectual proprietary rights in the said trademark due to long and exclusive usage. The defendant has not disputed these facts and simply denied these facts in the written statement which is not sufficient in terms of the provisions contained in Proviso to Rule 5 subRule (1) of Order 8 of the Commercial Courts Act, which states that if allegations of fact in plaint are not denied CS (Comm) No. 305/2022 The Leather Laundry Pvt. Ltd. Vs. Kapil Mathur & anr. Page No.8 of 22 under Rule 3A, they shall be taken to be admitted except as against a person under disability. Order 3A (3) provides that the defendant shall state reasons for denying the fact and if he intends to put forward a different version of events, that given by the plaintiff, he must state his own version. The defendants have failed to give any reason for the denial of the above facts and simply averred that the plaintiff be put to strict proof thereof, which is no denial in terms of these provisions and amounts to admission.
8.1 PW1 in her examinationinchief, also deposed that the plaintiff Corporation has acquired a decent name and fame in the market for the services rendered and has also attained a significant market in the Indian cities and abroad. There was no crossexamination of PW1 on this fact. However, she did not relied on any document nor proved it to show as to how the plaintiff company has a goodwill in the market regarding its services/business nor examined any customer to show that they were attracted only to the plaintiff for its services because of their quality, name and goodwill.
8.2 A question arises whether the mark claimed by the plaintiff is a trademark or merely a tradename. There is a difference between the two. A tradename is the official name under which an individual as a sole proprietor or a company chooses to do business. Registering a tradename legally is an important step in branding for a company, but it does not provide an unlimited brandname or legal protection for the use of the name. On the contrary, a trademark can be associated with or can CS (Comm) No. 305/2022 The Leather Laundry Pvt. Ltd. Vs. Kapil Mathur & anr. Page No.9 of 22 be part of the tradename and can be used to provide legal protection for the use of name, logo, symbol etc. In short, a trade name does not enjoy any legal protection whereas a trademark enjoys statutory protection under the Trademarks Act, 1999 if registered and under the common law if unregistered. 8.3 Trademark has been defined in Section 2 (zb) of the Trademarks Act, 1999 as a mark capable of being represented graphically and which is capable of distinguishing the goods or services of one person from those of others and may include shape of goods, their packaging and combination of colours. 8.4 It is also not disputed that the case of the plaintiff is related to the services being rendered by it under the said name, 'TLL' i.e. of cleaning, repairing and laundering of leather products.
8.5 In RB Health (US) LLC & anr. Vs. Dadar India Limited (http://indiankanoon.org/doc/64878627) dated 27.11.2020 of the Hon'ble High Court of Delhi, observed that :
"Passing off is an action in deceit. For the plaintiff to succeed in such an action, it would have to establish a proprietary right in the impugned trademark ...... An action for passing off would be maintainable only if the trademark used by the defendant or the overall getup and tradedress is similar to the plaintiff's trademark or tradedress. The deception must lead to confusion with regard to the origin of the goods."
8.6 The Court referred to the judgment in Reckitt & Colman Products Ltd. Vs. Borden I.A. (1990) 1 All E.R. 873 wherein the principle of 'classic trinity' was propounded. It was further held that :
"For an action of passing off to succeed, it must CS (Comm) No. 305/2022 The Leather Laundry Pvt. Ltd. Vs. Kapil Mathur & anr. Page No.10 of 22 have, in the very least the three indicia's as laid down in the said judgment. Firstly, the plaintiff must establish that it has the necessary goodwill and reputation in the goods sold or services offered to the consumers at large which in turn should be interlinked with the getup in which they are proffered.
Second, the plaintiff must be able to demonstrate that the defendant's misrepresentation qua the goods or services offered by him have led consumers to believe that they originate from the plaintiff.
Third, the action of the defendant has resulted in damage or is likely to result in damage on account of the misrepresentation of the defendant with regard to the origin of the goods and services."
8.7 The Court further distinguished between reputation and goodwill and held that :
"The difference between reputation and goodwill has to be borne in mind. While goodwill is inextricably linked to territory, reputation may extend beyond the geographical area where business is carried out. Therefore, in a case, where a plaintiff institutes a passing off action, it is incumbent upon him to demonstrate that he has interalia goodwill in the jurisdiction over which the concerned Court has sway."
8.8 Thus, in light of the above observations of the Hon'ble Court it is to be evaluated if the plaintiff has successfully proved the test of classic trinity.
(i) Goodwill : 8.9 It is necessary for the plaintiff in an action for
passing off to prove that its mark enjoyed a goodwill in order to succeed. Goodwill is nothing more than the probability that the old customer will resort to the old place. It has been elaborately CS (Comm) No. 305/2022 The Leather Laundry Pvt. Ltd. Vs. Kapil Mathur & anr. Page No.11 of 22 defined in Trego Vs. Hunt (1896) AC 7, wherein Lord Macnaughten observed that 'Often it happens that Goodwill is the very sap and life of the business, without which the business would yield little or no profits. It is the whole advantage whatever it may, of the reputation and connection of the firm, which may have been built up by years or honest work or gained by lavish expenditure of money.' 8.10 It has been stated in the plaint that the plaintiff has a large base of clients/customers across the country and globally and has gained immense reputation and goodwill. However, no evidence to that effect has been led by the plaintiff. Even the documents relied upon by PW1 relate only to the acts of the defendants in allegedly stealing of the database of the plaintiff and alluring the customers of the plaintiff. Even if the testimony of PW1 regarding the goodwill and reputation of the plaintiff company remain unrebutted, it was incumbent upon the plaintiff to have establish the same by leading independent and cogent evidence, preferably, through its customers by examining them or proving their reviews which was not done.
8.11 Another fact which could have proved the goodwill is the profits earned by or under the claimed trademark. The plaintiff has failed to mention in the plaint or in the affidavit in evidence of PW1, any amount which the plaintiff earned as profit by doing business under the trademark 'TLL' or 'The Leather Laundry' in the previous years before filing of the present suit. 8.12 In view of the above discussion, it is clear that the plaintiff has failed to prove that its trademark enjoyed any CS (Comm) No. 305/2022 The Leather Laundry Pvt. Ltd. Vs. Kapil Mathur & anr. Page No.12 of 22 goodwill or reputation.
(b) Misrepresentation : 8.13 It has been claimed by the plaintiff that defendants
misrepresented the customers that the services offered by them originated from the plaintiff.
8.14 The most important question in passing off is whether the conduct of the defendants is such as to confuse the public that the business of the defendant is of the plaintiff or is a cause of confusion between the business activities of the two. Misrepresentation means when the defendant takes or tries to make the public believe that the goods and services which he is providing are of the plaintiff.
8.15 It has been alleged that the defendants had been running their business in the name of Luxury Leathers. However, there is not a single document to support this allegation. It has also been averred in the plaint that the defendants portrayed themselves to be associated with the plaintiff company and got registered a website namely www.leatherlaundry.cleaning. Again, there is no evidence on record to show that the defendants ever used the said website. It is reiterated at the cost of repetition that no customer was examined by the plaintiff who could depose that the defendants approached them and represented themselves to be the employees of the plaintiff and took orders themselves under the said misrepresentation. PW1 relied upon a conversation between the client of the plaintiff namely Ms. Meena Wadhwa and the employee of the plaintiff namely Mr. Vinay Mishra to suggest that the defendants approached the said client to do the CS (Comm) No. 305/2022 The Leather Laundry Pvt. Ltd. Vs. Kapil Mathur & anr. Page No.13 of 22 same job at half prices. This conversation only suggests that someone approached the said customer to do the job for half the price but neither the identity of the said person nor the name of the company or entity from which the said person approached has been disclosed.
8.16 Similarly, the other conversation relied upon by the plaintiff and PW1 is between the chemical supplier to the plaintiff namely Mr. Vikrant Taneja and the Director of the plaintiff Ms. Mallika Sharma, also suggest that someone is doing parallel business at a lesser price.
8.17 The plaintiff has relied upon one whatsapp conversation with its customer Ms. Shreya Mishra which also suggests that she received messages from Mr. Vineet Mishra claiming to be in the leather restoration business and offering services. She also does not say that the caller represented himself to be an employee of the plaintiff and rather named himself as Mr. Vineet Mishra whereas defendant No. 2 is Mr. Vinay Mishra. The other whatsapp conversations relied upon by the plaintiff only suggests that the caller approached the customers for same business but never represented himself to be an employee of the plaintiff or represented the same trademark. 8.18 In the order dated 15.2.2023, while deciding the application of the plaintiff under Order 39 Rule 1 & 2 CPC, it was observed that no orders can be passed for closing down of the parallel business run by the defendants on account of equity as every person has a right to do any business of any kind. There is no illegality nor there is any bar if two people are engaged in a CS (Comm) No. 305/2022 The Leather Laundry Pvt. Ltd. Vs. Kapil Mathur & anr. Page No.14 of 22 similar business. The only bar is that no one should misrepresent itself as to be the holder of the trademark of the other. In the same order, the defendants made submission that they were not using the website www.leatherlaundry.cleaning as claimed by the plaintiff and were therefore, restrained from using the said website. In the written statement, the defendants submitted that they had purchased and are using the website with domain name www.luxuryleatherfurniturecare.com. Thus, the website of the plaintiff and the defendant are not phonetically similar nor identical except for the word 'leather' common to both which is a generic word, suggesting that the company deals with or in 'leather'. Thus, there is no evidence on on record to suggest that the defendants, in any manner, misrepresented themselves as the owners or even representatives of the plaintiff company to the customers for obtaining their orders in the tradename of the plaintiff or created any similar domain name. At the most, they simply approached the customers and offered same services for a lesser price.
8.19 It has to be proved that deceit was actually caused or misrepresentation was made to a potential customer by the defendants that the services being offered by them were by the plaintiff. The self deposition of PW1 or pleading in that regard would not suffice. No witness or any other evidence was led by the plaintiff to show that the defendants caused misrepresentation or deceit to anyone in the manner as aforesaid. 8.20 Thus, the plaintiff has also failed to prove the second indicia of the classic trinity.
CS (Comm) No. 305/2022
The Leather Laundry Pvt. Ltd. Vs. Kapil Mathur & anr. Page No.15 of 22
(c) Damages :
8.21 At last, to succeed in taking action to stop the
infringing party, the offended party must prove that it has suffered any actual or reasonable loss of business due to the alleged misrepresentation. It must be proved that misrepresentation must have harmed the goodwill or cause loss to the reputation resulting into loss of business or damages to the plaintiff. Though actual damages are not required to be proved but it must be proved that because of the misrepresentation and loss of goodwill the damages were caused. In the instant case, when the plaintiff has failed to prove that its tradename or trademark enjoyed any goodwill or the defendants caused misrepresentation, there is no question of its suffering any damages on that account.
8.22 It was simply stated in the plaint that because of the acts of the defendants, the plaintiff suffered loss of about Rs.51 lacs. Similarly, PW1 also deposed that a loss of about Rs.51 lacs has been estimated to the income of the plaintiff because of the misleads of the defendants and to elaborate the same, she relied upon an excel sheet Ex.PW1/G (colly). However, in her cross examination she admitted that the said sheet does not contain any signature nor the seal of the company and can be prepared at any time. She further deposed in her crossexamination that according to the data submitted, the plaintiff company suffered losses of Rs.51 lacs due to the defendants but she could not depose the turnover of the plaintiff company in the year 2021. She was also unable to depose if the plaintiff company had any CS (Comm) No. 305/2022 The Leather Laundry Pvt. Ltd. Vs. Kapil Mathur & anr. Page No.16 of 22 GST number. It is a matter of record that the Balance Sheet or the Profit & Loss Account of the plaintiff company were never placed on record for the relevant years to prove the said losses. 8.23 The aforesaid discussion makes it clear that neither the tradename or trademark of the plaintiff has any goodwill nor the defendants caused any misrepresentation and as such, there was no question of the plaintiff suffering any damages on that count. Therefore, the mark of the plaintiff cannot be termed as a trademark but has to be treated only as a tradename and as such no action for passing off is made out.
8.24 In view thereof, the plaintiff is not entitled to any relief of injunction as prayed. This issues is accordingly decided against the plaintiff.
ISSUE No. 2 :
9. The onus to prove this issue was upon the plaintiff, but no evidence was led on this issue. As already observed above, the plaintiff has failed to prove that it is entitled for any injunction against the defendants, as claimed for and has also failed to prove any losses caused to it because of the acts of the defendants. Further, it has failed to place on record its own accounts, balance sheet etc. to show the losses caused to it and therefore, cannot claim any decree of rendition of account against the defendants. This issue is also decided against the plaintiff. ISSUE No. 3 :
10. It is the case of the plaintiff that the defendants were its exemployees. To prove this fact, PW1 relied upon the employments Agreements with the two defendants as Ex.PW1/B CS (Comm) No. 305/2022 The Leather Laundry Pvt. Ltd. Vs. Kapil Mathur & anr. Page No.17 of 22 (colly). In the written statement as well as in the examinationin chief of DW1, the said Agreements have been denied. It was simply deposed by DW1 that in October 2021, the management got signed on the second page with assurance that the documents shall be used for the purpose of audit and other benefits. However, in reply to the legal notice issued by the plaintiff, the defendants admitted the terms of employment as stated in the said Agreement. Similarly, DW1 in his crossexamination admitted having signed the said Agreement without any disclaimer. It proves that the defendants were the exemployees of the plaintiff and they had voluntarily signed the Employment Agreement Ex.PW1/B (colly.).
10.1 Clause 7 of the said Agreement provides as under :
"7. Employee agrees that at no time during the term of his/her employment with the employer will he/she engage in any business activity which is competitive with the employer nor work for any company which competes with the employer.
For a period of one year immediately following the termination of employee's employment, employee will not, for him/herself or on behalf of any other person or business enterprise directly or indirectly or otherwise in any capacity whatsoever, engage in any business or employment or related activity which competes with the employer."
10.2 Similarly, Clause 8(nonsolicitation) of the said Agreement provides as under :
"8. During the term of employees' employment, and for a period of one year immediately thereafter, employee agrees not to solicit any employee or independent contractor of the employer on behalf of any other business enterprise, nor shall the employee induce any employee or any independent contractor associated with the employer to terminate or breach an employment, contractual or other relationship CS (Comm) No. 305/2022 The Leather Laundry Pvt. Ltd. Vs. Kapil Mathur & anr. Page No.18 of 22 with the employer."
10.3 Similarly, Clause 9 of the said Agreement cast an obligation upon the employer to maintain confidentiality and propriety of all technical information which the employee gains during its employment.
10.4 In his crossexamination DW1 deposed that he left the plaintiff company in October 2022. He also deposed that he formed his own firm namely Luxury Leather and Furniture Care in February 2022. In his further crossexamination, he was confronted with his website by the Ld. Counsel for the plaintiff by opening it on phone in Court wherein , in the column 'About us' it was mentioned that the said company Luxury Leather & Furniture Care was formed in June 2021. No explanation came from defendant No. 1 in this respect.
10.5 As per the Employment Agreements Ex.PW1/B (colly.), defendant No. 1 joined the services of the plaintiff on 15.10.2019 and defendant No. 2 on 02.12.2020. According to the plaintiff, they both left the employment of the plaintiff in January 2022. It means that the defendants started a parallel business as of the plaintiff company during their employment and just after leaving the employment of the plaintiff company, in violation of the terms of the Employment Agreement Ex.PW1/B (colly.) as reproduced herein above. This fact is fortified from the evidence led by the plaintiff which has remained unrebutted. PW1 relied upon the various whatsapp chats with the customers of the plaintiff Ex.PW1/C (colly.) and the various complaints made to the police against the defendants for having stolen the customer CS (Comm) No. 305/2022 The Leather Laundry Pvt. Ltd. Vs. Kapil Mathur & anr. Page No.19 of 22 data of the plaintiff. The said whatsapp chats are between the defendants and the customers of the plaintiff wherein the defendants tried to solicit them for the same business at a lesser price. It also proves that the defendants had access to the data base of the customers of the plaintiff and the probability that they had stolen the same while they were in employment of the plaintiff cannot be ruled out. It is a settled law that the civil suits are decided on preponderance of evidence and the aforesaid evidence on record points out to the fact of defendants, who had access to the customer data base of the plaintiff during their employment and as admitted by them, had taken the said data while leaving the company and used it for their benefit. 10.6 Thus, the defendants are guilty of violating the terms of the Employment Agreements Ex.PW1/B (colly.) and had breached the contract with the plaintiff. The remedy for breach of contract, as provided by the Contract Act, is damages. Hence, the plaintiff is entitled for damages against the defendants for breaching the contract as well as for stealing the trade secrets and information relating to trade practice, of the customer information of the plaintiff etc. Since the one year period from the date of the defendants leaving the employment of the plaintiff company has already elapsed, therefore they cannot be now injuncted from doing parallel business in terms of the contract of employment. However, they cannot be permitted to use the database of the customers of the plaintiff company and therefore, the defendants are restrained from using the same and approaching the customers of the plaintiff as per the said CS (Comm) No. 305/2022 The Leather Laundry Pvt. Ltd. Vs. Kapil Mathur & anr. Page No.20 of 22 database.
10.7 Section 73 of the Indian Contract Act provides as under: "When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party, who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.
Such compensation is not to be given for any remote or indirect loss or damage sustained by reason of the breach.
Explanation: In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused by the non performance of the contract must be taken into account."
10.8 In ONGC Ltd. vs Saw Pipes Ltd. (2003) 5 SCC 705, the Hon'ble court while deliberating upon the compensation to be granted under Section 73 and 74 of the Contract Act, relied upon the judgment of Maula Bux Vs. Union of India (1969) 2 SCC 554, wherein it was specifically held that :
"It is true that in every case of breach of contract the person aggrieved by the breach is not required to prove actual loss or damage suffered by him before he can claim a decree and the Court is competent to award reasonable compensation in a case of breach even if no actual damage is proved to have been suffered in consequence of breach of contract."
10.9 The plaintiff in the suit has not quantified the damages in the prayer clause as provided under Section 74 of the CS (Comm) No. 305/2022 The Leather Laundry Pvt. Ltd. Vs. Kapil Mathur & anr. Page No.21 of 22 Contract Act and has simply averred that the same may ascertained by this Court, though it has valued the suit at Rs.40 lacs on account of damages on which ad valorum court fees was paid. However, since there is no evidence on record as led by the plaintiff to show any actual damage, the Court is constrained to award nominal damage of Rs.5 lacs to the plaintiff and against the defendants.
This issue is decided accordingly in favour of the plaintiff. ISSUE No. 4/Relief :
11. In view of the findings on the above Issues, it is held that the plaintiff is not entitled for any injunction as claimed for restraining the defendant for passing off or for a decree of rendition of accounts. It is however directed that the defendants shall restrain themselves from using the same and approaching the customers of the plaintiff as per the customer database of the plaintiff. The plaintiff is also awarded a decree in the sum of Rs.5 lacs for damages for breach of contract, against the defendants. It is however, clarified that this relief is without prejudice to the right of the plaintiff to pursue criminal remedy, if any, against the defendants as per law.
Costs of the suit are also awarded to the plaintiff. Decree Sheet be prepared accordingly.
File be consigned to Record Room.
ANNOUNCED IN OPEN COURT ON 4th day of September 2023 (SANJAY SHARMAI) District Judge (Commercial Court01) East District Karkardooma Courts, Delhi CS (Comm) No. 305/2022 The Leather Laundry Pvt. Ltd. Vs. Kapil Mathur & anr. Page No.22 of 22