Delhi District Court
Asia Research Partners Llp vs Abhisekh Singh on 14 August, 2024
IN THE COURT OF SH. RAHUL BHATIA
DISTRICT JUDGE 01 - SOUTH EAST DISTRICT SAKET
COURTS, NEW DELHI.
CS DJ 593-23
ASIA RESEARCH PARTNERS LLP
(Through: Anubhav Raj)
Authorized Representative
E-9, Block No, B-1, Ground Floor,
Mohan Cooperative Industrial Estate,
Mathura Road,
New Delhi-110020.
......Plaintiff
Vs.
MR. ABHISEKH SINGH
S/o Shri Rajendra Prasad Singh,
R/o 204, Ace City, Sector-01,
Greater Noida,
NOIDA-2013 07
Mobile No. 8527032493
Email ID: [email protected]
Also at:
MR. ABHISEKH SINGH
S/o Shri Rajendra Prasad Singh,
63, Meghmau, Amethi-227806 (U.P)
.....Defendant
Date of institution of case : 14.08.2020
Date of Reserving Judgment : 08.08.2024
Date of Judgment : 14.08.2024
14.08.2024
JUDGMENT
1. Today the matter has come up for order on an application under Order VII Rule 11 CPC filed by the defendant CS DJ 593/2023 Asia Research Partners LLP Vs. Abhisekh Singh pg. 1 of 11 alleging that there is no cause of action to file the present case and the suit is barred by Section 41(e) read with Section 14 of the Specific Relief Act, 1963 and Section 27 of the Indian Contract Act, 1872.
2. Plaintiff has filed the present case for permanent and mandatory injunction restraining the Defendant for continuance and committing the breach of the conditions of appointment letter dated 23.03.2015. It is stated that the plaintiff is a limited liability partnership firm and is engaged in the business of providing business and market intelligence solutions to its clients. It is submitted that the defendant joined the plaintiff vide appointment letter dated 23.03.2015. However, suddenly on 03.07.2020, the defendant tendered his resignation to the Plaintiff vide email of even date and requested to be relieved without serving the mandatory notice period. It is stated that defendant was to serve 3 months' notice period as per the terms of the appointment letter dated 23.03.2015.
3. The plaintiff has stated that as per clause no. 11.1 of the employment letter, the defendant was required to give three months notice in writing at the time of resignation. However, the defendant tendered his resignation on 03.07.2020 with the request to be relieved from his duty without serving the mandatory notice period of three months. Even though the said request was not accepted, the defendant abstained himself from his duties in the plaintiff firm and therefore is in breach of clause no. 11.1 of the CS DJ 593/2023 Asia Research Partners LLP Vs. Abhisekh Singh pg. 2 of 11 employment letter. It is further stated that the defendant had an implied liability for making the payment of amount equivalent to three months salary in lieu of the notice period. Thus, the defendant has voluntarily abandoned his employment without complying with the terms of the appointment letter. It is further the case of the plaintiff that in violation of clause no. 12.1 of the employment letter, the defendant has joined with a competitor of the plaintiff. The plaintiff repeatedly reminded the defendant to comply with the terms of employment letter, however, the defendant did not perform his obligations under the employment letter. The plaintiff was constrained to issue legal notice dated 07.07.2020 asking the defendant to comply with the appointment letter, however, despite service neither the defendant replied to the said notice nor complied with its terms and as such, the plaintiff was constrained to file the present suit with the following prayers:-
(a) Pass the decree of permanent and mandatory injunction, directions restraining the defendant for continuance and committing the breach of the conditions of appointment letter dated 23.03.2015 mentioned in clause no. 11.1 and clause no. 12.1 in the said appointment letter:
Clause No. 11.1 CS DJ 593/2023 Asia Research Partners LLP Vs. Abhisekh Singh pg. 3 of 11 If you decide to leave our employment, you are required to give us three months notice in writing.
Clause No. 12.1 para second Post your resignation and leaving the company, you agree that you will not work directly or indirectly with the clients, suppliers or competitors of Asia Research Partners for the next three years from the date of your resignation in Asia Research Partners.
(b) The costs of this plaintiff be paid from the defendant.
(c) Pass any other orders in the interest of justice be kindly passed.
4. Summons were issued to the defendant who appeared and filed his written statement along with an application under Order VII Rule 11 C.P.C. on the ground that the present suit is barred by Section 27 of the Indian Contract Act, 1872 and Section 41(e) of the Specific Relief Act.
5. In reply, the plaintiff has stated that sufficient cause of action is shown in the plaint and the right of the plaintiff arises from clause no. 11.1 and clause no. 12.1 of the appointment letter dated 23.03.2015. It is further stated that the suit is not barred by Section 27 of the Indian Contract Act as the restraint on future employment of the defendant was only for a period of three years. Further, the plaintiff CS DJ 593/2023 Asia Research Partners LLP Vs. Abhisekh Singh pg. 4 of 11 has stated that the rights of the plaintiff arise from the breach of the employment letter conducted by the defendant.
6. In support of his application, Ld. Counsel for defendant has submitted that no restraint of trade can be put in an agreement by way of a negative covenant beyond the period of the employment of the defendant. He has further submitted that since the prayer for serving of three months notice period is in the nature of an injunction for performance of personal service, the specific performance of the same is prohibited under Section 14 of the Specific Relief Act and therefore no injunction can be granted in terms of Section 41(e) of the Specific Relief Act. In terms of the above grounds, Ld. Counsel for defendant has sought rejection of the present plaint being barred by law.
7. Per contra, Ld. Counsel for the plaintiff has submitted that negative covenants restricting an employee from engaging in employment agreement with the competitor of the employer can be enforced in case of breach of the said terms by the employee. In this regard, he has relied upon the judgment of Hon'ble Supreme court of India in Niranjan Shankar Golikari Vs. The Century Spinning and Manufacturing Company Ltd 1967 SCR (2) 378. It is further submitted that in case the plaintiff is in breach of an employment agreement, the same can be enforced by a court of law. Reliance has been placed upon judgment of the Hon'ble High Court of Delhi in Independent News Pvt.
CS DJ 593/2023 Asia Research Partners LLP Vs. Abhisekh Singh pg. 5 of 11 Ltd Vs. Anuraag Muskaan in OMP No. 151/2013.
8. Heard. Perused.
9. The case of the plaintiff is based upon the two clauses of the appointment letter dated 23.03.2015 which reads as follows:-
Clause No. 11.1 If you decide to leave our employment, you are required to give us three months notice in writing. Clause No. 12.1 Post your resignation and leaving the company, you agree that you will not work directly or indirectly with the clients, suppliers or competitors of Asia Research Partners for the next three years from the date of your resignation in Asia Research Partners.
10.Thus, what is evident from the prayer clause of the plaint is that the plaintiff has sought permanent and mandatory injunction restraining the defendants for continuation of the breach of clause 11.1 of the agreement as to giving three months notice in writing at the time of resignation. Although, the prayer is in the nature of permanent injunction, however, vide the said prayer, the plaintiff has sought that the defendant be asked to serve the three months notice period with the plaintiff. Thus, the said prayer, although worded as seeking permanent and mandatory injunction, is in the nature of seeking specific performance of clause 11.1 of the appointment letter. Section 14 of the Specific Relief Act states that a contract CS DJ 593/2023 Asia Research Partners LLP Vs. Abhisekh Singh pg. 6 of 11 which is dependent on the personal qualifications of the parties cannot be enforced. The section further prohibits grant of specific enforcement of a contract which involves the performance of continuous duty which the court cannot supervise. Hon'ble Supreme Court of India in Nandganj Sihori Sugar Co. Ltd. v. Badri Nath Dixit, (1991) 3 SCC 54 : 1991 SCC (L&S) 981 has held as follows:-
10. A contract of employment cannot ordinarily be enforced by or against an employer. The remedy is to sue for damages. (See Section 14 read with Section 41 of the Specific Relief Act;
see Indian Contract and Specific Relief Acts by Pollock and Mulla, 10th edn., page 983). The grant of specific performance is purely discretionary and must be refused when not warranted by the ends of justice. Such relief can be granted only on sound legal principles. In the absence of any statutory requirement, courts do not ordinarily force an employer to recruit or retain in service an employee not required by the employer. There are, of course, certain exceptions to this rule, such as in the case of a public servant dismissed from service in contravention of Article 311 of the Constitution; reinstatement of a dismissed worker under the Industrial Law; a statutory body acting in breach of statutory obligations, and the like. (S.R. Tiwari v. District Board, Agra [AIR 1964 SC 1680 : (1964) 3 SCR 55 : (1964) 1 LLJ 1] ; Executive Committee of U.P. State Warehousing Corporation v. C.K. Tyagi [(1969) 2 SCC 838 : (1970) 2 SCR 250] ; Executive Committee of Vaish Degree College, Shamli v. Lakshmi Narain [(1976) 2 SCC 58 : 1976 SCC (L&S) 176] ; see Halsbury's Laws of England, 4th edn., Volume 44, paragraphs 405 to 420).
11. On the facts of this case, the High Court was clearly wrong in issuing a mandatory injunction to appoint the plaintiff. Even if there was a contract in terms of which the plaintiff was CS DJ 593/2023 Asia Research Partners LLP Vs. Abhisekh Singh pg. 7 of 11 entitled to seek relief, the only relief which was available in law was damages and not specific performance. Breach of contract must ordinarily sound in damages, and particularly so in the case of personal contracts. Assuming that a contractual relationship arose consequent upon the letters addressed by defendant 3 to defendant 1, the plaintiff was a total stranger to any such relationship, for, on the facts of this case, no relationship of a fiduciary character existed between the plaintiff and defendant 3 or other defendants. Neither on principles of law or equity nor under any statute did the plaintiff acquire an enforceable right by reason of the letters exchanged between defendants 1 and 3. The plaintiff had no privity of any kind to their relationship. No collateral contract to which the plaintiff was a party did arise on the facts of this case. At no time was defendant 3 acting as an agent of the plaintiff. There is no express or implied contract which is enforceable by the plaintiff. (See Halsbury's Laws of England, 4th edn., Volume 9, paragraphs 334 to 342)."
11.Thus, a bare reading of Section 14 read with Section 41(e) of the Specific Relief Act as explained in the above judgment would reveal that contract of employment cannot be ordinarily enforced by or against an employer. The only recourse to either party in case of breach of an employment agreement is to seek damages for the loss suffered by the said party. A perusal of the prayer clause extracted herein above would reveal that the plaintiff has not sought any damages in lieu of the breach of the employment agreement committed by the defendant. Thus, once it is established that contract of personal service cannot be specifically enforced and the plaintiff has not sought any damages, the first prayer sought by the plaintiff is barred by Section 14 CS DJ 593/2023 Asia Research Partners LLP Vs. Abhisekh Singh pg. 8 of 11 read with Section 41 of the Specific Relief Act, 1963.
12.As far as the prayer regarding restraining the defendant for joining the competitor of the plaintiff in terms of clause 12.1 is concerned, the same is in the nature of a negative covenant being made effective after the termination of the employment agreement between the parties. Plaintiff has relied upon the judgment of Niranjan Shankar(supra), suffice is to say that as per the judgment, negative covenant in a contract has to be holistically viewed in terms of the overall agreement between the parties. It has been further held in that case that in case the same are unreasonable and unconscionable, the same cannot be enforced. In the present case, the negative covenant is with respect to the defendant not working either directly or indirectly with any of the clients, suppliers or competitors of the plaintiff for three years post resignation. This is an omnibus and very wide restriction which has been placed on the defendant. In the judgment Independent New Services(supra), which has been relied upon by the plaintiff, it has been held that "24. He cannot be directed to leave the new employment and rejoin the join the petitioner. The same would be compelling a person to work with a particular employer which is impermissible. The said order would be contrary to the provisions of Sections 14 and 41 of the Specific Relief Act, 1963. Any interim order passed of such nature would have a direct impact to his service and future. The respondent might have joined the petitioner earlier because of attractive service and future offered by the petitioner though he had a experience with other channels as an anchor, which is not disputed by CS DJ 593/2023 Asia Research Partners LLP Vs. Abhisekh Singh pg. 9 of 11 the petitioner, thus there is no justification to pass such order of injunction sought by the petitioner. Thus, status-quo-ante cannot be passed as it is a determinable contract between the parties, the petitioner in such breach if so established may be entitled for compensation in the arbitration proceedings. The respondent cannot be compelled to rejoin the petitioner under these circumstances."
13.The facts of the said case were completely different form the present case and even then the interim order passed in said case was limited for a period of seven days only, which arose out of the peculiar facts of that case.
14.Further, in the case of Superintendence Company of India Vs. Sh. Krishan Murgai, 1981 (2) SCC 246 of India, the Hon'ble Supreme Court has held as follows:-
"58. The drafting of a negative covenant in a contract of employment is often a matter of great difficulty. In the employment cases so far discussed, the issue has been as to the validity of the covenant operating after the end of the period of service. Restrictions on competition during that period are normally valid, and indeed may be implied by law by virtue of the servant's duty of fidelity. In such cases the restriction is generally reasonable, having regard to the interest of the employer, and does not cause any undue hardship to the employee, who will receive a wage or salary for the period in question. But if the covenant is to operate after the termination of services, or is too widely worded, the Court may refuse to enforce it."
15.Thus, what is clear is that a negative covenant in an employee agreement after the termination of the employment would not be valid and cannot be enforced. In CS DJ 593/2023 Asia Research Partners LLP Vs. Abhisekh Singh pg. 10 of 11 the present case, the plaintiff has sought to enforce the negative covenant against the defendant after the termination of the employment and as such the same cannot be enforced by a decree of specific performance or mandatory injunction.
16.In view of the above discussion, this Court is of the opinion that the present plaint is barred by Section 14 read with Section 41 (e) of the Specific Relief Act and Section 27 of the Indian Contract Act.
17.Consequentially, the application under Order VII Rule 11 C.P.C. is allowed and the plaint is rejected.
18.Decree sheet be prepared accordingly.
19.File be consigned to record room after due compliance.
Announced in the open court Digitally signed
by RAHUL
RAHUL BHATIA
Date:
BHATIA 2024.08.16
on 14.08.2024 21:15:09
+0530
(RAHUL BHATIA)
District Judge 01(SE),
Saket Courts, New Delhi.
CS DJ 593/2023 Asia Research Partners LLP Vs. Abhisekh Singh pg. 11 of 11