Delhi District Court
M/S Smc Pneumatics (India) Pvt. Ltd vs Mr. B.R. Hariprasad on 4 November, 2009
1
IN THE COURT OF SHRI D.C. ANAND
ADDITIONAL DISTRICT JUDGE (NORTH)-04 : DELHI
CS No. 361/09
M/s SMC Pneumatics (India) Pvt. Ltd.
B-94, Ashoka Enclave
Piragarhi, Rohtak Road, Delhi 110087
... Plaintiff
Versus
Mr. B.R. Hariprasad
S/o Mr. Rangappa
R/o H.No. 71, 6th Main 2nd Stage WCR,
Mahalakshmi Puram Nagapura
Bangalore 560086
...Defendant
Date of Institution : 29.10.2007
Date of hearing arguments : 28.10.2009
Date of judgment : 04.11.2009.
JUDGMENT
Plaintiff filed the present suit for specific performance, damages, permanent and mandatory injunction against the defendant inter-alia pleading therein that plaintiff company is a company duly registered under the Indian Companies Act 1956 having its registered office at B-94, Ashoka Enclave, Piragarhi, Rohtak Road, Delhi 110087 having its factory at D-107 to 112, Phase II Ext. Noida Distt. Gautam Budh Nagar (U.P) and the issuing, signing and executing of all the Contd/....
2documents are done at the registered office of the plaintiff. Vide resolution dated 6.3.2007, Sh. Jasmeet Singh Marwah, company secretary of the plaintiff company, who is also fully conversant with the facts of the case and is competent to file the present suit on behalf of the plaintiff. Plaintiff company is engaged in the business of the manufacturing and selling of Hi-tech Pneumatics and Hydraulics Components of Industrial use. To achieve the desired goal, plaintiff company required specialized confidential and reliable technical staff and for this training has to be given.
The plaintiff company is forced to incurred heavy expenses to have a strong technical staff and has stipulated various terms and conditions to safeguard and protect its own investments on each staff member.
It is also stated that defendant was appointed as Sales Engineer on 20.12.2004 situated at Bangalore under some terms and conditions mentioned in the appointment letter issued from the plaintiff's registered office situated at New Delhi which was signed and acknowledged at Delhi. The conditions which are mentioned in the appointment letter dated 20.12.2004 were also mentioned in the offer letter dated 9.12.2004 sent to the defendant from plaintiff's registered office at Delhi. The Contd/....
3defendant joined the plaintiff company and training was given for three weeks through highly trained and qualified professionals and also provide training at the cost of the plaintiff company from 9.4.2006 to 12.4.2006 to make the defendant technically perfect. After serving the plaintiff company for approximately two years and two month, defendant suddenly resigned from the plaintiff's company which resulted in loss in work and lacs of rupees. It is also stated that on 20.12.2004, an Employee Intellectual Property Agreement was also executed between the plaintiff company and the defendant at Delhi and accepted the terms and conditions of the agreement and defendant assured that he will abide by the terms and conditions mentioned in the appointment letter and the agreement. Even after admitting all the terms and conditions of the agreement and the appointment letter, the defendant did not fulfill the conditions and intentionally, willfully, deliberately and knowingly breached the each and every condition of the agreement causing great damage to the plaintiff company. On 13.2.2007, the defendant resigned from the plaintiff company job and again the defendant breached the agreement and terms and conditions of the appointment letter and joined the services of M/s Ash and Alain India Pvt. Ltd. at Bangalore which is a Contd/....
4distributor of M/s CKD Corporation Japan and is a competitor of the plaintiff company. The defendant is disclosing and rendering the Intellectual Property of the plaintiff company to his present employer M/s Ash and Alain India Pvt. Ltd. which is a clear violation of the terms and conditions of the agreement and the appointment letter. The defendant being a Sales Engineer at the time when the defendant resigned was entrusted with entire technical details pertaining to the day to day business of the plaintiff company and has given the defendant a confidential price list book, confidential engineering drawing and catalogues, important technical documents, import list and other important secret information related to the design of the components/products etc and these are given to the defendant as it was imperative for the defendant to be fully acquainted with the technicalities of the functions and design of the various products and these things are still with the defendant as the defendant has not returned the same. It was also agreed between defendant and the plaintiff company that if the defendant breached the terms and conditions, the plaintiff will be entitled to seek other equitable relief including relief in the form of Specific performance, temporary restraining order, temporary, permanent or mandatory injunction. It is also Contd/....
5stated that the defendant had breached all the terms of the agreement after joining the M/s Ash & Alain India Pvt. Ltd. at W-203 no.22 Sunrise Chambers, Ulsoor Road, Bangalore which is a competitor to the plaintiff company and have given a gain to M/s Ash & Alain India Pvt. Ltd. W-203 no.22 Sunrise Chambers, Ulsoor Road, Bangalore by disclosing various, trade secrets and other confidential and proprietary information and materials relating to the plaintiff's business. Many confidential documents are also still with the defendant and defendant is very well aware of the fact that these documents contain extremely confidential information. This shows that the defendant has intentionally and knowingly cheated the plaintiff company. It is also stated that in the above mentioned fact and circumstances, defendant should be immediately restrained from working with his present employer i.e. M/s Ash & Alain India Pvt. Ltd. W-203 no.22 Sunrise Chambers, Ulsoor Road, Bangalore and directed to stop immediately the disclosure of valuable information and secrets etc of the plaintiff's company. It is also pleaded that plaintiff company has lost its various high value customers such as Toyota Group of Companies etc and has suffered an approximate financial loss of Rs. 5 lacs. The plaintiff company sent a legal notice dated 3.9.2007 to the Contd/....
6defendant which was received by the defendant but not replied the same.
The plaintiff company also prayed that defendant be restrained from working with M/s Ash & Alain India Pvt. Ltd. W-203 no.22 Sunrise Chambers, Ulsoor Road, Bangalore and defendant from not going into business in the competition with the plaintiff company and for joining any firm who is a competitor to the plaintiff company atleast for a period of three years from the date of defendant's cessation of employment with the plaintiff company and also prayed for damages for a sum of Rs. 5 lac with the cost of the suit.
The defendant contested the suit by filing the WS on the grounds that the same is barred under the provisions of Specific Relief Act. The defendant has denied that the issuing, signing and execution of all the documents were done at registered office of the plaintiff company situated in Delhi and submitted that defendant had accepted the offer letter in Bangalore and appointment letter was signed in NOIDA and Employee Intellectual Property Agreement was singed and accepted by the defendant at Bangalore. It is also denied that defendant was given any training of any nature whatsoever at the time of joining the plaintiff company or at any point of time Contd/....
7subsequent thereof. Defendant submits that no terms and conditions of the appointment letter or of any agreement, which put restrain on right of choosing employment/trade can be enforced in court of law as such restrain is illegal, nullity and against the public policy. It is also submitted that the condition as contained in appointment letter dated 20.12.2004 restraining the defendant from going in to business in competition with plaintiff company or joining any company proposing to manufacture or already manufacturing/trading any products/ similar products as those of this company atleast for a period of three years from date of your cessation of employment is against the public policy, illegal and nullity. It is denied that defendant accepted such terms of appointment letter. It is also denied that defendant was given any training at the cost of the plaintiff company from 9.4.2006 to 12.4.2006 to make the defendant technically perfect. It is also denied that sudden resignation has resulted in loss in work for lakhs of rupees and submits that he has submitted the resignation in terms of appointment letter dated 20.12.2004. It is also stated that the appointment letter states that he could resign during the probation period or during the period of extended probation or after confirmation giving 30 days notice or salary in lieu of the notice period. It is also Contd/....
8submitted that Employee Intellectual Property Agreement cannot be looked into for want of stamp duty as this document is hit by section 45 of the Stamp Duty Act as such not admissible. The defendant had to sign the document on the dotted lines on account of undue influence of the plaintiff. It is also submitted that defendant never possessed any material relating to plaintiff's business which include trademark, copyrights, other ideas etc. It is also denied that defendant committed breach of agreement and terms and conditions of the appointment letter by joining the Services of M/s Ash & Alain India Pvt. Ltd. The defendant submitted that the present suit has been filed just to harass the defendant who humiliated and insulted the plaintiff during the course of his employment with the plaintiff. It is denied that defendant ever possessed any trade secrets and other confidential or proprietary information and materials relating to plaintiff's business including without limitation, patents, trademark and copy rights both registered and unregistered, various ideas, concepts, techniques, inventions, design, computer programs, computer resources, mask works, designs, etc. It is admitted by the defendant that he had joined the employment with new employer in August 2007 but specifically denied all the allegations of giving gain to the new Contd/....
9employer. The defendant as such prayed for dismissal of the suit.
Plaintiff filed replication wherein he assail the allegations as made in the written statement while reaffirmed the averments of the plaint in toto.
6 On the pleadings of the parties, following issues were framed on 24.7.2008 :-
1. Whether this court has no territorial jurisdiction to entertain and decide the present suit?OPD
2. Whether the agreement between the parties is not legally enforceable?OPD
3. Whether the suit has been signed, verified and instituted by the duly authorised person?OPP
4. Whether the plaintiff is entitled to decree of Specific Performance of Contract as claimed ? OPP
5. Whether the plaintiff is entitled to decree of permanent and mandatory injunctions? OPP
6. Relief The plaintiff has examined Sh. Prabhakar Company Secretary as PW-1 besides filing his affidavit in evidence U/o 18 CPC which affidavit was filed in exparte of the defendant on 14.9.2009 as the defendant was abstaining from the proceedings since 1.10.2008 and was proceeded exparte accordingly.
I have heard Ld. counsel for the plaintiff and I have also perused the documents and evidence on record. My findings on the issues are as under :
Contd/....10
ISSUE No.1 The onus to prove the issue no. 1 was on the defendant but the plaintiff placed and proved on record through the witness the appointment letter as Ex.PW1/4 as well as offer of appointment as Ex.PW1/5 and Employee Intellectual Property Agreement as Ex.PW1/6 which according to the plaintiff were signed and acknowledged by the defendant at the plaintiff's registered office at New Delhi and sent to the defendant from registered office. The perusal of the documents, however, does not reveals that entire cause of action arose at Delhi as the documents are on the letter head bearing the address of the plaintiff of Gautam Budh Nagar, UP and were addressed to the defendant at Bangalore except Ex.PW1/6 which is signed by the plaintiff at Peeragarhi,Rohtak Road, New Delhi as well as by the defendant which was executed at New Delhi. There is no dispute that the suit has been filed against the defendant who was serving the plaintiff office at Bangalore where he resides and work for gain as on date of filing of the suit. The suit of the plaintiff is based on the Employee Intellectual Property Agreement Ex.PW1/ 6 as well which is allegedly violated by the defendant by joining another firm namely M/s Ash & Alain India Pvt. Ltd. W-203 No. 22 Sunrise Chambers, Contd/....11
Ulsoor Road, Bangalore. The cause of action as such arose at Bangalore even in respect of Ex.PW1/ 6 and not at Delhi so as to provide jurisdiction of the Delhi court as per cause of action clause of the plaint where as suit has been filed at Delhi Court on the ground that cause of action arise at registered office of the plaintiff at Delhi from where appointment letter was issued and as per para 11 of Ex.PW1/6 which only speaks of agreement specially to the jurisdiction of the court at New Delhi. It is well settled proposition of the law that the parties can not create jurisdiction by such agreement as already observed agreement the Ex.PW1/6 was violated at Bangalore by the defendant when he joined the other firm and violated the terms and conditions of the Employee Intellectual Property Agreement Ex.PW1/6 by providing secrets of the trade to the firm joined. Yet since the onus was on the defendant to prove the issue and the defendant failed to lead any evidence, the issue is decided against the defendant and in favour of the plaintiff. ISSUE No.2, 4 and 5 :
Issue no. 2, 4 and 5 are taken up together as primarily the onus to prove the agreement which has been sought to be enforced has to be proved that the same is enforceable by the plaintiff for grant of relief of prayer as Contd/....12
claimed by the plaintiff. The suit of the plaintiff, as deposed in the affidavit filed in evidence, is based on appointment letter of the defendant dated 20.12.2004 Ex.PW1/4, officer letter thereof dated 9.12.2004 Ex.PW1/ 5 and Employee Intellectual Property Agreement proved as Ex.PW1/6. The material deposition by the plaintiff witness is that the resignation letter and the letter dated 28.2.2007 proved as Ex.PW1/7 and Ex.PW1/8 vide which the resignation was accepted and the defendant was released from the duty w.e.f. 28.2.2007, however, subject to certain conditions as also mentioned in Ex.PW1/8 which reads as under :
"You will treat as strictly confidential the affairs of the company, its collaborators and its customers of which you may be cognizant. Any information relating to sales, marketing processes technical knowhow Administrative and/ or Organizational Methods Security Arrangements of this company or its principals that you might have acquired as a result of your employment with us must be treated as strictly confidential and must not be disclosed either by word of mouth or in writing to any one in order to safeguard the interest of the company. You are also debarred from going into business in competition with this company or joining any company proposing to manufacture or already manufacturing/trading any products/ similar products as those of this company atleast for a period of three years from date of your cessation of employment with SMC Pneumatics (India) Pvt. Ltd".
Contd/....
13The plaintiff witness while deposing that defendant joined M/s Ash & Alain India Pvt. Ltd. W-203 No. 22 Sunrise Chambers, Ulsoor Road, Bangalore and committed breach of Employee Intellectual Property Agreement Ex.PW1/6 by giving gain to M/s Ash & Alain India Pvt. Ltd. W-203 No. 22 Sunrise Chambers, Ulsoor Road, Bangalore by disclosing various trade secrets and other confidential or proprietary information and materials relating to plaintiff's business including without limitation, patents, trademark and copy rights both registered and unregistered, various ideas, concepts, techniques, inventions, design, computer programs, computer resources, mask works, designs, many related documentation, compilations, information's electronic and other records, financial, operational, security and other plans and record business operation plans, specifications, methods of procedure, methods of operation, method of manufacturing technology policies and protocols and other works of authorship and the like and etc. to defendant's present employer and in this way defendant is causing loss to the plaintiff company and wrongful gain to himself and defendant's new employer company. He also deposed that many confidential documents of the plaintiff company are also still in the defendant's possession and Contd/....
14defendant is very well aware of the fact that these documents contain extremely confidential information, which can be severally detrimental to the plaintiff which had been divulged by the defendant to the competitors i.e his present employer.
The plaintiff as per deposition stated that defendant cheated the plaintiff company. The plaintiff witness also deposed in support of the case that defendant has breached the terms and conditions of the offer letter dated 9.12.2004 and appointment letter dated 20.12.2004 executed between the defendant and the plaintiff company as stated and has given a gain to M/s Ash & Alain India Pvt. Ltd. by joining their services which is a distributor of M/s CKD Corporation Japan, a competitor of the plaintiff company. The defendant is also giving/providing gain to M/s Ash & Alain India Pvt. Ltd. by disclosing various trade secrets and other confidential information and materials relating to plaintiff's business including without limitation, patents, trademarks, and copyrights both registered and unregistered various ideas, concepts, techniques, inventions, design, computer programs, computer resources, mark works many related documentation, compilations, information's electronic and other records, financial, operational, security and other plans and record Contd/....
15business operation plans, specifications, methods of procedure, methods of operation, method of manufacturing technology policies and protocols and other works of authorship and the like and etc to defendant's present employer.
The breach of Employee Intellectual Property Agreement by the defendant is deposed to be because of the present employer of the defendant who is also engaged in selling of similar kind of components which are sold by the plaintiff company, hence the defendant is using plaintiff's company product information for making comparison and promoting M/s Ash & Alain India Pvt. Ltd. who is a competitor of the plaintiff company. According to the plaintiff witness deposition, the plaintiff company has lost business worth around 5 lacs to the respondent's present employer company since his (defendant) joining.
The present defendant employer namely M/s Ash & Alain India Pvt. Ltd. by whom violation of Intellectual Property Agreement, right of the plaintiff on account of fact of defendant being employee of M/s Ash & Alain India Pvt. Ltd., whereas the said M/s Ash & Alain India Pvt. Ltd. has not been made a party to the suit nor examined as a witness so as to assess the claim damages as contemplated under the provisions of the Contract Contd/....
16ACt. Also no statement of account/ledger is placed and proved on record to show that plaintiff suffered damages of Rs.5 lac while seeking relief against the defendant that defendant be restrained from working with M/s Ash & Alain India Pvt. Ltd. and further not going into business with the competitor of the plaintiff company with damages of Rs. 5lacs.
The prayer made in the plaint under the terms and conditions of letter of appointment, Intellectual Property Agreement and offer letter is to restrain the defendant from working with M/s Ash & Alain India Pvt. Ltd. which is against the provisions of Section 27 of the Contract Act 1872 whereas explanation one of section 27 of the Contract Act does not apply to the defendant who joined M/s Ash & Alain India Pvt. Ltd. as employee and not as business partner in M/s Ash & Alain India Pvt. Ltd. The agreement as per offer letter Ex.PW1/5 which is not agreement in the eyes of law can not debar the defendant from joining any company even if the said company is in competition with the plaintiff company in respect of similar produce for a period of 3 years from the date of cessation to the date of joining of the plaintiff company as the same is barred by section 27 of the Contract Act. In term of the Explanation 1 to section 27of the Contract Act, it can also not be said that there Contd/....
17was relationship of seller and buyer between the plaintiff and the defendant in respect of the good will as contemplated therein which is also not the case of the plaintiff. The restriction of not joining other firm after resignation, can not be said to be reasonable as the defendant can not be restrained from joining other competitive firm as it would amount to restrain him from exercising lawful profession even if he has acquired the Intellectual Property right of the plaintiff during his employment with the plaintiff as such Intellectual Property Rights are not exercised or violated by him but may be by the new employer namely M/s Ash & Alain India Pvt. Ltd. who has not been made a party to the suit. Such restrictions are also against the competitive market in economic globalization for better incentives and result in the economy of the nations.
The claim of the plaintiff is based on enforcement of the agreement of offer letter Ex.PW1/5 read with appointment letter Ex.PW1/ 4 and Employee Intellectual Property Agreement Ex.PW1/ 6 read with a prayer in the plaint which is held to be not enforceable as the plaintiff is not entitled to the prayers made in the plaint being barred U/s 27 of the Contract Act 1872. In this connection reference is also made to Section 20 of the Specific Relief Act in terms of issues framed in respect of Ex.
Contd/....
18PW1/5 and Ex. PW/16 of which Specific Performance has bee sought by the plaintiff. Such offer of appointment as well as conditions of service as per agreement can not be specifically performed through the court of law being discretionary relief sought in Specific Performance thereof including recovery of damages from the defendant. It is so because such agreement gives the plaintiff an unfair advantage over the defendant while offering employment to such defendant which involved hardship on the defendant as well which he could not enforce and whereas non-performance would involve no such hardship to the plaintiff. Such agreement if called to be agreement in the eyes of law would also makes it equitable to enforce specific performance thereof. The very resignation of the defendant from the service implies that such hardship as resulted from the act of the plaintiff and causing unfair advantage to them as is also apparent in view of section 27 of the Contract Act as already discussed. These issues are accordingly decided in favour of the defendant and against the plaintiff that such agreement can not be enforced and also not enforceable.
ISSUE No.3 The onus to prove the issue no. 3 was on the plaintiff which he fails to discharge as the suit was filed by the plaintiff Contd/....
19under the signatures of authorized signatory namely Jasmeet Singh Marwah, Company Secretary of the plaintiff company who has not been examined so as to prove resolution placed on record in his favour passed by the plaintiff company which authorised him to file the present suit. The witness examined by the plaintiff has not proved the said resolution who infact proved the resolution in his favour dated 3.9.2009 as Ex. PW1/3 and not the resolution passed in favour of the person who signed the plaint for an on behalf of the plaintiff namely Jasmeet Singh Marwah. Since it is not proved that the suit has been filed by the duly authorized person for and on behalf of the plaintiff, this issue is decided in favour of the defendant and against the plaintiff.
Relief :
In view of my findings on the issues, the plaintiff is held not entitled to any relief as prayed for in the suit. The suit of the plaintiff is accordingly dismissed. However, no orders as to cost in the give facts. Decree be drawn accordingly. File be consigned to record room.
Announced in open court (D.C. ANAND)
on 04.11.2009 Addl. Distt. Judge (North)-IV/
Delhi
Contd/....
20
CS No. 361/09
04.11.09
Present : None
Vide separate judgment announced in the court, the suit of the plaintiff is dismissed. However no orders as to cost in the facts and circumstances. Decree be drawn accordingly. File be consigned to record room.
(D.C. ANAND) ADJ(NORTH) - 04/ DELHI 04.11.2009 Contd/....