Indian Kanoon - Search engine for Indian Law

8. What is the true scope and effect of S. 42 was one of the questions raised before us. Section 42 deals with a case where a contract comprises an affirmative stipulation to do a certain act coupled with a negative stipulation, express or implied, not to do a certain act. Now, if S. 42 had not been enacted, by reason of S. 41, Clause (e), it would not have been possible to grant an injunction to restrain the breach of the negative stipulation. The breach of the negative stipulation would have been a breach of the contract would injunction though limited to preventing the breach of the negative stipulation would have been an injunction to prevent the breach of the contract and the contract being one of which performance would not be specifically enforced, S. 41, Clause (e), would have precluded the Court from granting an injunction to prevent the breach of the negative stipulation. Section 42 was, therefore, enacted and it provided that in such a case even though the contract cannot be specifically enforced, the Court would still be entitled to grant an injunction restraining the breach of the negative stipulation, if it otherwise thinks it fit and proper so to do. The bar created against the granting of such an injunction by S. 41, Clause (e), is thus removed by S. 42, but that does not mean that the Court must grant such an injunction even if the effect of doing so would be to compel the defendant to specifically perform the contract. The Court has a discretion whether or not to enforce the negative stipulation by grant of an injunction. That discretion is declared in no uncertain terms by S. 36 and is further emphasized by S. 38, Sub-secs. (1) and (2). The languages of S. 42 also shows that the discretion of the Court is not intended to be taken away by anything stated in the section. The words used are "the circumstance that the Court is unable to compel specific performance of the affirmative agreement shall not preclude it from granting an injunction"

so that S. 41, Clause (e), shall not stand in the way of the Court in granting an injunction; but the Court would still have to consider whether in the exercise of its discretion it should grant the injunction or not. That the Court has a discretion in the matter is amply borne out by various authorities. It will be sufficient to refer only to three of them. One is Charlesworth v. MacDonald [23 Bom. 103] (vide supra), the other is Deshpande v. Arvind Mills Company [48 Bom. L.R. 90] (vide supra) and the third is Shri Ambernath Mills Corporation v. Custodian of Evacuee Property [A.I.R. 1957 Bom. 119]. These authorities clearly lay down that even where an injunction is sought to prevent the breach of a negative covenant, it is always a matter for the Court whether to grant the injunction or not. The same is the position also in England though at one time for historical reasons a view did prevail in England that where there is a negative covenant, it must be enforced by an injunction. That view gradually underwent a change and with the realization of the difficulties attendant upon such a rigid and inflexible view the Courts ultimately accepted that even in the case of negative stipulation, injunction is a discretionary remedy and it may or may not be granted by the Court according to the circumstances of each particular case. Some of the instances where injunction was either wholly refused or partly granted and partly refused or granted only in a modified form though the stipulation sought to be enforced was a negative stipulation will be found in Ehrman v. Bartholomew [(1898) 1 Ch. 671], Rely-a-Bell Burglar and Fire Alarm Company, Ltd. v. Eisler [1926 Ch. 609], William Robinson & Co., Ltd. v. Heuer [(1898) 2 Ch. 451]. Warner Bros. Pictures, Inc. v. Nelson [(1937) 1 K.B. 209] (vide supra) and Macro Productions, Ltd. v. Pagola (vide supra). It would, therefore, be idle to contend that in a case falling under S. 42 the Court has no discretion whether to grant an injunction or not.

19. If the negative stipulation which imposes a restraint is reasonably necessary for the adequate protection of the interests of the employer, it must be enforced by issue of an injunction. But if the negative stipulation goes beyond what is reasonably necessary to protect the legitimate interests of the employer, there is no reason why a Court should interpose to enforce the negative stipulation. The employer in the latter case would not need an injunction for protection of his interests, nor would his interests be protected by issue of such injunction. The only object which he could possibly hope to achieve by obtaining an injunction would be to spite or punish the employee for having broken the contract or perhaps to induce the employee to come back to his employment. Now it is clear from what we have said above while discussing the true basis of the rule against specific enforcement of a contract of personal service that the law does not favour compulsion of an employee to work against his will for any employer. The object to get back the employee in service is, therefore, not an object which the law countenances and it cannot be a legitimate object for enforcement of a negative stipulation that the employee would, even if not compelled, be at least induced or to use the words of Branson, J., in Warner Bros. v. Mrs. Nelson [(1937) 1 K.B. 209] (vide supra) tempted to come back. The law cannot regard such a consideration as a relevant consideration, for if such a consideration were relevant, the Court would in effect be doing indirectly what it cannot do directly, because the Court would issuing an injunction in order to induce the employee to go back to his employer, a thing which the Court should not think of doing. An injunction if otherwise properly granted may have the effect of inducing or tempting the employee to go back to the service of his employer but that is not the object for which injunction can be granted by the Court. It must, therefore, be seen whether the enforcement of the negative stipulation is reasonably necessary for the protection of the legitimate interests of the employer. If it is not going to benefit the employer in any legitimate manner, the Court would not injunct the employee from exercising his skill, training and knowledge merely because the employee has agreed to it. Of course when we say this, we did not for a moment wish to suggest that in such cases sanctity of contract may not be respected or may be violated with impunity. The question is only one of remedy. The employee having agreed to the negative stipulation, the negative stipulation must be held binding on him and if there is breach of the negative stipulation, the employer would have his remedy in damages, if any, but the Court would not grant the extraordinary remedy by way of an injunction because by doing so, beyond a mere enforcement of a contractual obligation, no legitimate object or purpose would be advanced. The Court would not interfere with the freedom of occupation of the employee unless it is necessary to do so for the protection of the interests of the employer. To that extent, freedom of contract must yield to freedom of occupation in public interest. We are, therefore, of the view that the principle laid down by Lord Macnaghten in Nordenfelt case [1894 A.C. 535] (vide supra) must be imported in order to guide the discretion of the Court in regard to the question as to when an injunction should be issued for breach of a negative stipulation in a contract of personal service, for that principle effects a happy reconciliation and adjustment of freedom of contract and freedom of occupation and subserves public interest.

24. It would, therefore, be clear that in all these cases the Court did not enforce the negative stipulation by means of an injunction merely because the employee had agreed to it but because the Court found that it was necessary to do so in order to protect the interests of the employer.

25. Before we apply this principle to the facts of the present case we must refer to one other contention of Sri C. T. Daru on behalf of the defendant. He urged that S. 42 in so far as and to the extent to which it empowers the Court to restrain a person from practicing any trade or profession of occupation of his choice is violative of the freedom guaranteed under Art. 19(1)(g) of the Constitution and the Court cannot issue an injunction imposing such a restrain resting on the authority purported to be conferred by that section. Now it is a little difficult to appreciate the force of this contention. Section 42 is no doubt wide in its terms but it leaves a discretion to the Courts whether or not to enforce a negative stipulation in a contract of personal service by issue of an injunction. It does not provide that the Count shall issue an injunction in every case where there is a negative stipulation in a contract of personal service. If such had been the case, it might have plausibly been argued that the section imposes an unreasonable restriction on the fundamental right of person to follow the occupation of his choice and is, therefore, in conflict with Art. 19(1)(g). It is now established by the majority view of N. H. Bhagwati and Subba Rao, JJ. (S. K. Das, J., contra, and S. R. Das C.J., and Kapur, J., not expressing any opinion on the point) in Basheshwar Nath v. Income tax Commissioner [A.I.R. 1959 S.C. 149], that the fundamental right under Art. 19(1)(g) cannot be waived and it is constitutionally impermissible to anyone to contract out of it. Notwithstanding to negative stipulation to the contrary, the fundamental right of the employee to follow the occupation of his choice would, therefore, remain and if the law provided that every negative stipulation, whatever be its scope or content, must be enforced by an injunction and the employee must be restrained from following the occupation of his choice in breach of the negative stipulation regardless of the consideration whether the imposition of such restraint was reasonable or not in the interest of the general public, the law might be liable to be regarded as being in conflict with the fundamental right of the employee to follow the occupation of his choice. But where the law merely confers authority on a civil Courts which is a judicial tribunal to decide in the exercise of its discretion whether to grant injunction or not, it is difficult to see how the law can be regarded as constituting an unreasonable restriction on the freedom to follow the occupation of his choice which belongs to the employee. The matter, being left to a judicial tribunal to be determined, would be decided after giving both parties full opportunity of presenting their case and after considering whether in the circumstances of a particular case, the restriction which would be imposed by the injunction is a reasonable restriction or not. The judicial tribunal, in exercising it discretion, would go into the reasonableness of the matter and grant an injunction only if it comes to the conclusion that the restriction imposed by the injunction would be a reasonable restriction : if it comes to the conclusion that the injunction would result in the imposition of unreasonable restriction, it would not grant the injunction. Therefore, the decision whether in a particular case the grant of injunction would be a reasonable restriction or an unreasonable one is left by S. 42 in the hands of a judicial tribunal and, in the circumstances it cannot be said that S. 42 involves any contravention of the fundamental right of the employee to follow the occupation of his choice. This view which we are taking is completely in accord with the decision of the Supreme Court in Godavari Sugar Mills v. K. T. S. Kamgar Sabha [1961 - I L.L.J. 313]. There the question arose in regard to the Bombay Industrial Relations Act and the contention was that inasmuch as on a reading of S. 3(18) which defined an "industrial matter" and S. 3(17) which defined an "industrial dispute," power was conferred on the industrial court to adjudicate on the mode of employment and this interfered with the right of the employer to carry on his trade as he liked subject to reasonable restrictions, S. 3(18) in so far as it defined an "industrial matter" to include the mode of employment contravened the fundamental right guaranteed under Art. 19(1)(g). This contention was repelled by the Supreme Court in the following words which apply wholly and completely to the situation before us :