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The court was of the view that 'negative covenants operating during the period of the contract of employment when the employee is bound to serve his employer exclusively are generally not regarded as restraint of trade and therefore do not fall under Section 27 of the Contract Act and that a negative covenant that the employee would not engage himself in a trade or business or would not get himself employed by any other master for whom he would perform similar or substantially similar duties is not therefore a restraint of trade unless the contract as aforesaid is unconscionable or excessively harsh or unreasonable or one-sided'. In the opinion of A.P. Sen, J, in Superintendence Co. Ltd (supra), the question whether an agreement is void under Section 27 must be decided upon the wording of that section. A contract, which has for its object a restraint of trade, is prima facie, void. Section 27 of the Contract Act is general in terms and unless a particular contract can be distinctly brought within Exception I there is no escape from the prohibition. As observed by A.P. Page 2691 Sen, J. We have nothing to do with the policy of such a law. All we have to do is to take the words of the Contract Act and put upon the meaning which they appear plainly to bear. The observations of Sir Richard Couch, C.J., in Madhub Chunder v. Raj Coomar Doss: 14 BLR 76 (1874) were noted as having become the locus classicus on this subject. Those observations were:

36. In Taprogge Gesellschaft (supra), a decision of a learned single Judge of the Bombay High Court, the facts were that the plaintiff company engaged in the business of manufacturing cooling water filters and allied products. It was a German Company and appointed the defendant, an Indian company, as its agent to sell its goods in India. Under the contract, there was a restriction to sell the defendants own products. Disputes arose and the contract was rescinded. The plaintiff claimed an injunction restraining the defendants from recommending, offering or selling any of the covered products for a period of five years after the contract was rescinded. The defendant took the plea that the negative covenant embodied in the clause was in restraint of trade and therefore void under Section 27 of the Contract Act. The court held that the negative covenant embodied in the clause of the contract between the parties to the suit could not be enforced in India. Therefore, it refused to grant injunction in favor of the plaintiff. The court observed as under:

41. After an elaborate discussion of the case law, both English and Indian, the Supreme Court came to the following conclusion in Niranjan Shankar Golikari (supra):

17. The result of the above discussion is that considerations against restrictive covenants are different in cases where the restriction is to apply during the period after the termination of the contract than those in cases where it is to operate during the period of the contract. Negative covenants operative during the period of the contract of employment when the employee is bound to serve his employment exclusively are generally not regarded as restraint of trade and therefore do not fall under Section 27 of the Contract Act. A negative covenant that the employee would not engage himself in a trade or business or would not get himself employed by any other master for whom he would perform similar or substantially similar duties is not therefore a restraint of trade unless the contract as aforesaid is unconscionable or excessively harsh or unreasonable or one-sided....

42. It may be mentioned that the Supreme Court in Niranjan Shankar Golikari (supra) had already observed: '...there is nothing to prevent the court from granting a limited injunction to the extent that is necessary to protect the employer's interests where the negative stipulation is not void'. The court also observed in the context of the factual matrix of the case before it that there was also nothing to show that if the negative covenant is enforced, the appellant would be driven to idleness or would be compelled to go back to the respondent company. It further observed that it may be that if the appellant is not permitted to get himself employed in another similar employment, he might perhaps get a lesser remuneration than the one agreed to by Rajasthan Rayon. But that is no consideration against enforcing the covenant. The Page 2699 Supreme Court further observed that the appellant cannot be heard to say that no injunction should be granted against him to enforce the negative covenant which is not opposed to public policy. In that case, the injunction issued against the appellant was found by the Supreme Court to be restricted as to time, the nature of the employment and as to the area and, therefore, could not be said to be too wide or unreasonable or unnecessary for the protection of the interests of the respondent company.