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2014 DIGILAW 3087 (MAD)

Lister Technologies Private Limited v. Mukundhan Dakshinamurthi

2014-09-03

M.DURAISWAMY

body2014
JUDGMENT : M. Duraiswamy, J. 1. The Applicant-M/s. Lister Technologies has filed O.A. No. 276 of 2014 for Injunction restraining the First Respondent from approaching the customers of the Applicant-Company and interfacing in any manner with or attempting or diverting any contract or business opportunity of the Applicant-Company and also solicit business from or contract for any business purpose in any manner whatsoever, which competes directly or indirectly with the Applicant-Company. A. No. 2425 of 2014 has been filed by the Applicant-Company to pass an Order suspending the Business activities of the Second Respondent-Company. 2. A. No. 2426 of 2014 has been filed by the Applicant-Company seeking for appointment of an Advocate Commissioner as a Receiver, who with the assistance of the technically competent person enters the Business premises of the Respondents and inspect the computer system to find out the details of the confidential information of the Applicant-Company removed unauthorisedly by the First Respondent and produce the same before this Court. 3. Heard Mr. N.V. Srinivasan, learned Counsel for the Applicant and Mr. S. Sankaranarayanan, learned Counsel for the Respondents. 4. According to the Applicant, they are engaged in the business of developing software solutions across varied industry verticals such as manufacturing, health care, publishing, internet, e-commerce, telecom and education. According to the Applicant, they called the First Respondent for an interview and appointed him as a Project Manager, after being satisfied about his credentials and work experience in the relevant area of business of the Applicant. An Offer Letter was issued on 10.4.2012 to the First Respondent. The First Respondent accepted the Letter of Offer of employment on 7.5.2012. The First Respondent entered into an Agreement known as "Non-Disclosure Agreement" and appended his signature as a proof of his acceptance of the terms and conditions contained therein on 4.5.2012. On 15.11.2013, the First Respondent signed a Letter of Undertaking known as "Employee Undertaking". On 16.9.2013, the First Respondent tendered his resignation and he was relieved from the services with effect from 15.11.2013. The First Respondent was in service with effect from 4.5.2012 to 15.11.2013. 5. According to the Applicant, after relieving the First Respondent from the services of the Applicant-Company, the Applicant came to know that the First Respondent incorporated the Second Respondent-Company on 8.11.2013 (i.e.) during the tenure of his employment with the Applicant-Company as per the records of the Registrar of Companies, Chennai. 5. According to the Applicant, after relieving the First Respondent from the services of the Applicant-Company, the Applicant came to know that the First Respondent incorporated the Second Respondent-Company on 8.11.2013 (i.e.) during the tenure of his employment with the Applicant-Company as per the records of the Registrar of Companies, Chennai. According to the Applicant, the First Respondent is a Promoter-Director of the Second Respondent-Company. The Non-Disclosure Agreement dated 4.5.2012 was in vogue when the Second Respondent-Company was incorporated by the First Respondent. According to the Applicant, as per Clause 8 of the Non-Disclosure Agreement entered into between the Applicant-Company and the First Respondent, the First Respondent, during the employment or association with the Company and for a period of two years after his employment/association with the Company whether voluntarily or involuntarily will not on his own behalf or on behalf of any other person or entity directly or indirectly engage or solicit or sell products or services that are similar to or directly compete with the products or services of the Company provided at any time during the one year prior to his termination of employment with the Company. Since the First Respondent had incorporated the Second Respondent-Company even prior to he being relieved from the services, in which the business offered is similar in nature as that of the Applicant, he was privy to all the information of customer data of the Applicant-Company and used the same for promoting the Second Respondent-Company in breach of the contractual terms entered into. 6. According to the Applicant, the First Respondent has been contacting the past and present customers of the Applicant-Company as he is in possession of the Clients' data and thus, soliciting business, which is nothing but breach of the Non-Disclosure Agreement dated 4.5.2012 read with the Letter of Appointment dated 10.4.2012 and the Letter of Undertaking dated 15.11.2013. The First Respondent had unauthorisedly removed the confidential information of the Applicant-Company and had been utilising the same for his own benefit, thus, causing breach of the agreed conditions, resulting in the Respondent's acting detrimental to the interest of the Applicant. 7. Further, according to the Applicant, the First Respondent is aware of the entire client database of the Applicant-Company and is unauthorisedly using it. 7. Further, according to the Applicant, the First Respondent is aware of the entire client database of the Applicant-Company and is unauthorisedly using it. The acts of the First Respondent directly affects the interest of the Applicant-Company adversely, since the breach committed by the First Respondent were during the course of his employment. The First Respondent is obliged to comply with the terms of the Non-Disclosure Agreement signed by him. 8. According to the Respondents, the First Respondent is the Managing Director of the Second Respondent-Company and that he is a technically qualified person and was employed in various Companies in the USA for about seven years before joining the Applicant-Company. Since he was appointed as a Project Manager, his main role was to manage project execution and that he was dealing with technical aspect, common to any Software Company and never dealt with any confidential data of the Applicant-Company. The data mentioned by the Applicant-Company are common to everyone and none of the data is protected under any special enactment or Intellectual Property Right. 9. According to the First Respondent, while recruiting him, the Applicant promised that he will be elevated in the Company within a short period owing to his rich experience in the USA. Believing the false promise made by the Applicant, he resigned the lucrative job in the USA and joined the Applicant-Company. Contrary to the terms, the Applicant-Company recruited another person for a much lesser salary as Project Manager and wanted to promote him instead of the First Respondent. According to the First Respondent, when he questioned the act of the Applicant-Company, the relationship strained from April 2013 onwards. The Management of the Applicant-Company projected the First Respondent as liability to the Company and wanted him to resign the job. Therefore, the First Respondent was forced to resign his job on 16.9.2013. The First Respondent has not tendered any formal Resignation Letter to the Company as he did not volunteer to resign. The purported resignation was sent through an e-mail on 16.9.2013 at 08.43 p.m. The said resignation was accepted by e-mail sent on 17.9.2013 at 08.19 a.m. 10. The fact that his resignation was not on his own volition is evident from the e-mail that was sent at night and the acceptance of the same within 12 hours. The purported resignation was sent through an e-mail on 16.9.2013 at 08.43 p.m. The said resignation was accepted by e-mail sent on 17.9.2013 at 08.19 a.m. 10. The fact that his resignation was not on his own volition is evident from the e-mail that was sent at night and the acceptance of the same within 12 hours. In these circumstances, the First Respondent was looking for a new assignment with the knowledge of the Applicant and the Applicant has written mails to him that they would help him in his endeavours. The First Respondent was permitted to look for a job though he was attending the Applicant-Company. During the Notice period, the First Respondent did not get any job and when his friend wanted to promote the Second Respondent-Company, he included him as a Director and this fact was also informed to the Applicant-Company. That is the reason the Applicant-Company sent an e-mail on 8.11.2013 stating that they are relieving the First Respondent with effect from 15.11.2013, which is about 35 days prior to the expiry of the Notice period. Since the date of his resignation on 16.9.2013, he was not allowed to work or enter the premises of the Applicant-Company. 11. According to the First Respondent, he has not incorporated the Second Respondent-Company during the tenure of his employment. Further, according to the First Respondent, his tenure was over on 17.9.2013, when the Applicant-Company accepted his resignation. The business of software development is common to everyone and the Applicant cannot claim exclusive right for a common business prevalent in the software industry. According to the First Respondent, he was not privy to any of the confidential information. According to the First Respondent, the Applicant has not invoked the Arbitral clause. The calculation regarding the monetary loss are imaginary and frivolous. The Non-Disclosure Agreement dated 4.5.2012 got terminated on 17.9.2013. The provisions of Non-Disclosure Agreement is restrictive to trade and violates Section 27 of the Contract Act. 12. As per Section 27 of the Contract Act, an Agreement, which restrains anyone from carrying on lawful profession, trade or business is void. The restriction contained in the Non-Disclosure Agreement is not legally valid as it restrains the First Respondent's fundamental right and therefore, cannot be enforced. 12. As per Section 27 of the Contract Act, an Agreement, which restrains anyone from carrying on lawful profession, trade or business is void. The restriction contained in the Non-Disclosure Agreement is not legally valid as it restrains the First Respondent's fundamental right and therefore, cannot be enforced. Even assuming the loss is proved, the damage is capable of being assigned in terms of money and therefore, no injunction can be sought for by the Applicant. In these circumstances, the First Respondent prayed for dismissal of the Applications. 13. Mr. N.V. Srinivasan, learned Counsel for the Applicant, in support of his contentions, relied upon the following Judgments: "(i) Wipro Limited v. Beckman Coulter International S.A., 2006 (2) CTLJ 57 (Del), wherein the Delhi High Court held that during the subsistence of his employment, the employee may be compelled not to get engaged in any other work or not to divulge the business/trade secrets of his Employer to others and especially the competitors. (ii) Niranjan Shankar Golikari v. The Century Spinning and Mfg. Co. Ltd., AIR 1967 SC 1098 , wherein the Apex Court held that there is nothing to prevent the Court from granting a Limited Injunction to the extent that is necessary to protect the Employer's interest where the negative stipulation is not void. (iii) Unreported Judgment of the High Court of Delhi in Vogueserv International Pvt. Ltd. v. Rajesh Gosain & ors., C.S.(OS).1436 of 2012 dated 8.8.2013, wherein the Delhi High Court has held as follows: "Thus even compilation of clients' database has been held to be amounting to literary work wherein the author has a copyright. In Sanmar Specialty Chemicals Ltd. (supra) relied upon by learned Counsel for the Defendant the Court disposed of the Application in view of the specific contention of the Respondent therein that he was not using any of the confidential information that he acquired from the Applicants' Company and all the information he was making use of are easily available in the public domain. Learned Counsel for the Defendants has not been able to show that the data collected was in public domain nor can claim benefit of Section 27 of the Indian Contract Act." (iv) Unreported Judgment of the High Court of Delhi in Desiccant Rotors International Pvt. Ltd. v. Bappaditya Sarkar & anr., I.A. No. 5455 of 2008, I.A. No. 5454 of 2008 and I.A. No. 5453 of 2008 in C.S.(OS) No. 337 of 2008, dated 14.07.2009, wherein the Delhi High Court held as follows: "14. The stance of Indian Courts on the question of restraint on trade is unmistakably clear. There are no two ways about the fact that the approach towards a negative covenant subsisting during the course of employment is completely different from the approach which would be taken towards the applicability of a negative covenant post-employment duration. The Obligation Agreement dated June 12, 2007, amongst other things, provides that (i) for two years after termination of employment, Defendant No. 1 would not compete with the Plaintiff's business and would not advise, consult, serve or assist any party whose business competes with that of the Plaintiff and its group companies; (ii) for two years he would not interfere with the relationship of the Plaintiff and its customers, suppliers and Employees; that he would not disclose the confidential information to which he was privy as Employee of Plaintiff to any third party. The Plaintiff has stated that the Agreements it has relied upon (including the above-mentioned Obligation Agreement) are not in the form of restraint on trade but are only instruments through which it attempting to protect its confidential and proprietary information to which the Defendant No. 1 was privy. The Plaintiff at present is unable to produce any cogent evidence to prove its allegations against Defendant No. 1. Rather the said Defendant had, prior to the filing of the Suit, sent a letter to the Plaintiff asking it to permit his dues towards his employment. 15. I have no doubt that such was the intention of the Plaintiff, but with equal conviction I believe that such is the intention of all Employers, who rely on like negative covenants in employment contracts with their employees. 15. I have no doubt that such was the intention of the Plaintiff, but with equal conviction I believe that such is the intention of all Employers, who rely on like negative covenants in employment contracts with their employees. It is this attempt to protect themselves from competition which clashes with the right of the employees to seek employment where so ever they choose and in a clash like this, it is clear that the right of livelihood of the latter must prevail. Clearly, in part at least, the Obligation Agreement sought to restrain Defendant No. 1 from seeking employment with an Employer dealing in competitive business with the Plaintiff after he had ceased to be an Employee of the Plaintiff, and that too for a period of two years. Such an act cannot be allowed in view of the crystal clear law laid on this issue. However, in the impugned Order dated February 20, 2008 the injunction restraining Defendant No. 1 is limited in scope, in the sense that it dies not restrain the Defendant No. 1 from working with Defendant No. 2 or any other person/Company, thereby steering clear of impinging the former's freedom to choose his own work place. The injunction only restrains Defendant No. 1 from approaching the Plaintiff's suppliers and customers for soliciting business which is in direct competition with the business of the Plaintiff. Hence, the injunction which has already been granted by order dated February 20, 2008 is made absolute. The Interim Application is disposed of accordingly." (v) Power Finance Corporation Ltd. v. Pramod Kumar Bhatia, 1997 (2) LLN 5 (SC) : 1997 (4) SCC 280 , wherein the Apex Court held as follows: "It is now settled legal position that unless the Employee is relieved of the duty, after acceptance of the offer of voluntary retirement or resignation, jural relationship of the Employee and the Employer does not come to an end. Since the Order accepting the voluntary retirement was a conditional one, the conditions ought to have been complied with. Before the conditions could be complied with, the Appellant withdrew the scheme. Consequently, the Order accepting voluntary retirement did not become effective. Thereby no vested right has been created in favour of the Respondent. Since the Order accepting the voluntary retirement was a conditional one, the conditions ought to have been complied with. Before the conditions could be complied with, the Appellant withdrew the scheme. Consequently, the Order accepting voluntary retirement did not become effective. Thereby no vested right has been created in favour of the Respondent. The High Court, therefore, was not right in holding that the Respondent has acquired a vested right and, therefore, the Appellant has no right to withdraw the scheme subsequently." (vi) Homag India Private Ltd., A Company Incorporated having its Registered Office at #38, Industrial Suburb, II Stage Tumkur Road, Bangalore-560 022, rep. by its Authorised Signatory, S. Vaidyanathan v. Ulfath Ali Khan and another, wherein the Karnataka High Court, while allowing the Appeals, restrained the Defendants by an Order of Temporary Injunction from carrying on business in India or carrying on business with, dealing or in any manner transacting with any of customers of Plaintiff by utilizing confidential information whether in the form of technical data, correspondence and information pertaining to, manufacturing process, marketing plans, etc. (vii) Unreported Judgment of this Court made in L & T Finance Ltd., rep. by its Zonal Legal Manager, C. Balasubramanian, Montieth Place, 47, Monteith Road, Chennai-600 008 v. G.G. Granites, Prop: Mr. G. Gopalakrishnan, No. 3, Main Road, Keelaiyur, Melur Taluk, Madurai-625 102, Tamil Nadu, 2013 (6) CTC 654 , Application Nos. 2686 of 2013 (batch), dated 6.9.2013 wherein this Court held as follows: "13. Therefore, irrespective of whether the provisions of Order 39, Rules 6, 7 & 8 are imported verbatim or read verbatim into Section 9(ii) of the Arbitration Act or not, a normal Civil Court that exercises jurisdiction under Section 9 can always take the Rules found in Order 39, at least as Guidelines for the proper and fair exercise of the powers conferred by Section 9. The question as to whether a normal Civil Court can appoint a Commissioner to seize and possess a hypothecated property pending disposal of a Suit, either in terms of Order 26 or in terms of Order 39, Rule 7, did not give rise to as much controversy as it has given rise to, in relation to Section 9. The question as to whether a normal Civil Court can appoint a Commissioner to seize and possess a hypothecated property pending disposal of a Suit, either in terms of Order 26 or in terms of Order 39, Rule 7, did not give rise to as much controversy as it has given rise to, in relation to Section 9. This is perhaps due to the fact that due to repeated warnings issued and corrective measures taken by superior Courts, the normal Civil Courts do not pass such Orders without Notice of hearing to the opposite party. One more reason is that the Financial Institutions gained notoriety for certain practices adopted by them, until the heat on their feet generated by the decision of the Supreme Court in Manager, ICICI Bank Ltd. v. Prakash Kaur, 2007 (2) CTC 334, drove the Finance Companies to take recourse to Section 9." (viii) Gilford Motor Co. Ltd. v. Home, 1932 G 1418 : 1933 All ER 109, wherein the Court of Appeal held as follows: "For the reasons stated, I am of the opinion that the covenant was one which was reasonably required for the protection of the Company, and was neither ambiguous nor did it impose too wide a restraint on the covenantor. There only remain two subordinate points to be considered. The first is whether the Oral Agreement arrived at in November, 1932, operated to put an end to the covenant. Upon that question I find myself in entire agreement with the Master of the Rolls and with Farwell, J. The question depends upon what took place at the interview at which the Oral Agreement was arrived at. Apart from the prima facie presumption that the Company would not readily have agreed that their Managing Director who had, for a substantial time, been in control of their business should, on leaving, be permitted to solicit their customers, there is no evidence that at this interview it was agreed that the covenant in question, which was to come into operation after the termination of the employment, should be abrogated. Secondly, as to the question whether the injunction ought to extend to restraining the Defendant-Company from soliciting the Plaintiff-Company's customers. Secondly, as to the question whether the injunction ought to extend to restraining the Defendant-Company from soliciting the Plaintiff-Company's customers. I am of opinion that the evidence amply justified the learned Judge in drawing the inference that the Company was a mere cloak or sham for the purpose of enabling the Defendant to commit a breach of his covenant against solicitation. I need not recall the facts, but it seems to me that the evidence as to the formation of the Company and as to the position of its shareholders and directors leads to that inference. Of course, that inference might have been displaced by evidence adduced on the part of the Defendants, but although the issue was plainly raised on the pleadings, no such evidence was forthcoming. In these circumstances, I agree with the finding by the learned Judge that the Defendant-Company was a mere channel used by the Defendant-Home for the purpose of enabling him, for his own benefit, to obtain the advantage of the customers of the Plaintiff Company, and that therefore the Defendant-Company ought to be restrained as well as the Defendant-Horne." (ix) Elsevier Limited v. Robert Munro, 2014 EWHC 2648 (QB), wherein the Queen's Bench Division held as follows: "81. In summary, my main conclusions are these. The Defendant was not constructively dismissed by the Claimant. The Claimant did not repudiate the Defendant's Contract of Employment. The Defendant decided that he wanted to leave the Claimant's employment because he found the Cengage job on offer was more attractive. For the Defendant to take the job with Cengage during the period of his Notice would be a breach of his Contract of Employment. The issue is whether the Court should exercise its discretion to grant the remedy of an injunction to prevent such a breach. The fact that the Defendant is not presently working does not affect the Court's approach to the exercise of that discretion as was submitted on his behalf. His idleness is chosen by him not imposed by the Claimant, not is it caused by any wrongful conduct of the Claimant. 82. The Defendant's Contract prohibits him from working for a competitor of the Claimant during his employment. Cengage is a competitor of the Claimant, in respect of the Claimant's NHP businesses. His idleness is chosen by him not imposed by the Claimant, not is it caused by any wrongful conduct of the Claimant. 82. The Defendant's Contract prohibits him from working for a competitor of the Claimant during his employment. Cengage is a competitor of the Claimant, in respect of the Claimant's NHP businesses. If the Defendant worked for Cengage during his Notice period the Claimant would suffer damage for which money compensation would not be an adequate remedy. That is enough to justify an Injunction to prevent the Defendant working for Cengage for the duration of the Notice period. An additional justification is provided by the fact that the Defendant retains in his memory confidential information learned by him whilst working for the Claimant which is relevant to and of value to Cengage and the risk that such information would, during the Notice period, be misused by Cengage to the detriment of the Claimant. The Defendant has not taken away confidential documents and I do not find that he would deliberately misuse the information he retains, but the risk of misuse and consequent damage are present and substantial. 83. I agree with the Defendant's submission that the Claimant's claim for an Injunction to restrain a breach of the duty of good faith is unsound, because the wording is too vague and uncertain. However, I will grant an Injunction to enforce the prohibition on working for a competitor, in the form of Cengage, until the end of the contractual Notice period on 10th April 2015." 14. Mr. R. Sankaranarayanan, learned Counsel appearing on behalf of the Respondents, in support of his contentions, relied upon the following Judgments: "(i) J.K. Cotton Spg. & Wvg. Mills Co. Ltd., Kanpur v. State of U.P. and others, 1990 (2) LLN 682 (SC) : AIR 1990 SC 1808 , wherein the Apex Court held that the resignation is not complete until it is accepted by the proper authority and before such acceptance, an employee can change his mind and withdraw the resignation. But once the resignation is accepted, the contract comes to an end and the relationship of Master and Servant stands snapped. (ii) G.R.V. Rajan v. Tube Investments of India Ltd. rep. But once the resignation is accepted, the contract comes to an end and the relationship of Master and Servant stands snapped. (ii) G.R.V. Rajan v. Tube Investments of India Ltd. rep. by its Company Secretary, Madras-1, 1995 (1) LW 274 , wherein a Division Bench of this Court held that Section 27 of the Contract Act provides that "every Agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void". A reading of the main Section and the Exception places beyond doubt that there is only one exception to the Rule as it stands now and that exception can come into play only in the case of a goodwill and the like business being carried on by the purchaser. In such a case, the Court has to find out whether the limits imposed by the Agreement are reasonable, having regard to the nature of the business. The Section does not make a distinction between a partial restraint and an absolute restraint. The significance thereof is brought out by the language of Section 28, which deals with Agreements in restraint of Legal proceedings. In that Section, the restraint is void only if it is absolute. (iii) Superintendence Company of India (P) Ltd. v. Sh. Krishan Murgai, AIR 1980 SC 1717 , wherein the Apex Court held as follows: "22. In conclusion, the Court observed: "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 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 Employer 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". ....... 28. 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". ....... 28. The question whether an Agreement is void under Section 27 must be decided upon the wording of that Section. There is nothing in the wording of Section 27, to suggest that the principle stated therein does not apply when the restraint is for a limited period only or is confined to a particular area. Such matters of partial restriction have effect only when the facts fall within the exception to the Section. 29. 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 distinctively brought within Exception 1 there is no escape from the prohibition. 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 them the meaning which they appear plainly to bear. This view of the Section was expressed by Sir Richard Couch, C.J. in the celebrated Judgment in Madhub Chunder v. Rajcoomar Doss, 1874 (14) Beng LR 76 at pp. 85-86, laying down that whether the restraint was general or partial, unqualified or qualified, if it was in the nature of a restraint of trade, it was void." (iv) FL Smidth Pvt. Ltd., having its Office at FL Smidth House, 34, Egatoor, Kelambakkam, Rajiv Gandhi Salai, Chennai-603 103, rep. by its Power of Attorney Holder V. Rajagopalan v. Secan Investcast (India) Pvt. Ltd., having its address at S.F. No. 504/2C, L&T by-Pass Road, Near ARC Parcel Service, Eachanari P.O., Coimbatore-641 021, 2013 (1) CTC 886 (DB), wherein a Division Bench of this Court held as follows: "27. Post-Contract - Post Employment Restrictive Covenants: Indian Courts consistently refused to enforce post-termination-non-compete clause in Employment Contracts. Viewing them as a restraint of trade imperative under Section 27, in Niranjan Shankar Golikari v. Century Spinning and Manufacturing Co. Post-Contract - Post Employment Restrictive Covenants: Indian Courts consistently refused to enforce post-termination-non-compete clause in Employment Contracts. Viewing them as a restraint of trade imperative under Section 27, in Niranjan Shankar Golikari v. Century Spinning and Manufacturing Co. Ltd., AIR 1967 SC 1098 : 1967 (2) SCR 367, Appellant thereon accepted post of Shift Supervisor and signed standard firm contract of five years. The Appellant received training for nine months and thereafter absented himself and then handed over his Resignation Letter. Observing that Negative Covenant operative during period of Contract do not fall under Section 27, and that Clause 17 of the Contract does not amount to restraint in trade, the Honourable Supreme Court has held as under: "20. 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 Employer 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 as in the case of W.H. Milsted & Son Ltd., 1927 W.N. 233. Both the Trial Court and the High Court have found, and in our view, rightly, that the Negative Covenant in the present case restricted as it is to the period of employment and to work similar or substantially similar to the one carried on by the Appellant when he was in the employment of the Respondent-Company was reasonable and necessary for the protection of the Company's interests and not such as the Court would refuse to enforce. There is, therefore, no validity in the contention that the Negative Covenant contained in Clause 17 amounted to a restraint of trade and therefore, against Public Policy". There is, therefore, no validity in the contention that the Negative Covenant contained in Clause 17 amounted to a restraint of trade and therefore, against Public Policy". The Hon'ble Supreme Court drew a clear distinction between a restriction in a Contract of Employment which is operative during the period of employment and one which is to operate after the termination of employment." (v) Central Inland Water Transport Corporation Ltd. and another v. Brojo Nath Ganguly and another, 1986 (2) LLN 382 (SC) : AIR 1986 SC 1571 , wherein a Division Bench of this Court held as follows: "We have a Constitution for our country. Our judges are bound by their oath to "uphold the Constitution and the laws". The Constitution was enacted to secure to all the citizens of this country social and economic justice. Article 14 of the Constitution guarantees to all persons equality before the law and the equal protection of the laws. The principle deducible from the above discussions on this part of the case is in consonance with right and reason, intended to secure social and economic justice and conforms to the mandate of the great equality clause in Article 14. This principle is that the Courts will not enforce and will, when called upon to do so, strike down an unfair and unreasonable contract, or an unfair and unreasonable clause in a contract, entered into between parties, who are not equal in bargaining power. It is difficult to give an exhaustive list of all bargains of this type. No Court can visualize the different situations which can arise in the affairs of men. One can only attempt to give some illustrations. For instance, the above principle will apply where the inequality of bargaining power is the result of the great disparity in the economic strength of the contracting parties. It will apply where the inequality is the result of circumstances, whether of the creation of the parties or not. It will apply to situations in which the weaker party is in a position in which he can obtain goods or services or means of livelihood only upon the terms imposed by the stronger party or go without them. It will apply where the inequality is the result of circumstances, whether of the creation of the parties or not. It will apply to situations in which the weaker party is in a position in which he can obtain goods or services or means of livelihood only upon the terms imposed by the stronger party or go without them. It will also apply where a man has no choice, or rather no meaningful choice, but to give his assent to a contract or to sign on the dotted line in a prescribed or standard form or to accept a set of rules as part of the contract, however unfair, unreasonable and unconscionable a clause in that contract or form or rules may be. This principle, however, will not apply where the bargaining power of the contracting parties is equal or almost equal. This principle may not apply where both parties are businessmen and the contract is a commercial transaction. In today's complex world of giant corporations with their vast infrastructural organizations and with the State through its instrumentalities and agencies entering into almost every branch of industry and commerce, there can be myriad situations which result in unfair and unreasonable bargains between parties possessing wholly disproportionate and unequal bargaining power. These cases can neither be enumerated nor fully illustrated. The Court must Judge each case on its own facts and circumstances." (vi) Firm Ashok Traders and another v. Gurumukh Das Saluja and others, 2004 (2) CTC 208 (SC) : AIR 2004 SC 1433 , wherein the Apex Court held as follows: "18. Under the A & C Act, 1996, unlike the predecessor Act of 1940, the Arbitral Tribunal is empowered by Section 17 of the Act to make orders amounting to interim measures. The need for Section 9, in spite of Section 17 having been enacted, is that Section 17 would operate only during the existence of the Arbitral Tribunal and its being functional. During that period, the power conferred on the Arbitral Tribunal under Section 17 and the power conferred on the Court under Section 9 may overlap to some extent but so far as the period pre and post the Arbitral proceedings is concerned the party requiring an interim measure of protection shall have to approach only the Court. During that period, the power conferred on the Arbitral Tribunal under Section 17 and the power conferred on the Court under Section 9 may overlap to some extent but so far as the period pre and post the Arbitral proceedings is concerned the party requiring an interim measure of protection shall have to approach only the Court. The party having succeeded in securing an interim measure of protection before Arbitral proceedings cannot afford to sit and sleep over the relief, conveniently forgetting the "proximately contemplated" or "manifestly intended" Arbitral proceedings itself. If Arbitral proceedings are not commenced within a reasonable time of an order under Section 9, the relationship between the Order under Section 9 and the Arbitral proceedings would stand snapped and the relief allowed to the party shall cease to be an Order made 'before' i.e. in contemplation of Arbitral proceedings. The Court, approached by a party with an Application under Section 9, is justified in asking the party and being told how and when the party approaching the Court proposes to commence the Arbitral proceedings. Rather, the Scheme in which Section 9 is placed obligates the Court to do so. The Court may also while passing an Order under Section 9 put the party on terms and may recall the Order if the party commits breach of the terms. 19. During the course of hearing, we asked the learned Counsel for Group "A" what steps have they taken for initiation of Arbitral proceedings ever since 2.6.2003 the date on which they claim to have invoked Arbitration clauses, or since 22.7.2003 - the date on which the Application under Section 9 was filed? We were told that Group "A" was awaiting the Orders of the Court under Section 9 of the Act. This is hardly an explanation. Commencement of Arbitral proceedings is not dependent on the interim relief being allowed or denied. It was expected of Group "A" to have post-haste sought for the appointment of Arbitrator under Section 11 of the Act if the partners noticed had failed to respond to the demand of Group "A" for Arbitration. This, by itself, in our opinion, would have been enough to deny relief to Group "A". It was expected of Group "A" to have post-haste sought for the appointment of Arbitrator under Section 11 of the Act if the partners noticed had failed to respond to the demand of Group "A" for Arbitration. This, by itself, in our opinion, would have been enough to deny relief to Group "A". However, in the facts and circumstances of the case, as we find the High Court having felt convinced of the need for appointment of Receiver and as we are inclined only to suitably modify the order, we do not deem it proper to dismiss the Application under Section 9 in its entirety and for this reason alone. We direct the Applicant under Section 9 to take steps for appointment of Arbitrator/s, without any further loss of time." (vii) Polaris Software Lab Limited, rep. by its Company Secretary v. Suren Khiwadkar, Pune, 2004 (1) LLN 794 (Mad.) : 2003 (3) MLJ 557 , wherein this Court held that while reasonable restrictions could be placed on an Employee in the post-employment period only by express agreement, Negative Covenant could only be restricted to the period of employment while in service. (viii) Reena Silicate Industries Pvt. Ltd. v. GAIL (India) Ltd. & anr., AIR 2006 Mad. 266 , wherein this Court held that if the Applicant failed to take steps to commence Arbitral proceedings after invocation of Arbitral clause, the Applicant is not entitled for any Interim Order. (ix) UCMAS Mental Arithmetic v. Akademi Sempoa & Mental, 2014 (4) CTC 548, wherein this Court held as follows: "15. As per 27 of the Contract Act, every Agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void and there is an exception to Section 27, and it relates to a circumstance where a person sells the goodwill of a business may agree with the buyer to refrain from carrying on a similar business, within specified local limits, so long as the buyer carries on a like business provided that such limits appear to the Court as reasonable. So far as the facts of the case are concerned, we will have to see whether Clause 9.1(a) is violative of Section 27 of the Contract Act. 19. In the Judgment reported in the case of Gujarat Bottling Co. So far as the facts of the case are concerned, we will have to see whether Clause 9.1(a) is violative of Section 27 of the Contract Act. 19. In the Judgment reported in the case of Gujarat Bottling Co. Ltd. v. Coca Cola Company, AIR 1995 SC 2372, it is held that normally the Doctrine of Restraint of Trade is not attracted in cases where the restriction is to operate during the period the contract. It applies in respect of a restriction which operates after the termination of the contract. Therefore, any restriction restraining a person from doing similar business, after termination of the Contract amounts to Restraint of Trade as per Section 27 of the Contract Act and the same is void. Therefore, the Respondent/Plaintiff cannot resort to Clause 9.1(a) of the Agreement and restrain the Applicant from doing similar business after termination of the Contract and the restriction imposed under Clause 9.1(a) is also void, as it amounts to restraint of trade as per Section 27 of the Contract Act. 20. Further, regarding Clause 17.1.4(a) & (b) are concerned, the Applicants are not entitled to operate any of the UCMAS course, which is the exclusive property of the Plaintiff and according to the Applicants, they are not using UCMAS and similar Abacus & Mental Arithmetic Courses and there have newly invented a program known as 'Indian Abacus', which is not similar to UCMAS course and also narrated the difference and their concept in Paras 14 & 17 of the Plaint and in the Counter Affidavit, there is no specific denial. Further, whether the Indian Abacus Program alleged to have been invented by the Applicants is a new invention of the Applicants or not, can be only decided during trial and having regard to the Affidavit filed by the parties, wherein the Applicants answered that their product is a new invented one and also gave details about their product and narrated the difference of their product and the same was not controverted in the Reply Affidavit, it cannot be contended at this stage that the Applicants are using UCMAS course or other similar Abacus and Mental Arithmetic Courses of the Plaintiff. Hence, the Plaintiff is not entitled to the relief of injunction at this stage on the ground that Clause 9.1(a) is violative of Section 27 of the Contract Act and prima facie material has been placed by the Appellants to the effect that they are using different concept from that of the Plaintiff and unless, the Plaintiff is able to substantiate the product of the Applicants is the same as that of the Applicants, it cannot be contended that the Applicants are not entitled to use the Indian Abacus. Hence, at this stage, no prima facie has been shown by the Plaintiff and the balance of convenience is also in favour of the Applications/Defendants." 15. It is the case of the Applicant that the First Respondent, who was an erstwhile Employee of the Applicant-Company tendered his resignation and incorporated the Second Respondent-Company and is indulging in acts detrimental to the interest of the Applicant-Company by carrying on the same business activities of the Applicant-Company, by transferring the business and clientele from the Applicant. According to the Applicant, the said act of the First Respondent is in violation of Clause 8 of the Non-Disclosure Agreement dated 4.5.2012 entered into between the Applicant and the First Respondent. The Applicant relied upon an e-mail dated 25.4.2014 wherein one Michael Snapp of Snapptraffic Consulting had sent an e-mail to one Vasan of the Applicant-Company informing that the First Respondent told him that he was leaving the Applicant-Company and Snapptraffic Consulting may consider using his new team for development. 16. This Court, by Order dated 20.6.2014, granted an Order of Injunction. It is not in dispute that in the Offer Letter issued by the Applicant-Company to the First Respondent on 10.4.2012, it was mentioned that while rendering services to the Company, he will not engage in any other gainful employment, business and activity without the written consent of the Company or act in any manner detrimental to the interest of the Company. Similarly, in the Non-Disclosure Agreement dated 4.5.2012 in Clause-8, it was mentioned as follows: "8. Similarly, in the Non-Disclosure Agreement dated 4.5.2012 in Clause-8, it was mentioned as follows: "8. During my Employment/Association with the Company and for a period of two (2) years after my Employment/Association with the Company terminates, whether voluntarily or involuntarily, I will not on my own behalf or on behalf of any other person or entity, directly or indirectly: (a) Interface in any manner with or attempt to divert my contract or business opportunity of the Company of which I became aware during my Employment/Association with the Company. (b) Solicit business from or contact for any business purpose, in any manner whatsoever, any Customer or Customer Representative. (c) Respond to any inquiries in regard to business opportunities that I may receive from Customers or Customer Representative; I further agree that I will promptly notify the Company of any such inquiry or contact by Customer or Customer Representative. (d) Solicit or sell products or services that are similar to or directly compete with the products or services the Company provided at any time during the one year prior to the termination of my Employment/Association with the Company. (e) Solicit for employment or hire any employee or representative, who works for or is associated with the Company. (f) The covenants described in Paragraphs (a) & (e) above are separate provisions and shall be extended by a time period equal to any time consumed in enforcement of the obligations hereunder during which employee engaged in activities violating any of those covenants." 17. It is the case of the First Respondent that since the Applicant failed to fulfill their promise (i.e.) that they will elevate him in the Company within a short period of time owing to his rich experience in the USA and that they recruited another person for much lesser salary as Project Manager and wanted to promote him instead of the First Respondent, there was a strained relationship between the Applicant and the First Respondent since April 2013, which forced the First Respondent to resign from the job on 16.9.2013. 18. It is also pertinent to note that the e-mail, informing the Applicant about the resignation, was sent on 16.9.2013 at 08.43 p.m. it is also strange that the resignation was accepted on the very next day at 08.19 a.m. (i.e.) even before the office working hours. 18. It is also pertinent to note that the e-mail, informing the Applicant about the resignation, was sent on 16.9.2013 at 08.43 p.m. it is also strange that the resignation was accepted on the very next day at 08.19 a.m. (i.e.) even before the office working hours. According to the First Respondent, after the acceptance of the resignation on 17.9.2013, he was looking for new assignment and one of his friend informed him about promotion of the Second Respondent-Company and he also included the First Respondent as a Director of the Company. The Company was started on 8.11.2013. According to the First Respondent, these facts were known to the Applicant-Company and that is the reason why the Applicant-Company sent an e-mail on 8.11.2013 stating that they are relieving him from the Company with effect from 15.11.2013, which is about 35 days prior to the expiry of the Notice period. The Applicant has not disclosed the details about the confidential data in possession of the First Respondent. 19. It is also the case of the First Respondent that the Applicant-Company did not allow him to work or enter into the premises of the Applicant-Company after 16.9.2013. Further, the details of the clients attached to the Applicant-Company are available in the social websites and there are hundreds of sources to reach the clients of the Applicant. Therefore, the Applicant cannot claim that they are the only source of contact point through whom the First Respondent contacted the clients. When the First Respondent has specifically stated that he was not privy to any of the confidential information, the Applicant is put to strict proof of the same. However, the Applicant has not established that the First Respondent was privy to the confidential data. 20. Under Section 27 of the Contract Act, an Agreement, which restrains anyone from carrying on lawful profession, trade or business is void. Agreements in restraint of trade are those in which one or both parties limit their freedom to work or carry on their profession or business in some way. The Indian Law is rigid, in that it invalidates all restraints, whether general or partial, and neither the test of reasonableness nor the restraint being partial apply to a case governed by Section 27, unless they fall within the exception of that Section. 21. The Indian Law is rigid, in that it invalidates all restraints, whether general or partial, and neither the test of reasonableness nor the restraint being partial apply to a case governed by Section 27, unless they fall within the exception of that Section. 21. Section 27 of the Contract Act provides that every Agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void. As held by the Division Bench of this Court, a reading of the main Section and the Exception places beyond doubt that there is only one exception to the Rule as it stands now and that exception can come into play only in the case of a goodwill and the like business being carried on by the purchaser. 22. It is also pertinent to note that Section 41(e) of the Specific Relief Act provides that no injunction can be granted to prevent the breach of a contract, the performance of which would not be specifically enforced. The Applicant must prove that the contract is such, that the Court can grant a Decree for Specific Performance. Prima facie, no such Decree can be granted. Similarly, Section 41(h) also provides that in case an efficacious remedy is available, injunction would not be granted. In the case on hand, the Applicant can always claim damages, if ultimately, it is proved by evidence that the First Respondent solicited their customers or obtained orders. 23. It is settled position that a reasonable restriction could be placed on an Employee in the post-employment period only by express Agreement, Negative Covenant could only be restricted to the period of employment while in service. In the case on hand, the First Respondent is a technically qualified person having expertise knowledge in software. He had worked in various Companies in the USA before joining the Applicant-Company. Clause-8 of the Non-Disclosure Agreement prohibits the First Respondent from soliciting or selling products or service that are similar to or directly compete with the products or services of the Applicant-Company for a period of two years after leaving the employment. Admittedly, the First Respondent is a Software employee and one cannot expect him to do some other work other than software, when according to him is an expert in the said field. 24. Admittedly, the First Respondent is a Software employee and one cannot expect him to do some other work other than software, when according to him is an expert in the said field. 24. Though the Applicant contended that the First Respondent unauthorisedly contacted M/s. Snapptraffic Consulting, which is an existing customer of the Applicant, the only document available before this Court is an e-mail dated 25.4.2014 sent by one Michael Snapp of Snapptraffic Consulting. The present Applications were filed on 7.4.2014 and the e-mail is dated 25.4.2014. The Applicant has not produced any other similar document prior to the filing of the Applications. The e-mail dated 25.4.2014 is only between the Applicant and the said Snapptraffic Consulting, that is also subsequent to the filing of the present Applications. Therefore, an Order of Injunction cannot be granted, solely based on the e-mail dated 25.4.2014. 25. Any restriction restricting a person from doing similar business, after termination of the contract amounts to restraint of trade as per Section 27 of the Contract Act and the same is void. 26. Though the First Respondent informed about the resignation through an e-mail on 16.9.2013, which was also accepted by the Applicant on 17.9.2013 and that he was relieved from the employment by e-mail dated 8.11.2013 with effect from 15.11.2013, it is brought to the notice of this Court that the Applicant has not initiated arbitration so far. Having obtained an Order of Injunction before this Court on 27.6.2014, still they have not initiated the Arbitration. The Judgments relied upon by the learned Counsel for the Respondents reported in Firm Ashok Traders and another v. Gurumukh Das Saluja and others, 2004 (2) CTC 208 (SC); and Reena Silicate Industries Pvt. Ltd. v. GAIL (India) Ltd. & anr., AIR 2006 Mad. 266 , squarely applies to the facts and circumstances of the present case. Since the Applicant had failed to establish that the First Respondent offered services to the clients of the Applicant and solicit business from them, the Applicant cannot be granted an Order of Injunction. Even if the loss sustained by the Applicant is proved, the damage is capable of being ascertained in terms of money and therefore, an Order of Injunction cannot be granted. 27. The Second Respondent is a running concern. The suspension of the Business activities would infringe on the Fundamental Right of the First Respondent. 28. Even if the loss sustained by the Applicant is proved, the damage is capable of being ascertained in terms of money and therefore, an Order of Injunction cannot be granted. 27. The Second Respondent is a running concern. The suspension of the Business activities would infringe on the Fundamental Right of the First Respondent. 28. The learned Counsel for the Applicant submitted that the Application may be dismissed since the appointment of an Advocate Commissioner will not benefit the parties in any manner because of efflux of time. In these circumstances, I find no merits in these Applications. The Order of Injunction granted by this Court on 27.6.2014 is vacated. The Applications deserve to be dismissed. Accordingly, the same are dismissed.