Skip to content


Sunilchand C. Mazumdar Vs. the Aryodaya Spg. and Wvg. Mills Co. Ltd. - Court Judgment

LegalCrystal Citation
SubjectService;Contract
CourtGujarat High Court
Decided On
Case NumberA.F.O. No. 76 of 1962 with Civil Appl. No. 1205 of 1962
Judge
Reported in(1963)GLR795
ActsSpecific Relief Act, 1877 - Sections 57; Contract Act - Sections 27; Constitution of India - Article 19(1)
AppellantSunilchand C. Mazumdar
RespondentThe Aryodaya Spg. and Wvg. Mills Co. Ltd.
Appellant Advocate C.T. Daru, Adv.
Respondent Advocate J.B. Mehta and; S.K. Zaveri, Advs.
DispositionAppeal dismissed
Cases ReferredGodavari Sugar Mills Ltd. v. K. T. S. Kamgar Sabha
Excerpt:
contract - specific performance - section 57 of specific relief act, 1877, section 27 of contract act and article 19 (1) of constitution of india - appeal against order granting interim injunction against appellant - appellant entered into contract making free untrammeled choice of occupation - prima facie appellant committed breach of contract by leaving service of plaintiff - alleged contract valid and enforceable - court has power to issue injunction to prevent breach of negative covenant contained therein - injunction indirectly enforced specific performance of its affirmative stipulation - impugned order justified. - - on may 4, 1962, the plaintiff-company replied that his resignation was not accepted and thereupon on may 13, 1962, the defendant wrote a letter complaining that.....j.m. shelat, j.1. this is an appeal against the order passed by the city civil court, ahmedabad, granting an interim injunction against the appellant restraining him from serving or engaging himself directly or indirectly for or under any other person, firm or company in india as a senior assistant in the spinning department or in any other similar capacity and from divulging any of the secrets, process or information received by him in respect of his employment till the hearing and final disposal of the suit. 2. the following facts are not in dispute. the plaintiff-company is a joint stock company and is running a textile mill in ahmedabad. by an agreement dated march 22, 1961, made between the plaintiff-company and the defendant, it was agreed that the defendant, who is a qualified.....
Judgment:

J.M. Shelat, J.

1. This is an appeal against the order passed by the City Civil Court, Ahmedabad, granting an interim injunction against the appellant restraining him from serving or engaging himself directly or indirectly for or under any other person, firm or company in India as a senior assistant in the spinning department or in any other similar capacity and from divulging any of the secrets, process or information received by him in respect of his employment till the hearing and final disposal of the suit.

2. The following facts are not in dispute. The plaintiff-company is a joint stock company and is running a textile mill in Ahmedabad. By an agreement dated March 22, 1961, made between the plaintiff-company and the defendant, it was agreed that the defendant, who is a qualified technician and a diploma holder in textile technology, should serve the company for a period of five years commencing from May 1, 1961, on the terms and conditions contained therein. The defendant worked in the textile mill of the plaintiff-company as a senior assistant in the spinning department until April 17, 1962, on which day he sent a letter to the plaintiff-company resigning his employment. On May 4, 1962, the plaintiff-company replied that his resignation was not accepted and thereupon on May 13, 1962, the defendant wrote a letter complaining that he was not given good treatment and, therefore, had left service. On May 22, 1962, the defendant wrote that he was prepared to work for the plaintiff-company provided assurance of good treatment were given to him. On May 24, 1962, the plaintiff-company wrote to the defendant asking him to resume service and on June 1, 1962, the company again wrote to him offering to make an inquiry into any complaint as to improper treatment that the defendant might have had to suffer. The defendant gave no reply to the aforesaid letter and on June 7, 1962, he accepted an employment as an assistant spinning master in the Vishnu Laxmi Cotton Mills at Sholapur on a salary, higher than the one he was getting in the plaintiff-company. On July 2, 1962, the plaintiff-company filed the present suit and in a Notice of Motion taken out by the plaintiff-company, the learned trial Judge passed an interim order which is challenged in this appeal. It is the case of the plaintiff-company that the defendant was engaged by it as he had a specialised (raining for its spinning department and that there is considerable dearth of such trained technicians and such trained persons are, therefore, not easily available.

3. Mr. Daru for the appellant has raised five contentions:

(1) that the Court would not grant an injunction if the result of it would be to enforce specific performance of the positive contract a thing which the Court never does in the matter of personal service,

(2) that the Court would refuse injunction, it the effect of it would be to reduce the employee either to idleness or starvation,

(3) that the grant of an injunction being discretionary and such discretion being one, which is to be exercised according to well settled principles, the Court would refuse to exercise it, if the terms of the agreement are unreasonable or unnecessarily wide,

(4) that the Court would refuse to exercise its discretion if the result would leave the employee the alternative either to go back to the employer i.e. indirectly enforcing specific performance of the positive covenant or face idleness and starvation, and

(5) that the Court would also refuse to exercise its discretion if its effect would be to prevent the employee from following an occupation of his choice. The exercise of discretion in such a case would be an unreasonable restriction and contrary to Article 19(1)(g) and Clause (6) of Article 19 of the Constitution.

4. Now, the relief by way of injunction is governed in India by statute. Under Section 52 of the Specific Relief Act, 1877, the grant of an injunction is' placed in the discretion of the Court, a discretion to be exercised, of course, as the discretion of Courts always is. Under Section 56 of the Act, an injunction would be refused in a case where the performance of a contract, the breach of which is sought to be prevented, would not be specifically enforced. Section 21 of the Act enumerates contracts which the Court would refuse to enforce specifically, one of such contracts being a contract dependant upon the personal qualifications or volition of he parties or otherwise from its nature is such that the Court cannot enforce specific performance of its material terms. Section 57, however, provides that notwithstanding Section 56, Clause (f), where a contract contains an affirmative covenant to do a certain act coupled with a negative covenant not to do a certain act, the fact that the Court cannot compel specific performance of the affirmative contract shall not preclude ii from granting an injunction to perform the negative covenant, provided of course that the applicant has not failed to perform the contract so far as it is binding on him. It is obvious that the word 'preclude' must mean that the grant of an injunction in cases falling under Section 57 is still a matter of discretion of the Court and it is not as if the section compels the Court thereunder to grant the injunction. The principle enunciated in section 57 is illustrated by the rule in Limley v. Wagner, (1852) 1 D. M. and G 604, where the contract provided that A was to sing at B's theatre for 12 months and not to sing in public elsewhere. It was there held that though B could not obtain specific performance of the contract to sing at his theatre, he was entitled to an injunction restraining A from singing at any other place of public entertainment. It is clear from the wide language of section 57 and the illustrations to that section that the operation of the section is not confined to cases like (1852) 1 DM and G 604. The negative covenant need not be express as in the case of (1852) 1 DM and G 604. It may be implied as in illustrations (b) and (d). Illustration (d) shows that it may be implied even in the case of a contract of personal service. The well-recognised principle however is that unless the affirmative covenant is coupled with a negative one, an injunction is not to be issued. This principle is illustrated in Whitewood Chemical Co, v. Hardman, (1891) 2 Ch. 416. Under two agreement dated September 25, 1885, and July 24, 1889, the defendant there was engaged and was bound to serve the plaintiffs for a period of 10 years on a certain salary and commission and to give the whole of his time to the company's business. Kekewich J. who tried the action held that from the fact that the defendant had agreed to devote the whole of his time to the company's business, he could infer that there was a negative covenant, not an implied but an expressed one, and observed that though the covenant was in the positive and not in the negative, still, it was no less negative because it was in that positive form and following the authority in (1852) 1 DM and G 604 issued an injunction. The Appeal Court, however set aside the order of injunction passed by Kekewich J. and it did so on the ground that it refused to see a negative covenant in the contract. This is clear from the observations of Lindley L. J. at pp. 426 and 427. But it is also clear that Lindley L. J. did not dissent from the decision in (1852) 1 DM and G 604 but set aside the order of Kekewich J. on the ground that fhat order went beyond the authority in (1852) 1 DM and G 604. It has also been made clear by Key L. J. at pp. 430 and 431 of the report that the contract before them did not contain any negatives covenant sought to be spelt out by Kekewich J. and also in his observation that in (1852) I DM and G 604 Lord St. Leonards had expressly stated that if he had to deal only with an affirmative covenant that the defendant Wagnor would perform at Lumley's theatre, he would not have granted any injunction. At p. 431 Key, L. J. again observes:

' He (Lord St. Leonards) makes it clear that ha granted the injunction upon the express agreement on her part that she would not during a certain time sing for anybody else, and that if those negative words had not been there he could not have granted the injunction'.

5. The decision in the case of Whitwood Chemical Co. (1891) 2 Ch. 416 thus does in no manner differ from Lumley's case. What it does is to caution that it is not to be extended and emphasises that an injunction cannot be granted in a case of a contract of personal service where there is only a positive covenant without an express negative covenant and where an injunction would mean indirectly specific performance of personal service which the Courts have consistently declined to specifically enforce. In Davis v. Foreman, (1894) 3 Ch 654 the Court held that though the covenant therein was couched in negative language, in substance it was positive and meant that the employer would retain the manager in his employ and, therefore, the covenant being affirmative and not negative, no injunction would be granted. This decision also is not in any way inconsistent with Lumley's case and the principle consistently followed that whereas the Court would decline to specifically enforce a positive stipulation as to personal service either directly by a decree for specific performance or indirectly by an injunction, it would enforce a negative covenant by directing that the defendant will not do a particular thing during the term of his employment and such a thing would not mean specific performance of an affirmative stipulation that he will serve his employer for a particular term. At page 656 of the report, the learned Judge gives out clearly the reason why he refused to grant an injunction.

' 'It is I think', said the learned Judge, 'distinctly affirmative and positive in substance, and the negative part of it is a mere form. In that respect this agreement differs entirely from that in (1852) 1 DM and G 604 where there was a distinct engagement by the defendant that she would not use her talents at any other theatre than the plaintiff's. What the Court there had to consider was not the engagement o the defendant, and how far that could be enforced, but whether she could with propriety remove her services from the plaintiff's and transfer them to another theatre'.

Kirchner and Co. v. Gruban, (1909) 1 Ch. 413, was a case on all fours with the case in Davis v. Foreman, and Eve J. there held that though the covenant was in negative language, in substance it was affirmative and therefore following Kekewich J. in (1894) 3 Ch 654 held that granting an injunction in such a case_ would be specifically enforcing an affirmative stipulation as to personal service. In Rely-A-Bell Burglar and Fire Alarm Co. Ltd. v. Eisler (1926) 1 Ch. 609, the defendant Eisler entered the employment of the plaintiff under an agreement which provided that during the term of his employment with the company he would not enter into any ether employment nor be interested in the business of any other company, firm or individual installing or dealing with burglar or fire alarms. During the currency of the term, Eisler entered the employment of a competing company and thereupon the plaintiffs claimed an injunction restraining the defendant Eisler until April 5, 1927, from entering into or continuing in the employment of the defendants, or of any company, or from being interested in the business of the defendant company, or any company, firm or individual, other than the plaintiff-company, installing or dealing with the burglar or fire alarms. Russel J. who tried the action held that these terms were valid in law and not unlawful as being in restraint of trade. But as regards the grant of injunction he relied on Chapman v. Westerby, (1913) WN 277 and quoted with approval the observations of Warrington J. namely,

'that it was essential that the negative stipulation which the Court was asked to enforce should be a stipulation requiring the contracting party not to do some particular act on which the Court can put its finger, and so frame the injunction so as to restrain him from doing that act. In the present case the only stipulation which was sought to be enforced was that the defendant should not give his time or personal attention as skipper or otherwise to any other business or occupation other than that of acting as skipper to the partnership trawler. In the face of those authorities it was impossible to say that such a stipulation could be enforced by injunction. To so enforce it would involve this, that so far earning his living was concerned the defendant would have to be absolutely idle for the term of ten years or continue this contract of personal service; in other words, it would for all practical purposes be granting specific performance of a contract of service, a thing which the Court would never do'.

Following these observations, Russel J. refused the injunction. A distinction was sought to be made by Counsel for the plaintiff-company by an argument that the defendant would not remain idle or starve during the period of stipulation because he could start an independent business which the employer could not in Chapman v. Westerby but Russel J. negatived the argument observing that the distinction was a mockery, inasmuch as

'it would be idle to tell this defendant, a servant employed at a wage, that he must not serve anybody else in that capacity, but that the world was still open to him to start business as an independent man'.

It must, however, be observed that the injunction was refused in this case because the covenant though in a negative form was in such wide and general terms, forbidding the defendant from entering into any employment whatsoever, that its enforcement would have been to reduce the defendant to the position of remaining idle and therefore of starvation. In other words, there would have been only one recourse open to the defendant and that was of being compelled to go back to his employer during the rest of the period of the contract. That would have been nothing short of specifically enforcing the positive stipulation in the contract of personal service. This decision, again is in no way a departure from the decision in (1852) 1 DM and G 604. It only reiterates though in different language that the Court would not issue an injunction of which the effect would be the specific enforcement of personal service.

6. In a case involving a contract of personal service, the Court has to see whether in granting the injunction as to a negative covenant, it directly or indirectly grants specific performance, a thing which the Court ought not and should not do. If that, however, is not the effect of an injunction, an order restraining the defendant from doing something inconsistent with and in contravention of the negative covenant can be issued. This is clear from Marco Productions Ltd. v. Pagola. (1945) 1 All ER 155 where the plaintiff company entered on November 6, 1942. into a contract with the defendants known as 'The Four Pagolas', where by the defendants agreed to act in the companv's the atrical productions for the Christmas season, 1942. The contract contained a restrictive covenant in clause (3) which provided that the artists shall not during the engagement or any time prior appear in any other entertainment private or public or exercise their talent for the purpose of the same being broadcast or heard by means of wireless, telephone or other wireless means of communication or other similar means or for the purpose of gramophone records etc. without the written consent of the company. Clause 18 gave the company an option on the defendants services for the Christmas season, 1943, on the same terms and conditions as in the 1942 contract. The 1942 contract was carried out by both the parties, but when the company exercised the option, a disagreement arose, which ended into a compromise agreement whereby the option was to be exercisable for the Christmas season, 1944. This option was validly exercised, and required the defendants to appear in a production at Oxford. In the meantime the defendants had contracted to appear for another theatrical producer for the 1944 Christmas season at Manchester. The plaintiff company claimed inter alia an injunction to restrain the defendants appearing in any entertainment other than the one produced by the plaintiff company. The defendants resisted the claim for the injunction on the grounds:

(1) that the restrictive covenant was wider than reasonably necessary and, therefore, unenforceable.

(2) that the injunction ought not to be granted as the plaintiff company had not shown that it would sustain damage from a breach of the restrictive covenant, an argument which Mr. Daru also adopted before me;

(3) that the enforcement of the restrictive covenant would in effect be to grant specific performance of a contract for personal service; and

(4) that in all the circumstances the Court ought not to exercise its discretion in favour of granting an injunction.

Hallett, J., held inter alia that the plaintiff was not required to prove that he would suffer damage from the breach of the restrictive covenant before the Court would grant an injunction to restrain that breach, and, secondly that the granting of an injunction on the evidence before him would not necessarily compel the defendants to give specific performance of their positive obligations under the agreement and in all the circumstances of the case the plaintiff was entitled to an injunction. Having held so the learned Judge addressed himself the question whether in the circumstances of the case he ought to exercise the discretion in favour of granting the injunction. At page 160 he observed:

'On the one hand, I recognise that, if the injunction be granted, a certain amount of hardship will be caused to the defendants. I recognise also that the damage sustained or likely to be sustained by the plaintiffs is damage arising from the defendants performing for Littler or some other rival producer. But counsel for the plaintiffs has pointed out that, to quote the words of (1852) 1 DM and G 604 the agreement to perform for the plaintiffs, and during that time not to perform for anybody else, is in effect one contract. The affirmative covenant by the defendants, and the negative stipulation on their part to abstain from the commission of any act which will break in upon their affirmative covenant, are covenants which are ancillary to, concurrent and operative with each other. Counsel for the plaintiff submits that the fact that damage will follow from the breach of the contract as a whole is amply sufficient to justify the Court in granting an injunction against the breach of the restrictive clause in the contract. He reminds me also, and rightly, that the policy of the Court of Equity is to respect and enforce the sanctity of contracts, although there are limitations as to the methods by which that can be done'.

Having considered all these aspects, the learned Judge ultimately held that the case before him was one where upon the principles well settled by the authorities, he ought to grant the injunction claimed, restraining the defendants from appearing for a period of four weeks in any entertainment other than in one of the plaintiffs' productions. Warner Brothers Pictures Inc. v. Nelson, (1936) 3 All ER 160, is yet another case where a restrictive covenant was enforced by an injunction and the principle upon which the injunction was granted was that though the Courts will not grant specific performance of a contract of service, that principle has for a long time been subject to the limitation that, when a person engaged by reason of special qualifications enters into a contract prohibiting him or her from working for anyone else, the negative stipulation would be enforced by an injunction. The only cases where an injunction would be refused would be those where damages could be assessed and where they would be a sufficient remedy, I may observe that on behalf of the defendant an argument was addressed to the Court that the terms of the contract in that case were too wide and that severance of the good and the bad terms was not possible. But that contention was negatived. The learned Judge held that where the enforcement of such negative covenants did not amount to a decree for specific performance of the positive covenants or to obliging the employee to remain idle or perform the positive covenants, such negative covenants can be enforced by an injunction. But the granting of such an injunction was discretionary and should be limited to what is reasonable in all the circumstances of the case. Thus, in England it is well settled that an injunction would issue in a case of an express negative covenant if the effect of it is not specific performance of the affirmative agreement of personal service.

7. In India, however, the position is somewhat different, for, the law as to injunction in such cases has been codified in Section 57 of the Specific Relief Act and illustration (d) to that section clearly indicates that an injunction can be granted in suitable cases even where the services in question are not of any special or specialized nature. Thus, in Bum and Co. v. McDonald, ILR 36 Cal 354, it was held that the employers were entitled to an injunction against the servant, who had left their service during the term of the contract. By an agreement the defendant was engaged by the plaintiff firm as an assistant for a period of five years. The agreement inter alia provided that he should diligently and to the best of his ability devote himself to the duties incumbent upon him and should faithfully observe and comply with such instructions as he might from time to time receive from the firm. During the term of his engagement, the defendant left the employ of the plaintiff firm and entered that of another firm. In a suit instituted by the plaintiff firm for an injunction to restrain the defendant from serving, working or being employed by any other person or persons and for damages it was held that although there was no negative condition in terms in the agreement, a negative covenant could be properly implied, under section 57 of the Specific Relief Act, and illustration (d) thereto, which gave legislative sanction in India to the law as laid down by Selborne L. J. in Wolverhampton and Walsall Rly. Co. v. London and North-Western Rly Co., (1873) LR 16 Eq 433. The suit was tried by Fletcher J. who, following the observations of Lindley L. I. in (1891) 2 Ch. 416 held that it was impossible to infer from the agreement a negative covenant and further held that even if such a negative covenant were to be implied, it would be void as being in restraint in trade. On the basis of these conclusions he declined to issue an injunction and passed a decree for damages only. Before the Appellate Court, the counsel for the employee submitted that the Court's jurisdiction to grant the injunction was discretionary and that the case was not a proper one where an injunction could be granted. It was also argued that the agreement was unfair, one-sided and wanting in mutuality and further that to grant an injunction in a case like the one before them would amount in substance to a decree for specific performance. Macleen C. J. held reversing the judgment and decree by Fletcher J. that in India, by reason of section 57 in the Specific Relief Act, it was permissible to infer a negative covenant and that an injunction was the proper remedy. Harington J. at p. 368 of the report also held that the English decisions did not apply and that the law in India was the one as laid down in Section 57 and illustration (d) to that section. Dealing then with the finding of Fletcher J. that the agreement was void being in restraint of trade, Harington J. stated:

'I should have thought that an agreement to serve Messrs. Burn and Co. in the course of their made was not an agreement in restraint of trade, because by it the defendant stipulated that he would ply his trade, and that distinguishes the case from that familiar class of cases in which an employee covenants that after the expiration of his service he will not ply his trade within some specified distance of his late employer's place of business. In the one case, he agrees to ply his trade, in the other case he specifically agrees not to ply his trade. But, whether that distinction be sound or not, it is really not necessary in the present case, because, in my opinion, illustration (d) affords the answer to the argument that this contract is void as in restraint of trade'.

Thus even though the contract in this case permitted the employers to terminate the agreement at any time and that too without assigning any reasons on payment of a month's salary and though there was no express negative covenant, and injunction was issued restraining the employee serving, working or being employed by any other person or persons. In Madras Rly. Co. v. Thomas Rust, ILR 14 Mad 18, the employee was a carriage painter who had been brought from England at the company's expense. But that was not the only consideration on which an injunction was granted, as it appears clear from the contentions advanced. Counsel for the employee contended in that case that the contract could not be enforced by a decree for specific performance as being a contract of service and also as extending over a period of three years, and that section 57 could not be applied to a case where the two objections to specific performance above stated have concurred. He also contended that the agreement was unfair, one sided and wanting in mutuality; furthermore, that the parties regarded money payment as sufficient compensation for its breach. Dealing with the argument that when the remedy by specific performance of a contract is expressly refused by Chapter II of the Specific Relief Act, then an injunction cannot be granted and further that the contract being one extending over more than three years and therefore not capable by Section 21(g) of specific performance, Handley J., observed that such a contention would make section 57 of the Act a nullity. He also observed that Section 57 provided in the case of an affirmative agreement coupled with a negative agreement express or implied, that an injunction may be granted though specific performance could not and since it gives, as illustrations some of file contracts, specific performance of which a precluded by Section 21, Clause (b), why cannot an injunction be granted in the case of those, specific performance of which is refused by Section 21 Clause(g)? He held that in that view a case had been made out for the interference of the Court by an interim injunction and granted to the plaintiffs an injunction though on the condition that the plaintiff company should take back the defendant into its service if he was willing, and should not, pending the decision of the suit, exercise its powers under the agreement of dispensing with his services on three months' notice. Charles worth v. MacDonald, 1LR 23 Bom 103 was a case of an agreement of an assistant physician and surgeon by the plaintiff at Zanzibar. There also the learned trial Judge relying upon 1891-2 Ch. 416 declined to infer a negative covenant and further held that even if such a covenant were inferred, it would be void under Section 27 of the Contract Act as being in restraint of trade. On appeal, the judgment and decree passed by the learned trial Judge were set aside, Farran C. J. holding that it was not an agreement which restrained the defendant from exercising his lawful profession. He also held that such an agreement did not fall within Section 27 of the Contract Act and that if it did, all agreements for personal service for a fixed period would be void. He then observed that an agreement to serve exclusively for a week, a day, or even for an hour, necessarily prevented the person so agreeing to serve from exercising his calling during that period for any one else than the person with whom he so agreed and therefore, it could hardly be contended that such an agreement would be void. In truth, a man who agreed to exercise his calling for a particular wage and for a certain period agreed to exercises his calling and such an agreement did not restrain him from doing so. To hold otherwise would be a contradiction in terms. He also observed that illustration (d) to Section 57 of the Specific Relief Act was a legislative decision to the same effect. As regards the question whether an injunction ought to be granted or not the learned Chief Justice held that as the Specific Relief Act did not apply to Zanzibar the rule in 1891-2 Ch. 416 should apply. But he held at the same time that the facts of the case before him were different from those in 1891-2 Ch. 416 because there was a negative covenant in the agreement before him and that it was the settled law in England that if the parties expressed by negative words their intention that the employee was not at liberty to carry on business on his own account during the term of his engagement, the Court would enforce that agreement by an injunction. As regards the observations made in some of the English cases regarding the propriety of extending the law of injunction to contracts of personal service which contained a negative covenant, he said that the Indian Legislature had adopted that extension and that an action for damages would afford the employer no protection, certainly ho adequate protection. A case almost on all fours with the instant case--is to be found in V. N. Deshpande v. Arvind Mills Co Ltd., 48 Bom LR 90: (AIR 1946 Bom 423) where Kania A. C. J. and Gajendragadkar J. held that agreements of service containing a negative covenant preventing an employee from working elsewhere during the term covered by the agreement are enforceable. It was also held that the existence of a negative covenant in such agreements did not make the agreements void under Section 27 of the Contract Act on the ground that it was in restraint of trade, and that illustrations (c) and (d) to Section 57 of the Specific Relief Act, 1877, in terms recognised such contracts and the existence of a negative covenant therein. They also held that the question whether a particular covenant in a particular agreement was unreasonably wide had to be decided on the nature of the agreement, the qualifications of the employee and the service he had to render, considered along with the places where the employee could get alternative services of the same nature. The terms of the agreement in that case were that the defendant, who was appointed a weaving master in the plaintiff company would neither absent himself from his work without leave nor engage himself directly or indirectly to work for any other person, firm or company in any capacity whatever nor attempt to impede his employers in their business nor divulge any of the secrets, information or connections to any other person whatever. Clause 8 provided that the weaving master should devote his whole time and attention to the services of the said agents, or if so directed to other agencies, wherein any of the above partners was interested as such, as aforesaid during the said term of three years and shall not during the said term whether he be in employment or not, get in the employ of or be engaged or be connected as a weaving master or as an employee under any title discharging substantially the same duties he might be discharging there with any firm or company or individual in any part of India including the Indian States for the space of the said years or any portion of the remaining period of the said term. Clause to provided that the said weaving master agrees not to leave the services of the said agents and not to serve or engage himself directly or indirectly to work for any other person, firm or company in India including the Native States in the same capacity and if the said weaving master must attempt to do so the agents had a right to prevent the said weaving master from doing so. The agreement further provided that the agents shall have this right in addition to and without prejudice to any right they might have to claim damages from the said weaving master. One of the contentions raised before the learned Judges was that the covenants in that agreement were unreasonable and in restraint of trade and therefore, the whole agreement was unenforceable. In dealing with this contention the learned Judges observed that agreements of service, containing a negative covenant preventing the employee from working elsewhere during the term covered by the agreement were known to Indian Courts and after citing Pragji v. Pranjiwan. 5 Bom LR 878; ILR 23 Bom 103; ILR 14 Mad 18, Subba Naidu v. Haji Badsha Sahib, ILR 26 Mad 168 and ILR 36 Cal 354, they observed that illustrations (c) and (d) to Section 57 of the Specific Relief Act in terms recognised such contracts and the existence of a negative covenant therein and therefore, it was futile to contend that the existence of a negative covenant in a service agreement made the agreement void, on the ground that it was in restraint of trade and against the principles found in Section 27 of the Contract Act. Dealing with the contention that the negative covenant was unreasonably wide and was, therefore, in restraint of trade the learned Judges negatived that contention on the ground that it was to subsist during the period of contract and not beyond and that such negative covenants which operated during the period of the contract were recognised by Courts of law even in England. In that case the learned Judges granted an injunction against the defendant restraining him from getting in the employ of or being engaged or connected as a weaving master or as an employee under any fide discharging substantially the same duties as a weaving master in the Rohit Mills or any other company, or individual in any part of India including the Native States for the term ending on December 31, 1946. Mr. Daru, however, contended that in Deshpande's case it was not contended that an injunction should not be granted where enforcement of a negative covenant would amount to specific performance of an affirmative covenant. That is true but even in the instant case, the enforcement of the negative covenant, in my view, would not amount to specific performance of the positive covenant but would only restrain the employee not to engage himself elsewhere in violation of the negative covenant he solemnly entered into. That would not mean that if an injunction were issued he would be compelled to serve the plaintiff company. This was precisely what was done both in Deshpande's case as also in 3936-3 All ER 160. Reliance, however, was placed on a recent judgment of the Calcutta High Court in Shree Gopal Paper Mills Ltd. v. S. K. G. Malhotra : AIR1962Cal61 . There Mr. Justice Ray held on the terms of the agreement before him that the agreement was a total restraint of trade that the restrictive covenant was too wide in terms and was unreasonable and was not for the protection of any proprietary interest of the plaintiff and therefore there was no enforceable negative covenant. The decision in this case is not applicable as the facts of the case and the reasoning adopted therein arc quite different from the ones in the instant case. Besides that decision is contrary to the one in 48 Bom LR 90: (AIR 1946 Bom 423) which is binding upon me and also the decision in ILR 36 Cat 354 a Full Bench decision of the Calcutta High Court itself. In my view, the facts in Deshpande's case, 48 Bom LR 90: (AIR 1946 Bom 423) are akin to the ones before me and therefore, the decision therein apart from it being binding upon me is applicable to the facts before me.

8. Mr. Daru then contended that the negative covenant in the present agreement was unreasonable for under Clause 10 of the agreement even if the employer were to discharge the services of the employee and thus terminate his employment, the provisions of clause 10 would still apply even after such termination of the agreement inasmuch as Clause 10 provides that the negative covenant therein is to endure for a period of five years. He contended that if his construction of Clause 10 were to be accepted, the negative covenant would be in restraint of trade being operative even beyond the subsistence of the agreement. It is not possible to accept this contention because the construction placed by Mr. Daru on Clause 10 of the agreement is not correct. Read as a whole, Clause 10 assumes the subsistence of the agreement and it is on that ground that a claim for damages for the breach of the positive and negative covenant's has been provided for in that clause. For the reasons aforesaid, I have come to the conclusion that the contract in the instant case is valid and enforceable, and an injunction to enforce the negative covenant can be granted.

9. The second line of argument adopted by Mr. Daru was that assuming that the contract was valid and enforceable, the grant of an injunction being a matter of discretion of the Court, I should not exercise my discretion in favour of the plaintiff company because the effect of such an injunction would be to compel the defendant either to go back to the plaintiff company or face idleness and starvation. I have no reason, however, to think that if the injunction were to be granted, the defendant would either remain idle or starve because the only restraint against him is not to serve elsewhere than in the plaintiff-company as a Senior Assistant in a Spinning Department The very difficulty which Mr. Daru points out in this part of his argument was in Deshpande's case, 48 Bom LR 90: (AIR 1946-Bom 423) and yet an injunction in the terms referred to above was granted. The next contention urged by Mr. Daru was that the Court should not exercise its discretion and grant an injunction the effect of which would be to prevent a person from following his choice of employment. He submitted that such exercise of discretion would not be valid inasmuch as it would be violative of the appellants fundamental right to follow his choice of occupation as guaranteed by Article 19(1)(g) of the Constitution. As to this contention, I must confess that it is somewhat difficult for me to see the force of it. There can be no doubt that the contract was entered into by the appellant of his own free volition and with full awareness of its terms. By that contract, the appellant made a free choice of occupation in accordance with the fundamental right guaranteed to him under Article I9(l)(g). There was no restraint nor any compulsion when he made his choice of occupation and in pursuance whereof entered into the contract with all solemnity. I am satisfied, at least, prima facie, that he committed a breach of that contract by leaving the service of the plaintiff-company and by joining the service of another textile mill probably because he got a higher salary there than the one he was getting from the respondent company. Can it, in these circumstances be said that the remedy given to a contracted under Section 57 of the Specific Relief Act to prevent such a breach or its enforcement through a Court of law is unconstitutional as being violative of his right of area choice of occupation under Article 19(1)(g) 7 I must at once observe that the validity of section 57 of (he Specific Relief Act is not challenged and Mr. Daru expressly stated so. As I said before, the appellant had his free untrammeled choice of occupation when he entered into the contract in question. A remedy in law, which is not even challenged on any ground of constitutionality to prevent such a breach or its enforcement by a judicial proceeding cannot, in my view, be considered as contravention of Article 19(1)(g) or a restriction in violation, or excess of clause (6) of that Article. I find myself supported in this conclusion by the decision in Godavari Sugar Mills Ltd. v. K. T. S. Kamgar Sabha : (1961)ILLJ313SC where a contention of a similar nature was put forward before the Supreme Court. It was there argued that reading the definitions of 'an industrial matter' and 'an industrial dispute' in Sections 3(17) and 3(18) of the Bombay Industrial Relations Act, 1947, the Industrial Court was given the power to decide disputes as to the mode of employment and that that contravened the fundamental right guaranteed under Article 19(1)(g), for it enabled an Industrial Court to adjudicate on the mode of employment and thus interfere with the right of an employer to carry on his trade as he liked subject to reasonable restrictions. Dealing with this contention, the Supreme Court observed that assuming that the mode of employment used in section 3(18) included such questions as abolition of contract labour, the question would still be whether a provision which enabled an Industrial Court to adjudicate on the question whether contract labour should or should not be abolished, was an unreasonable restriction on the employer's right to carry on his trade. The Supreme Court observed that it was not possible to see how the fact that power was given to the Industrial Court, which was a quasi-judicial tribunal to decide whether contract labour should be abolished or not would make the definition of 'an industrial matter' in so far as it referred to the mode of employment an unreasonable restriction on the fundamental right of the employer to carry on trade. The Supreme Court further held that the matter being entrusted to a quasi-judicial tribunal it 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 on the mode of employment was a reasonable restriction or not. The tribunal would always go into the reasonableness of the matter and if it came to the conclusion that the mode of employment desired by labour was not reasonable, it would not allow it; it is only when it came to the conclusion that the mode of employment desired by labour was e reasonable restriction that it would insist on that particular mode of employment being used. The Supreme Court also held that the decision whether the mode of employment in a particular case was a reasonable restriction or unreasonable one was in the hands of a quasi-judicial tribunal and in the circumstances it could not be said that by providing in Section 3(18) that an 'industrial matter' included also the mode of employment, there was any contravention of the fundamental right of the employer to carry on trade. The Supreme Court observed that if the argument on behalf of the appellant were to be accepted it would mean that judicial and quasi-judicial decisions could be unreasonable restrictions on fundamental rights and that such a thing was not envisaged at all by the constitution. This reasoning would apply more forcibly to Courts of law. That being the position, this part of the contention of Mr. Daru must be rejected.

10. There is thus no doubt that the contract in the instant case is the valid and enforceable contract and the Court has power to issue an injunction to prevent breach of the negative covenant contained therein. The negative covenant is not void as being in restraint of trade nor unreasonable nor unnecessarily wide in its scope. An injunction in the terms in which it had been granted by the learned trial Judge would not, in my view, have the effect or indirectly enforcing specific performance of its affirmative stipulation nor of reducing the appellant into either idleness or starvation as contended by his learned advocate.

11. That being so, the learned trial Judge, in my view was right in granting the interim injunction. It is also not possible to say that the terms of the injunction are in any sense unnecessarily wide or in any way unreasonable. The result, therefore, is that the appeal fails and is dismissed with costs. The order of interim stay granted previously is vacated.

12. Mr. Daru at this stage applies for a stay of the injunction for a period of four weeks as he desires to proceed further. The injunction granted is stayed for a period of four weeks from today.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //