TMI Blog1967 (1) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... owledge, know-how, experience, data and documents passed on by the said AKU and VCF and the Century Rayon should undertake to enter into corresponding secrecy arrangements with its employees. The respondent company thereafter invited applications for appointments in its said plant including appointments as Shift Supervisors. On December 3, 1962 the appellant sent his application stating therein his qualifications. By its letter dated March 1, 1963 the respondent company offered the appellant the post of a Shift Supervisor in the said tyre cord division stating that if the appellant were to accept the said offer he would be required to sign a contract in standard form for a term of five years. On March 5, 1963 the appellant accepted the said offer agreeing to execute the said standard contract. On March 16, 1963 he joined the respondent company and executed on that day the said contract Exhibit 28. 3. Clause 6 of the agreement provided :- The employee shall during the period of his employment and any renewal thereof, honestly, faithfully, diligently and efficiently to the utmost of his power and skill (a). . . (b) devote the whole of his time and energy exclusively ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... til about September, 1964. The appellant thereafter remained absent from the 6th to the 9th October, 1964 without obtaining leave therefore. On the 10th October, he took casual leave. On October 12, he applied for 28 days' privilege leave form October 14, 1964. Before that was granted he absented himself from the 14th to the 31st October, 1964. On October 31, he was offered salary for 9 days that he had worked during that month. On November 7, 1964, he informed the respondent-company that he had resigned from October 31, 1964. The respondent-company by its letter of November 23, 1964, asked him to resume work stating that his said resignation had not been accepted. On November 28, 1964 the appellant replied that he had already obtained another employment. 7. It is clear from the evidence that in October he was negotiating with Rajasthan Rayon Company at Kotah which was also manufacturing tyre cord yarn and got himself employed there at a higher salary of ₹ 560/- per month than what he was getting from the respondent company. The respondent company thereupon filed a suit in the Court at Kalyan claiming inter alia an injunction restraining the appellant from serving in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing engaged or connected as a Shift Supervisor in the Manufacture of tyre cord yarn or as an employee under any title discharging substantially the same duties as a Shift Supervisor in Rajasthan Rayon, Kotah or any other company or firm or individual in any part of India for the term ending 15th March, 1968. (2) The defendant is further restrained during the said period and, thereafter, from divulging any of the secrets, processes or information relating to the manufacture of tyre cord yarn by continuous spinning process obtained by him in the course of and as a result of his employment with the plaintiffs. 9. It is clear that the injunction restrained the appellant only from serving as a Shift Supervisor and in a concern manufacturing tyre cord yarn by continuous spinning process or as an employee under any designation substantially discharging duties of a Shift Supervisor. It was also confined to the period of the agreement and in any concern in India manufacturing tyre cord yarn. 10. In the appeal filed by him in the High Court, the plea taken by him as to undue influence and coercion was given up. The High Court, agreeing with the Trial Court, found that the eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vely for the spinning department of the tyre cord division and his letter of acceptance was also in relation to the post of a Shift Supervisor in that department. The High Court therefore concluded that Clauses 9 and 17 related only to the business in the tyre cord division and therefore restraints contained in those clauses meant prohibition against divulging information received by the appellant while working in that Division and that clause 17 also meant a restraint in relation to the work carried on in the said spinning department. Therefore the inhibitions contained in those clauses were not blanket restrictions as alleged by the appellant, and that the prohibition in clause 17 operated only in the event of the appellant leaving, abandoning or resigning his service during the term of and in breach of the said agreement. On this reasoning it held that clause 17, besides not being general, was a reasonable restriction to protect the interests of the respondent company particularly as the company had spent considerable amount in training, secrets of know-how of specialised processes were divulged to him and the foreign collaborators had agreed to disclose their specialised proces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the employment has ceased but a purchaser of a business is entitled to protect himself against competition per se on the part of the vendor. This principle is based on the footing that an employer has no legitimate interest in preventing an employee after he leaves his service from entering the service of a competitor merely on the ground that he is a competitor. (Kores Manufacturing Co., Ltd. v. Kolak Manufacturing Co., Ltd. [1959] Ch. 108. The attitude of the Courts as regards public policy however has not been inflexible. Decisions on public policy have been subject to change and development with the change in trade and in economic thought and the general principle once applicable to agreements in restraints of trade have been considerably modified by later decisions. The rule now is that restraints whether general or partial may be good if they are reasonable. A restraint upon freedom of contract must be shown to be reasonably necessary for the purpose of freedom of trade. A restraint reasonably necessary for the protection of the covenantee must prevail unless some specific ground of public policy can be clearly established against it. (E. Underwood Son, Ltd. v. Barker [189 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work or perform or render any services whatsoever to any person firm or company other than the corporation and its sub-lessees. 15. On a contention that this clause was a restraint of trade, Porter J., held that restrictions placed upon an employee under a contract of service could take effect during the period of contract and are not in general against public policy. But the learned Judge at page 1692 observed that a contract would be thought to be contrary to public policy if there were a restraint, such as a restraint of trade, which would be unjustifiable for the business of the claimants in the case. He however added that he did not know of any case, although it was possible, there might be one, where circumstances might arise in which it would be held that a restraint during the progress of the contract itself was an undue restraint. He also observed that though for the most part, those who contract with persons and enter into contracts which one might for this purpose described as contracts of service, have generally imposed upon them the position that they should occupy themselves solely in the business of these whom they serve but that it would be a question largely o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot to take service with any other employer or be engaged by a third party has been held not to be void and not against section 27 of the Contract Act. In Brahmaputra Tea Co., Ltd. v. Scarth I.L.R. 11 Cal. 545, the condition under which the covenantee was partially restrained from competing after the term of his engagement was over with his former employer was held to be bad but the condition by which he bound himself during the term of his agreement, not, directly or indirectly, to compete with his employer was held good. At page 550 of the report the Court observed that an agreement of service by which a person binds himself during the term of the agreement not to take service with any one else, or directly or indirectly take part in, promote or aid any business in direct competition with that of his employer was not hit by section 27. The Court observed : An agreement to serve a person exclusively for a definite term is a lawful agreement, and it is difficult to see how that can be unlawful which is essential to its fulfilment, and to the due protection of the interests of the employer, while the agreement is in force. 17. (See also Pragji v. Pranjiwan 5 Bom L.R. 872 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se and that the word business therein mentioned could not be held limited by the context to a wine merchant's business or in any similar way. So that the Court, while unable to order the defendant to work for the plaintiffs, is asked indirectly to make him do so by otherwise compelling him to abstain wholly from business, at any rate during all usual business hours. The other decision relied on by him was Mason v. Provident Clothing and Supply Co., Ltd. [1913] A.C. 724 This was a case of a negative covenant not to serve elsewhere for three years after the termination of the contract. In this case the Court applied the test of what was reasonable for the protection of the plaintiffs' interest. It was also not a case of the employee possessing any special talent but that of a mere canvasser. This decision, however, cannot assist us as the negative covenant therein was to operate after the termination of the contract. Herbert Morris v. Saxelby [1916] A.C. 688 and Attwood v. Lamont [1920] 3 K. B. 571, are also cases where the restrictive covenants were to apply after the termination of the employment. In Commercial Plastics Ltd. v. Vincent 3 All. E.R. 546, also the negative c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vely 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 employ 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. 21. The next question is whether the injunction in the terms in w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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