Back
HIGH COURT OF CALCUTTA
A. N. Ray
SHREE GOPAL PAPER MILLS LTD. - Appellant
Versus
SURENDRA K. GANESHDAS MALHOTRA - Respondent
Suit 1413 Of 1958
Decided On : DECEMBER 05, 1960
RESTRAINT OF TRADE - EMPLOYMENT CONTRACT - VALIDITY - REASONABLENESS - PUBLIC POLICY - INJUNCTION - SPECIFIC RELIEF ACT, 1877, SECTION 56(F).
Fact of the Case:
The plaintiff, a paper manufacturing company, employed the defendant as an apprentice under an agreement for 20 years, with a provision for termination by the plaintiff without notice on account of unsatisfactory performance or breach of discipline. The defendant left the company after a few months, claiming illness, and later sought employment in a pharmaceutical firm. The plaintiff sued for an injunction restraining the defendant from serving elsewhere, alleging breach of the agreement and threatened disclosure of trade secrets.
Finding of the Court:
1. The agreement imposed unreasonable restraint on the defendant's lawful profession, trade, and business, reducing him to the status of a serf. 2. The contract lacked mutuality and reciprocal obligations on the part of the employer. 3. The plaintiff failed to prove that the defendant acquired any trade secrets or confidential information during his employment. 4. The plaintiff's claim for an injunction was not maintainable as the restrictive covenant was too wide, unreasonable, and not for the protection of any proprietary interest of the plaintiff. 5. The agreement was oppressive and gave the plaintiff an unfair advantage over the defendant.
Issues: 1. Whether the agreement between the plaintiff and the defendant was in restraint of trade. 2. Whether the plaintiff was entitled to an injunction restraining the defendant from serving elsewhere.
Ratio Decidendi: 1. A restraint of trade agreement is void to the extent that it unreasonably restricts an individual's right to exercise a lawful profession or trade. 2. The validity of a restraint of trade agreement depends on whether it is reasonable in the interests of the parties and the public. 3. A restraint of trade agreement must be narrowly tailored to protect the legitimate proprietary interests of the covenantee, such as trade secrets or confidential information. 4. An employer has no legitimate interest in preventing an employee from entering the service of a competitor. 5. An injunction will not be granted to enforce a negative covenant that is unreasonable and oppressive.
Final Decision: The suit was dismissed with costs.
( 1 ) THIS is a suit for an injunction restraining the defendant during the continuance of the agreement of employment dated November 22, 1957 from giving his services or advice to any person or company whatsoever other than the plaintiff or from becoming interested or engaged in any enterprise or undertaking either alone or jointly with other or any other in any business or trade Other than the plaintiff's business or trade. The plaintiff is a limited company and carries on business mainly of manufacture of paper. The plaintiff runs a scheme to train up graduates fresh from the Universities, inter alia, in the manufacture of paper on their agreeing to serve the plaintiff and/or the companies under the management of the managing agents and/or their allied concerns for 17 years after completion of an apprenticeship period of 3 years. In pursuance of the scheme the plaintiff issued advertisements for recruitment of apprentices and the defendant, who had graduated from the Bombay University, applied to the plaintiff on or about June 28, 1957 for being taken in as an apprentice under the plaintiffs scheme.
( 2 ) BY an agreement dated November 22, 1957 the plaintiff agreed to appoint the defendant as an apprentice. The terms and conditions of the agreement are inter alia as follows :" (a) That the defendant will serve the plaintiff for a term of twenty years from the date of his joining the duties i. e. , September 30, 1957 including the apprenticeship period of three years at the remuneration specified in the schedule to the said agreement; (b) That in the event of the defendant's work being found satisfactory, during the apprenticeship period, the plaintiff shall be entitled to retain his services for a period of further seventeen years after the expiry of the training period of three years, in the post of an Assistant Shift in charge (Pulp) or an Assistant Shift Chemist (Recovery) of a Laboratory Chemist giving him the remuneration set out in the said schedule subject to the conditions therein mentioned and intimating to the defendant its intention so to do within two months after the expiry of the apprenticeship period of three years; (c) That the defendant during the continuance of his employment shall well and diligently, according to the best of his ability, employ himself in the service of the plaintiff and shall obey the orders from time to time of the Plaintiff or its managing agents and in all respects shall conform to and comply with the directions and regulations given and made by them and shall well and faithfully serve the plaintiff and use the utmost interest and shall not divulge nor communicate to any person or persons whatsoever any information which he may receive or obtain in relation to the affairs of the plaintiff and/or its managing agents and shall not, nor will absent himself from the duty at any time without the sanction of the plaintiff or its managing agents first had or obtained, nor shall give his services or advice to any other person or company whomsoever, nor become interested nor engaged in any enterprise or undertaking either alone or jointly with other or any other in any business or trade; (d) That the plaintiff or its managing agents shall be entitled to terminate the services of the defendant without notice on account of either of the following events, irrespective of the fact whether the said agreement period would have expired or not: (i) If the plaintiff decides not to retain the services of the defendant at any time during the apprenticeship period of three years. (ii) If the defendant fails to perform his duties to the satisfaction and approval of the Plaintiff and/or its managing agents who shall have the absolute discretion in deciding whether the defendant does so and their certificate shall be final and conclusive between the parties hereto. (iii) If the defendant shall at any time wilfully disobey or be found unable to perform or comply with all lawful instructions g
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
