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High Court Of Delhi
Badar Durrez Ahmed
WIPRO LTD. - Appellant
Versus
BECKMAN COULTER INTERNATIONAL S.A. - Respondents
OMP 463 Of 2005
Decided On : 07/11/2006
The court held that the advertisement amounted to solicitation and the non-solicitation clause was enforceable in law. The court further held that an injunction could not be granted restraining the respondent from employing the petitioner's employees who had resigned and joined the respondent, but the respondent could be restrained from making any further solicitations during the period of two years.
Fact of the Case:
The petitioner, a distributor of the respondent's products in India, filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996, seeking directions and/or orders restraining the respondent from employing any person who is, or has been employed with the petitioner, during the pendency of arbitral proceedings. The petitioner alleged that the respondent had issued an advertisement soliciting its employees, in violation of a non-solicitation clause contained in the Canvassing Representative Agreement entered into between the parties in January 2002. The respondent contended that the advertisement was merely a general advertisement for recruitment and did not amount to solicitation.
Finding of the Court:
The court found that the advertisement amounted to solicitation, as it was directed towards the employees of the petitioner and was intended to induce them to leave their employment with the petitioner and join the respondent. The court also found that the non-solicitation clause was enforceable in law, as it was not a restraint of trade, business or profession, but rather a reasonable restriction that the parties had imposed upon themselves for a period of two years after termination of the agreement.
Issues: Whether the advertisement amounted to solicitation; Whether the non-solicitation clause was enforceable in law; Whether an injunction could be granted restraining the respondent from employing the petitioner's employees who had resigned and joined the respondent.
Ratio Decidendi: The court held that the advertisement amounted to solicitation, as it was directed towards the employees of the petitioner and was intended to induce them to leave their employment with the petitioner and join the respondent. The court also found that the non-solicitation clause was enforceable in law, as it was not a restraint of trade, business or profession, but rather a reasonable restriction that the parties had imposed upon themselves for a period of two years after termination of the agreement. The court further held that an injunction could not be granted restraining the respondent from employing the petitioner's employees who had resigned and joined the respondent, but the respondent could be restrained from making any further solicitations during the period of two years.
Final Decision: The court disposed of the application under Section 9 of the Arbitration and Conciliation Act, 1996, with the following directions: (1) the respondent is restrained during the pendency of the arbitration proceedings from taking out any other or further advertisements or to do anything to solicit, induce or encourage the employees of the petitioner to leave the petitioner's employment and take up employment of the respondent and/or its agents and/or representatives and/or competitors; (2) the employees of the petitioner would, however, be free to take up employment with the respondent, even in response to the said advertisement which has prima facie been held to be solicitation, but, the respondent would be liable to compensate the petitioner for such breach of the non-solicitation clause, if so established in the pending arbitration proceedings.
BADAR DURREZ AHMED, J.
( 1 ) IN this petition under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the said Act'), the petitioner is seeking directions and / or orders restraining the respondent from employing any person who is, or has been employed with the petitioner, during the pendency of arbitral proceedings. This prayer emanates from the Canvassing Representative agreement said to have been entered into by and between the petitioner and the respondent in January, 2002. The relationship between the petitioner and the respondent is that of a distributor and principal and has subsisted for almost 17 years which has been renewed from time-to-time. The last of the documents delineating the relationship between the parties is said to be the Canvassing representative Agreement entered into in January, 2002. This agreement is said to have taken effect on 1. 1. 2002 and was to operate til! 31. 12. 2002. It is alleged by the petitioner that, subsequently, by virtue of a letter dated 24. 5. 2004 (Annexure-P-3), the terms and conditions of the said agreement of 2002 were extended by another two year period commencing from 1. 1. 2004 and ending with 31. 12. 2005. Therefore, according to the petitioner, the said Canvassing representative Agreement of January, 2002 was to continue to operate till 31. 12. 2005 and this governed the relationship between the parties. The said agreement contained a document entitled 'exhibit-D' and and forms part thereof. Clause 5 of the said agreement which is the bone of contention between the parties, reads as under:"5. Non-solicitation of employees: both parties agree that for a period of two (2) years from the date of termination of the agreement to which this appendix is attached, including termination by either party with or without cause, either directly or indirectly solicit, induce or encourage any employee (s) to terminate their employment with or to accept employment with any competitor, supplier or customer of the other party, nor shall either party cooperate with any other in doing or attempting to do so. As used herein, the term 'solicit, induce or encourage' includes, but is not limited to (a) initiating communications with an employee relating to possible employment, and/or (b)offering bonuses or additional compensation to encourage employees to terminate their employment with and accept employment with a competitor, supplier or customer of the soliciting party, or (c) referring employees to personnel or agents employed by competitors, suppliers or customers of the soliciting party. General advertising of positions and other general means of recruitment shall not be considered solicitation; and neither party shall be restricted from responding to unsolicited applicants who are employees of the other party. "
( 2 ) IT is the contention of the petitioners that the parties had agreed that for a period of two years after the termination of the agreement, this non-solicitation of employees clause would be operative. This clause provides that upon the termination of the agreement, neither party shall solicit, directly or indirectly or induce or encourage the employees of the other party to leave and join a competitor or join the other party. There was an exception and that was that general advertising of posts and other general means of recruitment were not to be considered as solicitation.
( 3 ) IT is the case of the petitioner that it was only the petitioner who, for the past 17 years, was the exclusive distributor of the respondent's products in India. It is the petitioner's case that on 1. 9. 2005, the respondent informed the petitioner's representative over the telephone that a decision had been taken to prepare for direct operations in India without distributorship, such as the one with the petitioner. It was also indicated that by the end of October, 2005, the respondent would issue to the petitioner aformal notice for non-renewal of the contract an
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