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2013 Supreme(Del) 700
High Court of Delhi
MANMOHAN SINGH, J.
Omicron Energy Solutions Pvt. Ltd.
Versus
Imteyaz Anwar Siddiqui
O.M.P. No. 864 of 2012 & I.A. No. 21399 of 2012
Decided on : 01-07-2013.
For the Petitioner:Amrendra Sharan, Sr. Adv. with Aseem Chandra, Vivek Singh, Advocates.
For the Respondent:Maninder Singh, Sr. Adv. with M. Tarique Siddiqui, Ms. Rakhshan Ahmed, Advocates.
Enforceability of non-competition clauses requires evidence and disclosure of material facts. A section 9 petition under the Arbitration and Conciliation Act, 1996 must exhibit a manifest intention to arbitrate.
Headnote:
Employment Contract - Non-Competition Clause - Arbitration and Conciliation Act, 1996
Fact of the Case:
The petitioner, an Indian subsidiary of a Hong Kong company, sought to restrain the respondent, a former employee, from promoting products in competition with the petitioner's. The respondent had joined a rival company after resigning from the petitioner. The petitioner invoked an arbitration clause in the employment contract and filed a petition under the Arbitration and Conciliation Act, 1996 seeking interim relief.
Finding of the Court:
The court found that the respondent's technical expertise was not solely gained from employment with the petitioner, and the petitioner had not disclosed material facts. The court dismissed the petition, emphasizing the lack of evidence and the expiration of the non-competition clause.
Issues: Enforceability of non-competition clause, Disclosure of material facts, Manifest intention to arbitrate
Ratio Decidendi: The court emphasized the need for evidence to support the petitioner's claims and highlighted the expiration of the non-competition clause. It also stressed the importance of disclosing material facts and exhibiting a manifest intention to arbitrate in a section 9 petition.
Final Decision: The petition was dismissed with costs imposed on the petitioner.
Manmohan Singh, J.
1. The petitioner in the instant matter is the Indian subsidiary of Omicron Electronics Asia Ltd., Hong Kong and was established in 2004. The parent company is Omicron Electronics GmbH (parent company incorporated in Vienna). The petitioner is a company which provides testing and diagnostic solutions for the electrical power industry.
2. The respondent was initially employed by the petitioner as a Sales and Application engineer was later on promoted to the post of Area Sales Manager in 2007.
3. The employment contract, dated 23rd April 2007 between the petitioner company and the respondent contained a confidentiality clause, which prohibited the disclosure of any form of information gained while working as an Area Sales Manager. In this contract, the respondent also undertook to not promote, distribute or sell any products which are competition with those or all marketed by Omicron, whether alone or in conjunction with and 3rd party as principle, agent, partner, shareholder, consultant, guarantor or in any other capacity whatsoever for the period of one year after his discharge from employment under the petitioner company. The respondent also undertook not to take advantage of any opportunities which are under consideration before the petitioner company, to not solicit or contact any employee or customers of the corporation and to promote, distribute or sell any products which are in competition with that of the petitioner. Argument of the Petitioner in brief:
4. The respondent was the liaison between various Indian and foreign customers on behalf of the petitioner company, and was also entrusted for the sale of relay test equipment and primary test system products, which is a unique product. This product was sold exclusively by the respondent on behalf of the petitioner company. The petitioner states that, immediately after his resignation, the respondent joined a rival company, ISA Advance Instruments India Pvt. Ltd., as the Regional Manager for South Asia and the Middle East.
5. ISA Advance Instruments has been marketing products similar to that of the petitioner company in its South Asian and Middle Eastern markets as well. The petitioner submits that the respondent was aware of the terms and conditions of the confidentiality and non-competition agreement and by joining a rival company, he has violated the terms of his employment contract. The petitioner further alleges that the respondent has divulged confidential information, which relate to the petitioner’s business strategy, products and research.
6. The petitioner claim that he has an unfettered right to stop the respondent from promoting or selling products which are in direct competition with that of the
petitioner’s. The petitioner argues that, considering the exigent situation, wherein, the respondent has specialized knowledge and specialized technical expertise, a negative stipulation in an employment contract should not be seen as unconscionable.
7. The employment contract contained an arbitration clause, the relevant portion being, “Arbitration: any dispute, controversy or claim arising out of or related to this agreement, or the interpretation, breach, termination or validity hereof or arising out of or relating to the business of the corporation may be settled finally by the arbitration rules set by the Govt. of India by one arbitrator, appointed in accordance with such rules, upon the timely request by either of the parties (i.e., within six months of the commencement of the dispute), otherwise, the parties will resort exclusively to the court found within India were venue lies”.
8. The present petition is u/s 9 of the Arbitration and Conciliation Act, 1996 wherein the petitioner seeks interim relief against the respondent in order to restrain him from promoting any products which are in competition with or sold by the petitioner company. The petitioner submits that he has a strong prima faciecase, with the balance of convenience
