IA 15636/2013 (u/O XXXIX R 1&2 CPC)

IA 16770/2013 (by defendant u/O XXXIX R 4 CPC)

1. The plaintiff has filed the present suit, inter alia, seeking injunction against the defendant from entering into/doing/conducting/promoting/soliciting/canvassing etc. any business of travel and tourism or any connected or incidental or supplementary activity, or venture, individually or jointly, whether as a shareholder, director, partner, proprietor, employee, advisor, etc. contrary to the terms of Non Compete Agreement (in short the NCA) dated 1st April, 2005 executed between the plaintiff No. 2 and the defendant and also restraining the defendant from utilizing the data, confidential information, list of clients, list of customers etc., of the plaintiff No. 1 company.

2. Learned counsel for the plaintiff contends that the NCA between the plaintiff No. 2 and defendant is saved by the exception to Section 27 of the Contract Act, as in the present case the transaction between the parties was not relating to restraint on trade but to sale of business with goodwill, reputation etc. The defendant cannot be first permitted to take advantage of the agreement and thereafter turn around and say that he is not bound by it. The defendant first converted his firm into private company i.e. M/s. Le Passage To India Pvt. Ltd. wherein the plaintiff No. 2 bought 50% shares and since the defendant wanted further investments, the plaintiff No. 2 brought a German investor who bought the balance 50% share holdings of the defendant and 30 other shareholders. On 22nd January, 2003 the plaintiff No. 1 company had allotted 8500 shares to the defendant, besides the 5000 shares, at par value of Rs. 10 per share. Defendant sold 7900 shares and was thus left with 5600 shares. For these 5600 shares he was paid a total sum of Rs. 1,44,00,000/-. The defendant had started with the salary of Rs. 6 lakhs per annum and thus this amount which was paid in one go would have been his earnings of the years’ together. The plaintiff No. 2 had bought 50% shares of the plaintiff No. 1 company as Chief Mentor for Rs. 145 per share and when the balance 50% share were bought they were sold by the defendant and 30 other shareholders at Rs. 2580/- per share. Thus, the value of the shares given to the defendant within three months was very high. This consideration can never be a consideration between an employer and employee and thus this is clearly a case of sale of business and goodwill. As a matter of fact, 20 years of salary was given to the defendant in one go. The NCA was a voluntary action on the part of the defendant who agreed to sign the same. Even as per Article 4 Clause 2 of the Share Purchase Agreement (in short the SPA) Covenant ‘d’ of the NCA clearly notes that the defendant who was a shareholder and employee of Le Passage had acquired extensive experience, knowledge, reputation and goodwill over the years in the travel and tourism industry and one of the express terms on which plaintiff No. 2 had purchased the shares of plaintiff No. 1 from the defendant were that after the sales of shares the defendant shall not carry on, within or outside India, directly or indirectly, any business which competes with the Le Passage business for the term of the agreement, since by doing so the defendant would be affecting adversely the business of the company. It is contended that when men in business consciously enter into an agreement they are bound by the same. Thus, from the covenant ‘d’ it is clear that the defendant was expressly selling reputation, goodwill and business of plaintiff No. 1 to plaintiff No. 2 and agreeing that he will not compete with the business of plaintiff No. 1 in any manner whatsoever. The underlying principle under Section 27 of the Contract Act is that a person cannot be reduced to a state of penury and idleness. However, in the present case the defendant took exorbitant consideration for the sale of his shareholding which was almost 20 years’