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2021 Supreme(Del) 1493

IN THE HIGH COURT OF DELHI AT NEW DELHI
Sanjeev Narula, J.
Chem Academy Pvt. Ltd - Appellant
Versus
Sumit Mehta - Respondent
Original Miscellaneous Petition (I) (COMM.) No. 356 of 2021, Miscellaneous Application No. 14374, 14375, 14376 of 2021
Decided On : 11-11-2021

Advocates appeared:
Manoranjan, Advocate, Sambhavi, Advocate, Lakshay Joshi, Advocate

The court emphasized that the relief based on a negative covenant has to be considered having regard to the overall facts and circumstances of the case, and it can be refused if it would indirectly compel the employees either to idleness or to serve the employer.

Headnote:

Employment Contracts - Arbitration and Conciliation Act, 1996 - Clauses 2.14, 4.3, 5, 6.2 - The court dismissed the petitions seeking interim measures pending constitution of the Arbitral Tribunal. The court found that the agreements were terminated with employees' resignation, making the relief sought misconceived. The court also found that the negative covenant in the agreements was prima facie void under Section 27 of the Contract Act and cannot be enforced. The court concluded that the employer did not have a prima facie case or the balance of convenience in its favor, and the loss claimed could be compensated in money.

Fact of the Case:

The employees, engaged in coaching services, resigned from their employer and joined a competitor. The employer sought interim measures to restrain the employees from engaging in similar activities with the competitor during the employment term.

Finding of the Court:

The court found the relief sought in the petitions to be misconceived as the agreements were terminated with employees' resignation. The court also found the negative covenant in the agreements to be prima facie void and unenforceable. The court concluded that the employer did not have a prima facie case or the balance of convenience in its favor.

Issues: Validity of seeking interim measures after termination of agreements, enforceability of negative covenant, and employer's prima facie case for injunction.

Ratio Decidendi: The court held that the relief sought was misconceived as the agreements were terminated with employees' resignation, making the interim measures invalid. The court also found the negative covenant in the agreements to be prima facie void under Section 27 of the Contract Act and unenforceable. The court concluded that the employer did not have a prima facie case or the balance of convenience in its favor.

Final Decision: The petitions were dismissed as devoid of merit, and the employer's claims could be compensated in money. No costs were awarded.

JUDGMENT

Sanjeev Narula, J. - The background facts and reliefs sought in both the Petitions are similar, and therefore, the same are being disposed of by way of a common order.

2. Briefly stated, the facts of the case are as follows: -

    (a) The Petitioner viz. Chem Academy Pvt. Ltd. [hereinafter "Chem Academy"] is engaged in the business of commercial coaching and training services. The Respondents viz. Mr. Sumit Mehta in O.M.P.(I) (COMM) 356/2021 and Mr. Anoop Lamba in O.M.P.(I) (COMM) 357/2021 [hereinafter collectively referred to as "the Employees"] joined Chem Academy as "Trainee Faculty" and were subsequently, confirmed on 31st December, 2020 vide separate "FACULTY" AGREEMENT both executed on 31st December, 2020 [hereinafter collectively referred to as "the Agreements"], whereunder the terms and conditions of employment were laid down. [The terms and conditions of the employment qua both the Employees/ Respondents are identical.]

    (b) As per the Agreements, inter-alia, the Employees were designated as Professors. Their appointment was initially for a period of three years from the date of signing the Agreements viz. 31st December, 2020 till 30th December, 2023. It was provided that the Agreements would not expire with efflux of time on expiry of three years, unless Chem Academy did not wish to extend the employment tenure. [As per Clause 1.3 of the Agreement.]

    (c) Clause 1.4 stipulated that in case the Employees were desirous of leaving Chem Academy prior to completion of the agreed period of three years, they were bound to give a notice in writing, providing a three months prior notice [hereinafter "notice period"]. The rationale behind the above clause was that the termination of the Employees would coincide with the academic session ending on 31st December, 20XX. Nevertheless, even during the notice period, Employees were duty bound to perform their work with utmost sincerity.

    (d) As professors, they were required to take classroom, live and recorded lectures, fulfil other assignments relating to creation of booklet contents, study material, YouTube classes, etc. Reliance is placed upon Clauses 2.14, 4.3, 5 of the Agreements extracted as under [The aforesaid clauses extracted above from the Agreements are identical.]: -

    "2.14 The "Faculty" agrees not to interact with any media, press or with any social media platform, discussion sites or websites without the prior written consent of "Company". At no time shall the "Faculty" make any comments or discuss with any third-party any topic or information in relation to "Company" without first obtaining a written permission from "Company".

    xx .. xx .. xx

    "4.3 All work Product / Services are developed as works for hire. The "Faculty" acknowledge that the intellectual property rights in the work product or any other work in the course of the employment shall be the proprietary property of "Company", and all rights, title and interests therein shall vest in "Company"."

    xx .. xx .. xx

    "5.2 At all times during the employment and thereafter, for the longest period permitted by law, the "Faculty" agree to and shall hold Confidential Information in strict confidence in accordance with the provisions hereof and shall protect all Confidential Information with the same level of care the "Faculty" applied to his own confidential information, and in any event no less than reasonable care.

    5.3 The "Faculty" shall not disclose the Confidential Information to any third person without the "Company"s prior written consent. Nor will The "Faculty" make use of any Confidential Information for his own purpose or the benefit of any other than the "Company".

    xx .. xx .. xx

    5.5 The "Faculty" must act at all times in the best interests of the "Company" and avoid a situation where there is a potential for his interest conflicting with those of the "Company".

    xx .. xx .. xx

    5.12 Payment / Fee / Salary related information are highly confidential. Management("Company") does not allow to disclose this information with any o

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