Back
IN THE HIGH COURT OF DELHI AT NEW DELHI
C. Hari Shankar, J.
Abp Network Private Limited - Appellant
Versus
Malika Malhotra - Respondent
O.M.P.(I) (Comm.) 292 of 2021
Decided On : 12-10-2021
ARBITRATION - Pre-arbitral relief - Injunction - Contract of personal service - Negative covenant - Specific Relief Act, 1963 - Section 14(d), 41(e), 42 - Whether the negative covenant in the contract of personal service can be enforced by way of injunction - Held, no.
Fact of the Case:
The respondent was appointed as an Anchor with the petitioner, vide letter of appointment dated 28th April, 2021, at the salary of Rs. 7,26,000/- per annum. The respondent worked with the petitioner, uninterruptedly, till 3rd August, 2021, when she addressed an email to the petitioner, expressing her desire to resign from the post of Anchor with ABP Network. On 20th May, 2021, it came to the knowledge of the petitioner that the respondent is anchoring a show of a rival news channel (Aajtak). The petitioner has, in the circumstances, sought to invoke the jurisdiction of this Court, under Section 9 of the Arbitration and Conciliation Act, 1996, seeking a pre-arbitral interlocutory order restraining the respondent from "directly or indirectly, participating, consulting, rendering any services for, or engaging in any business competing with the businesses of the Petitioner or performing any task or undertaking any assignment, with or without remuneration, as being performed by the Respondent while being in the services of the Petitioner".
Finding of the Court:
The Court held that the negative covenant in the contract of personal service cannot be enforced by way of injunction. The Court observed that Section 14(d) of the Specific Relief Act, 1963 renders a contract which is "in its nature determinable" incapable of specific performance. The Court further observed that Section 41(e) of the Specific Relief Act, 1963 bars the grant of injunction to prevent the breach of a contract the performance of which would not be specifically enforced. The Court also observed that Section 42 of the Specific Relief Act, 1963, which provides an exception to Section 41(e), cannot be invoked to enforce a negative covenant in a contract of personal service, if such enforcement would indirectly compel the employee to idleness or to serve the employer against her, or his, will.
Issues: Whether the negative covenant in the contract of personal service can be enforced by way of injunction.
Ratio Decidendi: The Court held that the negative covenant in the contract of personal service cannot be enforced by way of injunction. The Court observed that Section 14(d) of the Specific Relief Act, 1963 renders a contract which is "in its nature determinable" incapable of specific performance. The Court further observed that Section 41(e) of the Specific Relief Act, 1963 bars the grant of injunction to prevent the breach of a contract the performance of which would not be specifically enforced. The Court also observed that Section 42 of the Specific Relief Act, 1963, which provides an exception to Section 41(e), cannot be invoked to enforce a negative covenant in a contract of personal service, if such enforcement would indirectly compel the employee to idleness or to serve the employer against her, or his, will.
Final Decision: The petition is dismissed with no orders as to costs.
JUDGMENT
1. The respondent was appointed as an Anchor with the petitioner, vide letter of appointment dated 28th April, 2021, at the salary of Rs. 7,26,000/- per annum. The following clauses of the letter of appointment, are relevant for adjudication of the issue in controversy:
"3.3 You agree not to engage in any conduct detrimental to the interests of the Company or contrary to the information received by the management of the Company in any manner whatsoever.
*****
5. Term:
5.1 You agree that your services with the Company shall be for a fixed term of Thirty Six (36) months commencing from the Date of Commencement, which may be further renewed, on the basis of factors including but not limited to your performance and requirements of the company ("Term").
*****
7. Termination of Employment:
7.1 During the period of your employment, your services are liable to be terminated by either party at any time, with ninety days (90) prior written notice or payment of ninety days basic salary for the notice period short for, in lieu thereof.
7.2 It is agreed by you that serving notice period shall be essential and mandatory, unless otherwise agreed by the Company management, in view of the nature of your KRA with the Company. In view thereof, you agree that the right of finalizing your exit date, from the Company, shall solely based with your reporting manager/management of the Company, and the same shall be confirmed to you after confirmation of your resignation/termination.
*****
11. Engagement in other Business:
11.1 You acknowledge that the Company requires you to devote your whole time and attention to the service of the Company during the term of your employment with it. Accordingly, you agree to be employed with the Company on an exclusive basis.
11.2 For this reason, during the term of your employment, you must not (without the Company's prior written consent) directly or indirectly own, manage, control, participate in, consult with, render Services to or engage in the business of any other business entity or other organisation (whether as an employee, officer, director, agent, partner, consultant or otherwise full time or part-time) including production of any creative interest with any production house, whether for ready commercial benefit or not.
12. Non-competition:
12.1 You acknowledge that during the term of your employment with the Company, you will become familiar with the Company's trade secrets and other confidential information concerning the Company and its associates and related companies and that your services will be of a special, unique and extraordinary value to the Company.
12.2 It is further agreed by you that being an identity and face of the Company, you shall not directly or indirectly own, manage, control, participate in, consult with, render services for, or engage in any business competing with the businesses of the Company or its associates or related companies, such as other news channel/web streaming platform/etc, whether by appearing on such channels/platforms for the same region (north/south/east/west) in India or in the same language and time slot, for a period of at least six (06) months from the date of your relieving from the Company."
Additionally, Clause 17.1 of the letter of appointment provided for arbitration as the mode for resolving disputes, with Delhi as the designated arbitral seat.
2. The respondent worked with the petitioner, uninterruptedly, till 3rd August, 2021, when she addressed the following email to the petitioner:
"Dear Sir,
As discussed with you, I wish to resign from the post of Anchor with ABP Network. Since I am still on probation, would be grateful if I could be relieved by August 16th. Even though it has been a very short journey, my heartfelt thanks to you for allowing me this opportunity.
Thank you so much.
Regards Malika"
3. This was succeeded by the following email dated 12th August, 2021:
"Dear Sir,
Dear Sir, as discussed, please relieve me on Monday, August 16th. I have cleared everythin
A contract that is determinable in nature cannot be specifically enforced, and no injunction against termination and enforcement of the contract can be issued.
The court ruled that an employment contract can be determinable, allowing for potential termination without an injunction, and that specific performance is permissible under amended provisions of the....
The court held that a contract of personal service is not specifically enforceable, and restrictions on trade after termination violate Section 27 of the Indian Contract Act.
A determinable contract, such as an insurance contract subject to renewal, cannot be specifically enforced under Section 14 of the Specific Relief Act, and no injunction can be granted to prevent its....
A contract with specific termination conditions is not inherently determinable under Section 14 of the Specific Relief Act, allowing for interim relief to maintain status quo pending arbitration.
A contract that is inherently terminable does not prevent the enforcement of specific performance claims if the termination is contested as being unjust or improper.
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
