Legal Aspects in Business Assignment

on

CASE STUDY ANALYSIS

“NDTV Vs. Mr. Sunil”

PGDM – B

Submitted To: Submitted By:

Prof. G K Kapoor KUMAR KARTIK JAIN
19PGDM104
PGDM-B

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FACTS OF THE CASE

Important facts discussed in this case are-

1. Mr. Sunil, was recruited by NDTV. He joined NDTV on 16 th January, 2014 as a

Presenter. He entered into an agreement with the petitioner on the same date. His
professional fee was fixed at Rs. 95,833/- per month. The term of the agreement dated
16th January, 2014 was for two years effective from the date of telecast of the 1 st show on
the channel.
2. It is alleged that on 8th February, 2015 NDTV received an e- mail from the respondent by
which he requested the petitioner to relieve him of his duties with immediate effect. He
was informed by the petitioner by mail that in view of terms of agreement, he cannot
leave the job, thus his resignation was not accepted. But he left the office with a request
to accept the resignation along with a cheque for an amount of Rs. 5,74,998/- (Six
months’ salary) on the table of one of the officials of the petitioner company. It is also
alleged that he is now falsely claiming that his resignation was accepted by the petitioner
company as the cheque for an amount of Rs. 5,74,998/- was left on the table of the
official of NDTV.
3. The main terms stipulated in the agreement dated 16th January, 2014, are:
 That the term of the agreement shall be 2 years
 The Presenter does not have any right to terminate the agreement
 For a period of one year after the termination of this contract or expiry of this
contract, the Presenter will not engage in a similar programme having a similar
concept on any other television channel.
 The Presenter shall not solicit, negotiate or engage in any discussion relating to
any future engagement at any time prior to the termination of the contract. This
obligation of the Presenter would continue for the term of the contract and for any
renewal thereof and 30 days thereafter.
 That if the Presenter breaches any terms and conditions stipulated in this
agreement, the petitioner company will be entitled to obtain an injunction
restraining the Presenter from engaging in such conduct and further also claim and
obtain damages for breach of this agreement.

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CASE IN DISCUSSION

NDTV has filled the petition before Delhi High Court against Mr. Sunil alleging him for a
breach of contract and seeking the following reliefs:

“That the respondent be restrained from in any manner engaging or providing services
in violation of the terms of the Agreement to any other television channel during the
term of the contract i.e. till 16th January, 2016 and for a period of one year thereafter
i.e. 16th January, 2017 either as a presenter, host, anchor, reporter in any other manner
in any on-screen role whatsoever or from permitting his name, image, voice or any
other personal television channel either for shows or promos or advertising."

NDTV case is based on the view that NDTV being the leading media companies spends a lot
of money on promoting the image, persona and personality of the Presenter and the same is
categorized as “BRAND BUILDING EXPENSE”.

NDTV has helped Mr. Sunil build his brand from their “BRAND BUILDING EXPENSE”. If
Mr. Sunil works for another media house during the validity of the agreement, then it will
divert the attention of audience to that media house and will result in loss for NDTV. Hence,
he should be restrained from doing any such activity.

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LAWS DISCUSSED IN THE CASE

1. Section 27 of Indian Contract Act,1872

Section 27 of Indian Contract Act provides: agreement in restraint of trade is void.
Every agreement by which anyone is restrained from exercising a lawful profession, trade
or business of any kind, is to that extent is void.
Freedom of trade and commerce is a fundamental right protected by the constitution of
India and the individual can not barter it away by agreement. The principle of law is
“Every man should have unfettered liberty to exercise his powers and capacities for
his own and community’s benefit.”

Madhub Chander Vs. Raj Coomar (1874) XIV Bangal Law Reports 76, is the first
case in which scope of the section came up for determination before Calcutta High
Court.
The Plaintiff and the defendants were rivals shopkeepers in a locality in Calcutta. The
defendant agreed to pay a sum of money to the plaintiff if he would close his business in
that locality. The plaintiff accordingly did so but the defendant refused to pay.
Restraint - Total or Partial: Court held the agreement void. The court further said that
“The words ‘restrained from exercising a lawful profession, trade or business’, do not
mean an absolute restriction only but are intended to apply to a partial restraint, also.
This interpretation of section has been generally accepted. “The section has abolished
the distinction between general or partial, unqualified, if the agreement is in the
nature of a restraint of trade, it is void.”

Restraints upon Employees:

After termination of Employment:
An agreement to restraint a servant from competing with the employer after the
termination of employment may not be allowed by the Court.

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 Brahmaputra Tea Co. Vs. E.Scarth ILR (1885) 11 Cal 545: an attempt was made to
restrain a servant from competing for five years after the period of service, the court
disallowed it.

The Supreme Court has laid down in Superintendence Company of India Vs.
Krishna Morgul (1981) 2 SSC 246:
A restraint beyond the term of service would be prima facie void and the only ground in
which it could be justified is by bringing it within the scope of the exception that is by
showing that it is necessary for the protection of the employee’s goodwill. The court
pointed out by even that even if such restraint is valid, it will only apply after the expiry
of the term in natural course or if the employee left his service earlier. If employee is
terminated, the restraint clause becomes inapplicable.

2. Article 19(1)(g) of the Constitution of India:

The Article 19(1)(g) of Indian constitution provides a fundamental right to freedom to all
citizens of India to practice any profession or to carry on any occupation, trade or
business.

3. Section 14 of Specific Relief Act, 1963:

Section 14 of Specific Relief Act, 1963 deals with the “Contracts that are not specially
enforceable” meaning that the contracts that can not be made enforceable in the court of
law.

The clause (c) to Subsection (1) of Section 14 of the Specific Relief Act, 1963 states that:
“A contract which is in its nature determinable cannot be specifically enforced.”

The word "determinable" used in clause (c) to Subsection (1) of Section 14 of the
Specific Relief Act, 1963 (the "Act") means that which can be put an end to.
Determination is putting of a thing to an end. Meaning thereby, all revocable deeds and
voidable contracts may fall within "determinable" contracts and the principle on which
specific performance of such an agreement would not be granted is that the Court will not
go through the idle ceremony of ordering the execution of a deed or instrument, which is
revocable at the will of the executant.

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4. Section 41 in The Specific Relief Act, 1963
An injunction cannot be granted to prevent the breach of a contract the performance of
which would not be specifically enforced.

An injunction is a legal remedy imposed by a court. In simple terms,

an injunction means that one of the parties to a certain action must either do something
or refrain from doing something.

In most jurisdictions, an injunction will not be granted unless the party seeking the
injunction can prove that they will cause irreparable injury if the court does not grant
the injunction. Irreparable injury means that the harm inflicted on one party is so bad that
no monetary or other type of payment is a good enough reward for putting up with the
circumstances.

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Reasoning from the CASE

Reasoning for Mr. Singh’s Arguments:

 As per termination clause mentioned in agreement, if Mr. Sunil was to leave the company
before the end of an agreement, he was liable to pay his 6 months professional fee to
NDTV. Since Mr. Sunil paid his 6 months professional fee before leaving NDTV which
means he exercised the power vested in him by the agreement. Therefore, it was not a
breach of agreement but a lawful resignation.

Fact from case supporting this Reasoning:

“Left the office with a request to accept the resignation along with a cheque for an amount
of Rs. 5,74,998/- (Six months’ salary) on the table of one of the officials of the petitioner
company.”

“Mr. Sunil tendered his resignation on 8th February, 2015 strictly as per one of the clauses of
termination of the agreement.”

 Since, the contract was such that Mr. Sunil has the power to end the agreement by
exercising the termination clause. So, the contract was a determinable contract and as per
clause (c) to Subsection (1) of Section 14 of the Specific Relief Act, 1963 states that:
“A contract which is in its nature determinable cannot be specifically enforced.” As
the contract cannot be enforced on the Mr. Sunil. Thus, the restraints asked by the
petitioner cannot be enforced on Mr. Sunil.
 As this is a determinable contract and cannot be specifically enforced which means that
As per Section 41 in The Specific Relief Act, 1963, injunction (restriction on the Mr.
Sunil) cannot be granted. Therefore, petitioner cannot request the court to restrain Mr.
Sunil from engaging or providing services to any other television channel.
 As in this case there is no mention as of any business secret that has been gained by Mr.
Sunil during his employment in NDTV. Therefore, as per section 27 of Indian Contract

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 Act, 1872, this agreement is restraining Mr. Sunil from exercising a lawful profession and
therefore is void.

Ambience India Pvt. Ltd. vs. Naveen Jain

“The law is well-settled that all contracts in restraint of trade are void and hit by Section 27 of
the Contract Act. A judgment of this Court in Krishan Murgai v. Superintendence Co. of
India; succinctly deals with the law on this point. An employee, particularly, after the
cessation of his relationship with his employer is free to pursue his own business or seek
employment with someone else. However, during the subsistence of his employment, the
employee may be compelled not to get engaged in any other work or not to divulge the
business/trade secrets of his employer to others and, especially, the competitors. In such a
case, a restraint order may be passed against an employee because Section 27 of the Indian
Contract Act does not get attracted to such situation. It is also to be added that a trade secret
is some protected and confidential information which the employee has acquired in the
course of his employment and which should not reach others in the interest of the employer.
However, routine day-to-day affairs of employer which are in the knowledge of many and are
commonly known to others cannot be called trade secrets. A trade secret can be a formula,
technical know-how or a peculiar mode or method of business adopted by an employer which
is unknown to others.”

 It has been mentioned that Mr. Sunil has already worked with many prestigious
organisations like Star News, Rajya Sabha TV. etc. before his employment in NDTV.
Therefore, he was already a famous anchor. Also, as per the agreement Mr. Sunil image
can be used by the NDTV or any other channel of the company for the promotion of the
channel. This means that for “Brand Building” for Mr. Sunil by NDTV has been less as
compared to NDTV using Mr. Sunil Image for promotional activities.

Facts supporting this reasoning:

“The Presenter shall also fully cooperate in the production of the show as also promos of
the said Programme. The Presenter shall be available for press conferences, events and
any other promotional or other publicity requirements for promotion of the Channel or the

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 Programme. The Company is fully entitled to use the Presente’s image, voice and other
personal attributes for the promotion of the programmes on NDTV, any other channel of
the Company and/or in the print/electronic media.”

Reasoning for Mrs. Renu Gupta’s Arguments:

 The first point she argued which states that “In the present case the contract containing
the negative covenants is completely enforceable in law.” As per the termination
clause, Mr. Sunil was to pay a six months professional fee to leave the company during
the agreement validity which he did. Hence, his employment under law with NDTV
was lawfully terminated. However, since there was no confidential information shared
by Mr. Sunil, the argument is incorrect as it put restrain on Mr. Sunil to carry out his
profession. Hence, it is void.
 Here second argument that the remedies from Mr. Sunil should be provided in case he
breaches in contract hold incorrect as per Section 14 of Specific Relief Act, 1963 and
Section 41 in The Specific Relief Act, 1963 which states that no injunction can be
provided in this case. The only liability for Mr Sunil was to pay the amount as directed by
the termination agreement which he already did. Hence, no further remedies need to be
provided from Mr. Sunil.

 Her next argument in which she mentioned that “the respondent cannot be allowed to
breach the agreement in this manner as he during the course of his employment was
engaged in negotiations with the rival channel which is clearly violation of the duties
and responsibilities which he owned to the company.” This argument does not stand
because the condition on which this argument lies is unreasonable and is in violation of
Fundamental rights of Mr. Sunil.

 In her last argument she mentions that “respondent is not entitled to take the benefit of
any ground of Section 27 of the Contract Act, 1872 as the doctrine of restraint of
trade does not apply during the continuance of the contract for employment”. This
argument holds no validity as the contract was already terminated by Mr. Sunil on 8 th Feb

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 by following the due procedure as prescribed by the contract, hence section 27 is
applicable to the present case and respondent can take the benefit of the said provision.

  In the case of “R. Babu and Anr. v. TTK LIG Ltd”, the court stated that “no injunction
can be granted against an employee after the termination of his employment restraining
him from carrying on a competitive trade.”

Judgement

 The Contract between NDTV and Mr. Sunil had been lawfully terminated as Mr. Sunil
followed the termination clause and did exactly what was mentioned in the clause.
 As per section 27 of Indian Contract Act, 1872, “Every agreement by which anyone is
restrained from exercising a lawful profession or trade or business of any kind, is to
that extent void”. The only exception to this is when “One who sells goodwill of a
business with a buyer to refrain from carrying on a similar business, within
specified local limits so long as the buyer, or any person deriving title to the goodwill
from him, carries on a like business therein provided that such limits appear to the
Court reasonable, regard being had to the nature of business”.

Mr. Sunil has not sold the good will, business secrets of the NDTV and therefore the
exception of this section 27 do not applies to Mr. Sunil. Hence, negative covenants
mentioned in the case are the restrain for Mr. Sunil as are therefore declared as void.

 Also, Negative covenants in the contract pertaining to the period post termination and
restricting an employee's right to seek employment in the same field as the employer
would be in restraint of trade and, therefore, a stipulation to this effect in the contract
would be void.
 Mr. Sunil cannot be directed to leave his current employment. The same would be
compelling a person to work with a particular employer which is impermissible. The said
order would be contrary to the provisions of Sections 14 and 41 of the Specific Relief
Act, 1963. Any interim order passed of such nature would have a direct impact to his
service and future. This is because the contract between the parties was determinable
contract.

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 Also, it should be noted that although in normal case, no restraint can be imposed on Mr.
Sunil but if Mr. Sunil walks out completely free then the wrong message would go to
the similar situated employees who may do the same without any fear and fairness.
Further, the way adopted by Mr. Sunil for termination of contract was not straight and
frank.
 Therefore, considering the overall facts and circumstances, Mr. Sunil is restrained
from either engaging or providing any kind of services in any manner to any
television channel for a period of 14 days between 16th December, 2019 to 29th
December, 2019.

(Kumar Kartik Jain) JUDGE DECEMBER 09, 2019.

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