JURISDICTION

The appellate has come to this Honorable District Court under section 96
(1) of Code of Civil Procedure, 1908 to appeal against the order of Civil
Judge senior division.
States- 96. Appeal from original decree. - (1) Save where otherwise
expressly provided in the body of this Code or by any other law for the
time being in force, an appeal shall lie from every decree passed by any
Court exercising original jurisdiction to the Court authorized to hear
appeals from the decisions of such Court.

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 Statement of facts
 Description of Parties-

SteelCorp India Private Limited (SIPL) is a subsidiary company of SteelCorp Inc., a

company based in Houstan, Texas, USA. It is engaged in the business of manufacturing
and trading aluminum products having a large business of 2 Billions USD around the
world. SIPL in india provides support services by handling confidential and
commercially sensitive information pertaining to manufacturing processes, marketing
plans, offers to customers, competitive pricing, customer list / database, of delivery, inter
alia.

Mr. Sridhar is the sales manager having 15-20 years experience in the same industry
employed by SIPL on 25/05/2013 vide an employment letter containing non-compete,
non-solicitation and non-disclosure terms which he categorically signed.

 List of events leading to the conflict-

In Dec 2015, Mr. Sridhar was accused of signing the minutes of a meeting
acknowledging a debit note of Rs.50,00000 which was outside his scope of authority.

Mr. Sridhar was informed that he will be suspended until the inquiry completed. But
subsequently Mr. Sridhar had put up his resignation letter to the management, but was
informed that he will be released from his services subject to certain terms and conditions
restricting him from working in the same industry.

In June 2016, SIPL found Mr. Sridhar employed in FerrousCorp a direct competitor of
SIPL.

SIPL filed a civil before the Hon’ble Civil Judge Senior Division, Pune to restrict Mr.
Shridhar and FerrousCorp Inc. from transacting in any manner with the clients of SIPL,
utilizing any confidential and sensitive information of SIPL and damages of Rs.
50,00,000, the civil judge decreed in favour of SIPL.

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 ISSUES

1. Whether the employment agreement between SIPL and Mr. Sridhar enforceable or not?
2. Whether Mr. Sridhar can be restrained after termination of employment or contract of
service or not?
3. Is Mr. Sridhar liable for breach of confidentiality?
4. Whether Mr. Sridhar be sued for contractual damages of Rs. 50,00,000 by SIPL or not?

SUMMARY OF ARGUMENTS
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1. Whether the employment agreement between SIPL and Mr. Sridhar enforceable or
not?

It is humbly submitted to the Hon’ble Court that the employment agreement signed
between SIPL and Mr. Sridhar is not enforceable as it is void under section 27 of Indian
Contract Act, 1827.

2. Whether Mr. Sridhar can be restrained after termination of employment or

contract of service or not?

It is humbly submitted to the Hon’ble Court that the lower court has erred by holding Mr.
Sridhar, liable for breaking the employment agreement and making him pay token
damages of 50 lakh rupees, as Mr. Sridhar cannot be restrained post termination of
employment under the non-compete clause.

3. Is Mr. Sridhar liable for breach of confidentiality?

It is humbly submitted to the Hon’ble Court that Mr. Sridhar  is not liable for breach of
confidentiality as it has nowhere written in the fact sheet that there was any ouverte act
wherein  Mr. Sridhar had divulged any confidential and sensitive information to
FerrousCorp relating to SIPL. The fact sheet has simply stated that SIPL sued Mr.Sridhar
for merely joining FerrousCorp.

4. Whether Mr. Sridhar be sued for contractual damages of Rs. 50,00,000 by SIPL or
not?

It is humbly submitted to the Hon’ble Court that Mr. Sridhar  is not liable to pay damages
amount of Rs.50,00,000 as it has been no where stated in the fact sheet that SIPL had
suffered a loss of that amount on Mr. Sridhar joining FerrousCorp and it the contractual
damages amount has not been mentioned in the employment agreement as well, so it is

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purely unsubstantial and unreasonable for asking such a huge amount from a sales
manager.

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 ARGUMENTS ADVANCED

1. Whether the employment agreement between SIPL and Mr. Sridhar enforceable or
not?

Section 27 of ICA, 1827 states that; “Every agreement by which anyone is restrained from
exercising a lawful profession or trade or business of any kind, is to that extent void”

As per this section the agreement between the parties involved is unenforceable as the
agreement puts a restriction on the appellant to practice his profession. any term and
conditions of the agreement which directly or indirectly either compels or restricts the
employee from joining a competitor or other employer is not valid under the law. 

clause 14. of the agreement, titled non competition restricts the appellant to practice is his
profession for a considerable period of time and is thereby unenforceable.

in Pepsi Foods Ltd vs. Bharat Coca-Cola Holdings the Delhi High Court held that
retraining an employee from engaging or undertaking employment for 12 months after he has
left the plaintiffs' service is a negative covenant clause. such contracts are in violation of
section 27 of the Indian Contract Act, 1872, and thereby unenforceable, void. 
It is submitted that the employees do not work for a rival soft drink company and that
too only for a period of one year. The employees are, however, free to leave and work
for other soft drink companies. But in our case it is clearly stated that employees should
not work in the same industry i.e aluminium industry altogether which is unreasonable
clause on the part of SIPL.

In R. Babu and Another vs. TTK LIG Ltd.

the Division Bench of Madras High Court has set aside the order of the learned Single
Judge restraining an employee from taking up employment as Manager (Production)
because by an agreement dated 1st May, 1990, as entered between the employer and the
employee wherein it was stipulated that the employee shall not furnish any data and
information relating to the formulation for manufacture of condoms and other items and he
would also not seek any employment in any establishment elsewhere of similar nature for a
period of five years after he ceases to be an employee of the employer.

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Superintendence Company of India (P) Ltd., vs. Krishan Murgai (AIR 1980 Supreme
Court 1717). According to the learned counsel, the Supreme Court in the judgment
referred to above has clearly held that the negative covenant after the employment has
come to an end is unenforceable in law and contrary to Section 27 of the Indian
Contract Act, 1872.

It is evident that a employment agreements containing terms and condition of employment

is valid and enforceable  if the parties agree to have free consent, i.e. without fraud,
coercion, undue influence, mistake and misrepresentation as under section 13, 14, 15, 16,
17, 18 of ICA, 1827. And in our case appalant too signed fulfilling these sections of ICA.

But there is a negative clause 14 under the employment agreement,

According to section 2(d) of ICA - “When, at the desire of the promisor, the promisee or
any other person has done or abstained from doing, or does or abstains from doing, or
promises to do or to abstain from doing, something, such act or abstinence or promise is
called a consideration for the promise;”

And according to section 23 of ICA; “What considerations and objects are lawful, and
what not.- The consideration or object of an agreement is lawful, unless-

it is forbidden by law, or

is of such a nature that, if permitted, it would defeat the provisions of any law; or

is fraudulent; or

involves or implies injury to the person or property of another; or property of another; or 

The court regards it as immoral, or opposed to public policy.

In each of these cases, the consideration or object of an agreement is said to be unlawful.

Every agreement of which the object or consideration is unlawful is void.”

 In every one of these cases, the consideration or object of an agreement is said to be
unlawful. The meaning of consideration given in Section 2(d) of the Indian Contract Act,
1872 is fairly a practical and pragmatic definition. 

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As enumerated in these two sections if the consideration (i.e to do or to abstain from doing,
something, such act or abstinence or promise is called a consideration) is defeating the
provision of any law then it is void. So, in our case the appellant has been abstained from
joining another company in the same industry after termination which is covered under
section 27 of ICA; where such restrictive clause from exercising lawful profession is void.

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2. Whether Mr. Sridhar can be restrained after termination of employment or contract
of service or not?

Section 27 of ICA 1827 states that; “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 restrictive clauses are enforceable during the course of employment but not post

termination of employee as per the case of Bakelite Hylam v. SJ Hasan  (1985) ILLJ 438

AP  (1) A contract or covenant which has for its object a restraint of trade is prima facie

void under S. 27 of the Contract Act. (2) Negative covenants operating during the

period of contract of employment do not fall under S. 27 of the Contract Act.   (3)Any

restrictive covenants extended beyond the termination of service is void under S. 27 of

the Contract Act.

In famous landmark judgement of the Supreme Court of India in(2) M/s Gujarat Pottling

Co.Ltd. & Ors vs The Coca Cola Co. & Ors on 4 August,

1995 (https://indiankanoon.org/doc/104935066/) any restriction imposed for carrying any

business and trade falls under purview of  Section 27 of the Indian Contract Act, 1872, and

such restrictive covenant in any Agreement shall not be legally valid and enforceable. It

was also decided that any restrictions after the termination of the Contract is not

valid and enforceable under law. Under Section 27 of the Contract Act, any restrictions

laid down in Agreement which shall be applicable after termination of contract shall

tantamount to illegal and anything illegal can not be enforced by the Court’s order.

In 2003 another judgement(3) of Percept D’ Mark (India) Pvt. Ltd v. Zaheer

Khan, supreme court laid down that any agreement or clause restraining any person to

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carry on trade is restrictive in nature. Further, the Supreme Court also said that this

principle does not specifically apply to this type of contract but also applies on

employment contracts with respect to obligations continuing after termination of contract.

However, any restrictions during the continuance of Agreement shall be treated as valid

but any post termination restrictions shall not be valid.

In contrast, the Apex Court took a lenient view in another case titled Niranjan Shankar

Golikari v. The Century Spinning and Mfg. Co. Ltd., wherein the court has decided that

if a restraint of trade against the employee is restricting the employee from competing

against the employer during the term of employment then such a covenant is valid and is

enforceable in respect of the employee’s actions during the employment.

All these case laws enumerates the same principle that post termination restrictive clause is

unenforceable. Even in our case the appalant Mr. Sridhar was subject to post termination

restrictive clause which imposed a heavy restriction wherein he couldn’t join any company

in the same industry which was not fair as he had an experience of 15- 20 yrs plus 3yrs

experience in SIPL in the same industry. It will be unjustice if the clause restricted him

from joining any other company in the same industry as he had expertise as a senior sales

manager in that industry.

the agreement are ultra virus to the employment agreement as even after relieving from the

office of the employee, restraining the ex-employee from joining the company other than

the plaintiff company is arbitrary, unjust and against the principle of natural law.

Hence it is proved that post termination restraint cannot be imposed on Mr. Sridhar.

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3. Is Mr. Sridhar liable for breach of confidentiality?

Mr. Sridhar is not liable for breach of confidentiality as it is no where stated in the fact
about breach of confidentiality by Mr. Sridhar. SIPL has purely sued Mr. Sridhar for
joining FerrousCorp after resigning from SIPL.

There is no substantial and evidential proof wherein it has been proved that Mr. Sridhar has
divulged or misused any confidential information of SIPL for the benefit of FerrousCorp.

Mr. Sridhar had joined FerrousCorp as he had an opportunity of employment there as a

sales manager post as he has 15-20 years experience as a sales manager in aluminum
industry and it is evident that he will work and earn better in the same industry.

In our case SIPL has failed to establish the breach of confidentiality by Mr. Sridhar, he is
encouraged by mala fide intentions as they don’t want Mr. Sridhar to work with any other
company in the same industry.

There is no actual breach of confidentiality,

In Bombay Dyeing and Manufacturing Co. Ltd. v. Mehar Karan

Singh, MANU/MH/0955/2010, the Bombay High Court found that Mehar Karan Singh
(Mr. Singh) had been appointed a whole time Director of the Bombay Dyeing Company
(Bombay Dyeing) under an employment agreement dated August 22, 2005 for the period
July 24, 2004 to July 23, 2009. Under this employment agreement, he agreed not to divulge
or disclose confidential information of any nature. However, he divulged Bombay
Dyeing’s information to its competitor. Mr. Singh had also exchanged several e-mails with
the competitor containing information relating to Bombay Dyeing. The Bombay High
Court restrained Mr. Singh from divulging any information about the software and its
manual prepared by Bombay Dyeing.

In this above case there is actual breach of confidentiality, but in our case Mr. Sridhar
hasn’t divulged any confidential info.

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4. Whether Mr. Sridhar be sued for contractual damages of Rs. 50,00,000 by SIPL or
not?

It is humbly submitted to the Hon’ble Court that Civil Judge Senior Division, Pune has

erred by passing a decree in favour of SIPL and making Mr. Sridhar pay token damages

of Rs. 50,00,000.

As above established that : 1. Contract is unenforceable, 2. No breach of contract, 3. No

actual divulge of information by Mr. Sridhar,

After witnessing all these things it is evident that there is no question of damages to be

paid by Mr. Sridhar to SIPL.

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 PRAYER CLAUSE

It is, therefore, prayed that the honourable court may be pleaded to pass judgement and decree
against the defendant and in favour of the appellant

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