Sessions 5 and 6 - Case Compilation

Altus Group India Private Limited vs Darrameks Hotels & Developers ...
on 20 April, 2018
Delhi High Court

Altus Group India Private Limited vs Darrameks Hotels & Developers ... on 20 April, 2018
$~8
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 20th March, 2018
O.M.P. (COMM) 499/2016
ALTUS GROUP INDIA PRIVATE LIMITED ..... Petitioner

Through Mr.Gopal Jain, Sr. Adv. with
Ms.Savita Sarna, Ms.Chinmayee
Chandra and Ms.Manila Munjal,
Advs.
versus
DARRAMEKS HOTELS & DEVELOPERS PRIVATE LIMITED

..... Respondent
Through Mr.Saurabh Banerjee and Mr.Bikranu
Singh, Advs.
CORAM:
HON'BLE MR. JUSTICE NAVIN CHAWLA
NAVIN CHAWLA, J. (Oral)
1. The present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter
referred to as the 'Act') has been filed by the petitioner challenging the Arbitral Award dated
06.07.2015 passed by the Sole Arbitrator inter-alia holding therein that the termination of the
Agreement dated 14.02.2011 by the respondent was invalid and consequentially granting the claims
of the respondent for refund of the mobilization advance as also awarding damages for such
unlawful termination in favour of the respondent and against the petitioner. The amount payable
under the award was directed to be paid along with interest @ 12% p.a.
2. The dispute between the parties is in relation to the "Professional Service Agreement for the
appointment of a Project Manager and Cost Consultant" dated 14.02.2011 executed between the
parties. The dispute is confined only to Clause 9 of the agreement and interpretation thereof and
therefore, Clause 9 is reproduced herein below:
9. TERMINATION I. The Owner may terminate the Agreement with a prior notice of
30 days.
II. The Project Management Consultant may terminate this agreement only in case
the Owner fails to pay its correctly invoiced fees within 30 days of receipt of a
reminder by courier letter informing Owner of due amounts.
Indian Kanoon - http://indiankanoon.org/doc/31719091/ 1

III. Upon the termination or expiry of this Agreement, the Project Management
Consultant shall return to the Owner any and all data, technical details, designs,
drawings and the like and shall not retain any copies and/or extract thereof.
IV. Either party may upon Thirty (30) days notice in writing to the other terminate
this Agreement. V. In the event of termination of the Agreement, the Owner shall pay
to the PMC the fee corresponding to the Services which were completed up to the
date of contract termination."
3. The petitioner relying upon Clause 9(IV) of the agreement, issued a notice of termination dated
23.12.2011.
4. The respondent contending that the termination was invalid, raised its claim for damages and
refund of the mobilization advance, which was referred to arbitration and has resulted in the
Impugned Award dated 06.07.2015.
5. Learned senior counsel for the petitioner submits that Clause 9(IV) of the agreement required no
interpretation. It plainly and simply allowed either party to terminate the agreement by giving a
notice of 30 days in writing to the other party. Such termination can be without cause and is to be
distinguished from Clause 9(II) of the agreement which provides for termination by the Project
Management Consultant (PMC) for a cause i.e. on the owner's failure to pay correctly the invoiced
fee within 30 days of the receipt of the reminder from PMC. He submits that in the agreement there
are two modes of termination provided; (i) with; and (ii) without cause. Equal right is given to both
the parties to terminate the agreement without assigning any cause under Clause 9(IV) of the
agreement. He submits that in the name of interpretation, the Arbitrator has in fact re-written the
agreement between the parties and has made Clause 9(IV) otiose and redundant.
6. Learned counsel for the respondent on the other hand, submits that the Arbitrator having
interpreted the contract, this Court in exercise of its power under Section 34 of the Act, cannot set
aside the Award only because it would have preferred another interpretation of the same.
7. I have considered the submission of the learned counsels for the parties. I would first quote the
relevant discussion on the two Clauses in the Impugned Award:
Analysis & conclusion:
5.5 Perusal of the said clauses would reveal that Clause 9(1) of the agreement
provides a right to the "owner" alone to terminate the agreement with 30 days prior
notice; clause 9(II) provides a limited right to the respondent to terminate the
agreement only when owner fails to pay the fee correctly within 30 days of the receipt
of the written reminder for payment. But, it is not the respondent's case. However,
Clause 9 (IV) also provides that, "either party may, upon thirty (30) days notice in
writing to the other party, terminate the agreement." In sub-clauses 9(II) and 9(IV),
there is an apparent contradiction. Therefore, we need to find out, whether Clause 9

(IV) gives an independent right to the respondent to terminate tine contract any time,
irrespective of the fact that 9(II) gives only limited right of termination, namely
non-payment of fee, despite reminder.
5.6 Guiding rules for construction of documents are all well settled by several
authoritative pronouncements. These are:
(a) to read the document as a whole for gathering intention of the parties; (b) to give
natural, ordinary and sensible meaning to the language used in the document; and
(c) the conflict, if any, is first to be resolved by giving harmonious construction to its
various clauses. Thus, an interpretation which renders any clause in the document
redundant is to be avoided. When we apply these principles to the facts at hand, it
becomes obvious that the respondent could not validly terminate the contract under
Clause 9(IV) for the following reasons:-
(A) If it is held that clause 9(IV) is independent and confers a right on the respondent
to terminate the contract at any point of time and for any reason by merely serving 30
days notice, in that eventuality Clause 9 (II), which restricts right of the respondent
for termination only in the eventuality of their fee not being paid despite reminder,
would become redundant. It would be against basic rule of harmonious construction,
of the various clauses of documents. In view of the same, it is held that Clause 9(IV)
of the agreement does not provide any independent right of termination of the
contract for the respondent. They could terminate the contract only for non-payment
of their fees or other dues, despite reminders and not otherwise."
8. A reading of the above would show that the Arbitrator has held that there is an apparent
contradiction between Clauses 9(II) and 9(IV) of the agreement and therefore, applying the
principal of harmonious construction of a contract, which is to avoid interpretation which renders
any clause redundant, holds that Clause 9(IV) does not provide any independent right of
termination of the contract for the petitioner; the petitioner can terminate the contract only for
non-payment of its fees and other dues, despite reminder and not otherwise.
9. In my opinion, the Arbitrator has completely misguided himself. It cannot be denied that
commercial contracts by their very nature are determinable. A contract may provide for the
termination of the contract with or without a cause. Private commercial transactions can be
terminated by the parties even without assigning any reason, with a reasonable period of notice in
terms of a clause in the agreement authorizing such termination. Such termination cannot be
challenged even on the grounds of it being malafide.
10. In Central Bank of India, Ltd, Amritsar v. Hartford Fire Insurance Co., Ltd., AIR 1965 SC 1288,
the Supreme Court, held as under:
"7. The contention of the appellant is based on the interpretation of clause 10. Now it
is commonplace that it is the court's duty to give effect to the bargain of the parties

according to their intention and when that bargain is in writing the intention is to be
looked for in the words used unless they are such that one may suspect that they do
not convey the intention correctly. If those words are clear, there is very little that the
court has to do. The court must give effect to the plain meaning of the words however
it may dislike the result. We have earlier set out clause 10 and we find no difficulty or
doubt as to the meaning of the language there used. Indeed the language is the
plainest. The clause says "This Insurance may be terminated at any time at the
request of the Insured"and "The Insurance may also at any time be terminated at the
instance of the company."These are all the words of the clause that matter for the
present purpose. The words "at any time" can only mean "at any time the party
concerned likes". Shortly put clause 10 says "Either party may at its will terminate the
policy". No other meaning of the words used is conceivable."
11. In Her Highness Maharani Shantidevi P. Gaikwad v. Savjibhai Haribhai Patel and Ors., (2001) 5
SCC 101, the Supreme Court, has held as under:
"49. We are unable to agree with the approach of the High Court and find substance
in the contention of Mr. Nariman. Clause (17) is in the nature of express stipulation
that before delivery of possession, the contract could be unilaterally terminated.
When there is no ambiguity in the clause, the question of intendment is immaterial.
The fact that the clause is couched in a negative form is of no consequence. The
intention is clear from the plain language of clause (17) of the agreement. In the case
in hand, Section 202 has no applicability. It is not a case of agency coupled with
interest. No interest can be said to have been created on account of plaintiff being
permitted to prepare the Scheme and take ancillary steps. The plaintiff could not get
possession before declaration under Section 21 of the ULC Act.
xxxxx
51. It has been held that "in the case of an ambiguous instrument, there is no reason
why subsequent interpreting statement should be inadmissible". In the present case
we are concerned with an unambiguous document and, therefore, we have to go by its
plain meaning. Further, affidavit-cum-declaration only reiterated what was contained
in the agreement. It did not enlarge the agreement. It did not substitute any clause in
the agreement. It was not a document executed between the parties. It was a
document executed by original Defendant no.1 alone for the purposes of filing it
before the competent authority. Clause 17 of the agreement does not call for any other
interpretation except that the contract could be unilaterally rescinded before delivery
of possession. Xxxxx
56. From the aforesaid, it is clear that this Court did not accept the contention that
the clause in the insurance policy which gave absolute right to the Insurance
Company was void and had to be ignored. The termination as per the term in the
insurance policy was upheld. Under general law of contracts any clause giving

absolute power to one party to cancel the contract does not amount to interfering
with the integrity of the contract. The acceptance of the argument regarding
invalidity of contract on the ground that it gives absolute power to the parties to
terminate the agreement would also amount to interfering with the rights of the
parties to freely enter into the contracts. A contract cannot be held to be void only on
this ground. Such a broad proposition of law that a term in a contract giving absolute
right to the parties to cancel the contract, is itself enough to void it cannot be
accepted."
12. This Court, after analysing various judgments on this issue, in Classic Motors Ltd.v. Maruti
Udyog Ltd., 65(1997) DLT 166, of course in relation to the franchise agreement, had held as under:
"(59) A critical analysis of the various articles and decisions placed at the bar shows
that termination of a franchise agreement is possible provided reasonable notice is
given so that slight recoupment of profits is made by the party against whom such an
action is envisaged. It is thus apparent that the franchise agreements are terminable
in character. Besides it must be noticed that there are State Legislations in America
whereunder franchise agreements have been recognised and provisions have been
made therein for terminating such agreements at will terminable for good cause,
terminable with reasonable notice or terminable after profits have been recouped as
would appear from reappraisal of the following cases:-
(60) In the case of Gary H.Sharman Vs. British Leyland Ltd.; 601 Fr 2d 429 (supra.)
which was heavily relied upon by the counsel for the plaintiff in support of his
submissions appears to be a case rendered in the context of the local State
Legislation. In the said case it was held that a showing of coercion and intimidation
which produces unfair and inequitable results is essential to a valid claim of lack of
good faith.
(61) In Hill Oils & Sales Ltd. case reported in 1987 LRC 468, on the ratio of which the
counsel for the plaintiff relied upon, appears to be a case where there was no
provisions for termination without cause. In the said case the court held that the
contract could not be terminated immediately without cause since there was no
provisions for immediate termination without cause. The court further held that the
rule requiring reasonable notice of termination should be implied as a reasonable
term of contract.
(62) Gillespie Brothers Ltd. reported in 1973(1) All E.R. 193 is a case based on
difference of opinion between the two Judges - wherein Lord Denning took a view
that an unconscionable term should not be enforced, while Lord Buckley took a view
that since the contract is between commercial businessmen, the contention and plea
of unconscionability does not arise.

(63) In Martin Baker Aircrafts Vs. Canadian Flight Equipment; 1955(2) All E.R. 722
the Queen's Bench decision distinguished the case of Llanelly Railway and Doc Co. by
holding that the Llanelly case was based on a peculiar agreement which did not
provide for a termination power and the statutory scheme under which there was an
indication of such an agreement being permanent. It was further held that mercantile
and commercial agreements were always intended not to be permanent.
(64) In 1928 (1) Chancery 447 (Vol.II) the case of Credition Gas Company it was held
that the contract for supply and purchase of gas without determination and
termination of the contract was held not to be permanent in character. (65) In
Staffordshire Area Health Authority Vs. South Staffordshire Waterworks Co. 1978(3)
All E.R. 769 the Court of Appeal held that the contract for water supply to a Hospital
at a given rate was terminable after giving reasonable notice.
(66) The law, therefore, laid down by the aforesaid decisions rendered by the various
courts outside India did not intend to lay down a law that an agreement is
indeterminable and permanent in character. The judgments of United States were in
the context of the State Legislations therein and original scheme of such franchise
was under public law. However, the law governing specific performance in India is
covered under Section 14 of the Specific Relief Act, a provision similar to that does
not exist under the American Law. The scheme of legislation in United States and
India is entirely different and unless and until there is Legislation on the similar line
as existing in the U.S.A, it is not possible to import the idea and concept of franchise
as exists in American law particularly in the realm of private contract arising out of
purely private commercial transaction.
xxxxx Interpretation and meaning of the express "without any cause"
(68) The aforesaid expression appears in clause 21 of the agreement which states that
either party to the agreement could terminate the contract after giving to the other
party a notice of 90 days `without assigning any cause'. The present agreement, it
must be remembered, was entered into by the parties in the realm of private law as a
result of purely private commercial transaction. It is also to be remembered that in a
private contract a party is free to choose the person and the subject matter of the
transaction according to its own free Will. No restriction or fetter could be imposed
on either of the parties to the manner, mode and the nature of the agreement that
they choose to enter into. But the law applicable would be different when such an
agreement is entered into in the realm of public law. xxxxx (70) In view of long catena
of decisions and consistent view of the Supreme Court, I hold that in private
commercial transaction the parties could terminate a contract even without assigning
any reason with a reasonable period of notice in terms of such a clause in the
agreement. The submission that there could be no termination of an agreement even
in the realm of private law without there being a cause or the said cause has to be
valid strong cause going to the root of the matter, therefore, is apparently fallacious

and is accordingly, rejected. (71) On an overall view of the entire matter, it appears to
me that the present agreement was never intended to be permanent and that in
respect of dealership sales agreements between private parties such agreements
could never be held to be perpetual unless so intended by the parties and specifically
stated in the agreement itself. On a reasonable construction of the agreement in hand
I hold that either party to the agreement was entitled to terminate the contract
without assigning any reason by giving 90 days notice or even without giving any
notice upon the happening of an event. Termination without cause in common law is
a valid power which the parties may give to themselves. xxxx (85) ..... However, in
view of the specific provision in the agreement that the defendant could terminate the
contract in accordance with Clause 21 without assigning any reason, which according
to the defendant was resorted to in the present case, this finding appears to be not
very material for the purpose of answering Issue No.1."
13. In Oil and Natural Gas Corporation Ltd. v. M/s Streamline Shipping Co. Pvt. Ltd., 2002 SCC
OnLine Bom 303, the High Court of Bombay, held as under:
"5. Having heard the learned Advocate General for the appellant and Mr. Thakkar for
respondent, in our opinion, it is not possible to agree with the view expressed by the
learned single Judge that Clause 19.3 is unconscionable and opposed to public policy.
Clause 19.3 gives power to the appellant to determine the contract after expiry of one
year without assigning any reason. All that the appellant did was to exercise that right
or power to terminate the contract whose terms and conditions were well known and
agreed to by the respondent. Thus the contract by virtue of Clause 19.3 sets out the
power of termination by the appellant and the appellant has so acted under that
clause. The clause while setting out the right of termination further says that the
appellant can do so without assigning any reasons for the same. However, in the
present case the duty to act fairly is sought to be imported into the contract to modify
and alter its terms and create an obligation upon the appellant which is not there in
the contract. It is settled position of law that where the contracts are freely entered
with the State there is no scope for invoking the doctrine of fairness and
reasonableness for the purpose of altering or adding to the terms and conditions of
the contracts. In such cases the question of public law based on Article 14 of the
Constitution do not arise and the matter must be decided strictly in the realm of
private law rights governed by the general law relating to contracts with reference to
the provisions of Specific Relief Act providing for non- enforceability of certain types
of contracts."
14. In Associate Builders v. Delhi Development Authority, (2015) 3 SCC 49, the Supreme Court had
cautioned the courts that in exercise of its power under Section 34 of the Act, if an Arbitrator
construes the terms of the contract in a "reasonable manner", the Award cannot be set aside;
construction of the terms of the Contract is primary for an Arbitrator to decide, unless the Arbitrator
construed the Contract in such a way that it can be said to be something that no fair minded and
reasonable man could do. In the present case, the arbitrator, in the name of interpreting the

contract, has in fact, rewritten the same. Equally, in his endeavour to harmoniously construe Clause
9 so as to prevent 9(II) from becoming redundant, has made 9(IV) redundant.
15. In Nabha Power Limited (NPL) v. Punjab State Power Corporation Limited (PSPCL) & Anr.,
2017(12) SCALE 241, the Supreme Court, has held as under:-
"Needless to say that the application of these principles would not be to substitute
this Court's own view of the presumed understanding of commercial terms by the
parties if the terms are explicit in their expression. The explicit terms of a contract
are always the final word with regard to the intention of the parties. The multi-clause
contract inter se the parties has, thus, to be understood and interpreted in a manner
that any view, on a particular clause of the contract, should not do violence to another
part of the contract."
16. As noted by me above, in the present case, there was no question of interpretation involved at all.
Clause 9(IV) being explicit, was the final word on the intent of the parties. There are two distinct
rights of termination vested in the hands of the parties in Clause 9 of the agreement. While Clause
9(II) empowers the petitioner to terminate the agreement for a cause, Clause 9(IV) authorizes either
party to terminate the agreement without cause and by simply giving notice to the other. The
Arbitrator seems to have proceeded on the basis that merely because a right to terminate for a cause
is provided in the agreement, a separate right given to a party to terminate the agreement without
cause would run counter to the same and therefore, would require to be harmoniously constructed
with the right to terminate for a cause. This was a fundamental error committed by the Arbitrator
vitiating the Impugned Award.
17. Another contention raised by the learned senior counsel for the petitioner is that the Arbitrator
has wrongly gone into the issue of reasons for the termination of the agreement by the petitioner. It
is submitted that the termination of the agreement by the petitioner was relying upon Clause 9(IV)
of the agreement, for which the petitioner was not required to show any cause. As noted by me
above, all commercial contracts by their very nature are determinable. The party may, however,
restrict the rights of termination by specifically providing so in the agreement itself.
18. The agreement in form of Clause 9(IV) being explicit in the present case; authorizing either party
to terminate the agreement with a simple notice of thirty days and not requiring any reason thereof
to be in existence or stated in such notice, the Arbitrator could not have gone into the reasons
behind the notice of termination by the petitioner.
19. The damages being awarded in favour of the respondent under Claim nos. 2 and 3 are
consequential to the finding of the Arbitrator that the petitioner was in breach of the agreement and
as such must compensate the respondent for the same. Though various submissions have been
made by the learned senior counsel for the petitioner challenging the award of damages, I need not
go into the same in view of my finding that the petitioner cannot be held to be in breach of the
agreement.

20. As far as Claim no. 1 is concerned, the same is in relation to the refund of the mobilization
advance. The learned Arbitrator in his Impugned Award, in my opinion, has given cogent reasons
for awarding the said Claim in favour of the respondent. I would only reproduce the same in the
present order:-
(V) However, mobilization advance of 10% on the total fee of Rs.1,78,10,000/- which
comes to Rs.17,81,000/- plus taxes, Rs.19,64,443/- stands on a totally different
footing. It was received by the respondents as an advance for the entire contract. The
contract having been abandoned after about 7 months, there can be no justification
for the respondent to keep this amount. Leaving aside the taxes paid to the
government in my view, interest of justice would be met if the respondent is directed
to refund & pay back Rs. 18,00,000 (eighteen lacs) to the claimant under this claim.
It is held accordingly.
(vi) For the foregoing reasons, it is held that claimant is entitled to a sum of
Rs,18,00,000/- (Rupees Eighteen Lac) towards the refund of the amount received by
the respondent during the pre-construction period. Claim No.1 is decided
accordingly."
21. The learned counsel for the respondent has also rightly drawn my attention to the email dated
12.04.2012 wherein the petitioner had also offered to refund the mobilization advance to the
respondent. I, therefore, find no reason to interfere with the above finding of the Arbitrator.
22. As far as the rate of interest awarded under the Impugned Award is concerned, the same being at
the discretion of the Arbitrator and even otherwise, no reasons been given by the petitioner for
challenging the same, the same is upheld.
23. In view of the above discussion, the Impugned Award so far as it grants Claim nos. 2 and 3 and
interest there on in favour of the respondent is set aside while the grant of Claim no. 1 and interest
there on in favour of the respondent under the Impugned Award is upheld.
24. The petition is allowed in the above terms, with no order as to costs.
NAVIN CHAWLA, J MARCH 20, 2018/Arya

Danieli Corus Bv vs Steel Authority Of India on 24 November, 2017
Delhi High Court

$~21
+ O.M.P.(I) (COMM.) 189/2017
Date of decision: 24th November, 2017
DANIELI CORUS BV ..... Petitioner

Through: Mr.Suhail Dutt, Sr. Adv. with
Mr.A.Singh, Ms.Moonmoon
Nanda, Ms.Anushree Sahai,
Mr.Kushagra Sah, Mr.Azhar,
Advs.
versus
STEEL AUTHORITY OF INDIA ..... Respondent

Through: Mr.Sudhir Chandra, Sr. Adv.
with Mr.Wasim Ashraf, Adv
CORAM:
HON'BLE MR. JUSTICE NAVIN CHAWLA
NAVIN CHAWLA, J. (Oral)
1. This is a petition under Section 9 of the Arbitration & Conciliation Act, 1996 (hereinafter referred
to as the 'Act') by the petitioner Danieli Corus BV inter-alia praying for the following reliefs:
i) Grant ad-interim orders and/or directions under Section 9 of the Arbitration &
Conciliation Act, 1996 restraining the Respondent, its servants, agents and employees
from any further disclosure or misuse or dissemination of OMP(I)(COMM) 189/2017
Page 1 Proprietary and Confidential Information of the Petitioner to any third party
in any manner whatsoever;
ii) Grant ad-interim order and/or directions under Section 9 of the Arbitration and
Conciliation Act, 1996 calling upon the Respondent to immediately delete and
remove all Proprietary and Confidential Information of the Petitioner which has been
uploaded online on website https://auction.buyjunction.in, https://sailtenders.co.in
and/or any other public forum in breach of Clause 16 of the Contract and in breach of
confidentiality;
2. The petitioner, the respondent and Tata Project Limited had entered into a contract dated
02.10.2008 for setting up Blast Furnace No. 5 at Rourkela Steel Plant of the respondent. Some of
the terms of the said contract relevant for the purpose of the present petition are reproduced herein
below:
"D. CONFIDENTIAL INFORMATION

15. Copyright "15.1 The copyright in all drawings documents and other materials
containing data and information furnished by the Contractor to the Employer herein,
shall remain vested in the Contractor; however, the Employer shall have the right to
use all such drawings, documents and other material, data and information for
execution of the contract and operation & maintenance of the Facilities being subject
of the Contract.
16. Confidential information 16.1 The Employer and the Contractor shall keep confidential and shall
not, without the written consent of the other party hereto, OMP(I)(COMM) 189/2017 Page 2 divulge
to any third party any document data or other information furnished directly or indirectly by the
other party hereto in connection with the Contract, whether such information has been furnished
prior to, during or following termination of the Contract. Notwithstanding the above, the Contractor
may furnish to its Sub-
Contractor(s) such documents, data & other information it receives from the Employer to the extent
required for Sub-Contractor(s) to perform its work under the Contract, in which event the
Contractor shall obtain from such Sub-Contractor{s) an undertaking of confidentiality similar to
that imposed on· the Contractor under this clause.
16.2 The Employer shall not use such documents, data and other information received from the
Contractor for any purpose other than the operation and maintenance of the Facilities. Similarly, the
Contractor shall not use such documents, data and other information received from the Employer
for any purpose other than the design, procurement of Plant and Equipment, construction or such
other work and services as are required for the performance of the Contract.
16.3 The obligation of a party under Sub-Clauses 16.1 and 16.2 hereof, however, shall not apply to
that information which
a) now or hereafter enters the public domain through no fault of that party.
OMP(I)(COMM) 189/2017 Page 3
b) can be proven to have been possessed by that party at the time of disclosure and which was not
previously obtained, directly or indirectly, from the other party hereto.
c) otherwise lawfully becomes available to that party from a third party that has no obligation of
confidentiality.
16.4 The above provisions of this clause (Clause 16 hereof) shall not in any way modify any
undertaking of confidentiality given by either of the parties hereto prior to the date of the Contract
10 respect of the Facilities or any part thereof.
16.5 The provisions of this clause (Clause 16 hereof) shall survive termination, for whatever reason,
of the Contract."

3. The petitioner claims that under this contract, it has provided various drawings to the
respondent, which are either directly covered under clause 16.1 as confidential information or are
having a disclaimer in the following words:-
"All Rights Reserved. This is a commercial drawing and is supplied for use for an
authorised job. This drawing or any information therefrom shall not be disclosed,
used or reproduced either wholly or in part, except in conjunction with such use and
with the prior written consent of Daniel Corus. This drawing may OMP(I)(COMM)
189/2017 Page 4 not be used for construction or fabrication until signed as checked
and approved."
4. The petitioner claiming that these drawings had been disclosed to third parties by the respondent
in its 'Online Competitive Bidding Event' for SB-TUYERE & INSERT ASSY, RFQ CAT. Code-
20314601000514 to be held on 03.06.2016 (hereinafter referred to as "Tender no. 1") and also
online Tender bearing RFQ No. 243/1402001801/01/00 (hereinafter referred to as "Tender no. 2")
dated 09.03.2015 for issuance of Lance Assembly for BF-5 Pulverised Coal Injection and also in the
online tender bearing No.005/595/1672000235/01/00/500004605 (hereinafter referred to as
"Tender no. 3") dated 21.04.2017 floated by the Respondent for issuance of Lining Set for BF-5
Tuyere Stock and Blow Pipe, filed the present petition praying for the above relief.
5. It was further submitted that even before filing of the present petition, Tender No.1 had already
been granted to a third party.
6. This Court vide its order dated 26th May, 2017 directed the counsel for the respondent to seek
instructions with respect to the drawings that form part of the above tenders, complaining of
disclosure of which, the petition had been filed. Counsel for the respondent on 30th May, 2017, on
behalf of the respondent, undertook to remove the said drawings from public domain.
7. The petitioner thereafter has filed an additional affidavit dated 3rd July, 2017 complaining therein
that the respondent has floated a fresh tender bearing no.005/595/1672000235/01/00/500004605
for OMP(I)(COMM) 189/2017 Page 5 issuance Tuyere with Insert for BF-5 (hereinafter referred to
as "Tender No.4") dated 26.05.2017, wherein drawing of operational spares namely Tuyere with
Insert for BF-5 has been copied from the petitioner's drawing bearing no. 2B0987Gl - M358 -
G0202.
8. The respondent in its reply has stated that in terms of the tender, apart from confidential
drawings, various General Arrangements Drawings had also been given by the petitioner to which
the petitioner can claim no confidentiality. In this regard, reliance was placed on clause 7.4.3.4 of
the contract, which makes reference to 'suppliers and manufacturing drawings' (except for
proprietary items). It is, therefore, submitted that merely by insertion of the disclaimer clause, as
has been reproduced above, the petitioner cannot claim that such drawings have become
confidential in nature or cannot be disclosed to the third party; it is only drawings of proprietary
items that are protected from disclosure. It is further submitted that there are approximately 17000
such drawings that were supplied by the petitioner to the respondent in performance of its work

under the contract, many of which are in public domain and in any case, cannot be termed as
confidential in nature or having any copyright protection. It is further submitted that for operation
and maintenance services, the petitioner, under clause 7.4.3.3 and 7.4.3.4, was obliged to supply
various details regarding the spares including complete ordering specification, the list of spares and
manufacturing drawings, etc. These drawings and specifications had been taken so that in case, the
petitioner at any point of time is unable to provide the spares or OMP(I)(COMM) 189/2017 Page 6
demand exorbitant price for such spares, which is not acceptable to the respondent, the same can be
procured from third party. This, in submission of the learned senior counsel for the respondent,
would itself entail and authorize the respondent to disclose the drawings, which are not of
proprietary items, to the third parties from whom such spares have to be procured.
9. It is further submitted that any order of injunction would cause grave irreparable injury to the
respondent inasmuch as in the absence of supply of spares, the entire work may come to standstill.
Drawing reference to the prayer (i) of the petition, it is submitted that the prayer is in omnibus
terms and in view of the judgment of this Court in National Highway Authority of India v. Sudip
Hariyal, 142 (2007) DLT 566 such an omnibus injunction order cannot be granted. It has been
contended by learned senior counsel for the respondent that though the petition was filed on
12.05.2017, till date the arbitration proceedings have not commenced. In fact, the petitioner has not
even filed its statement of claim before International Chamber of Commerce (in short 'ICC').
10. I have considered the submission of learned senior counsels for the parties. It is not disputed by
the respondent that, in terms and under the contract, it has received various drawings from the
petitioner which are of proprietary items and/or have a disclaimer of confidentiality as has been
reproduced herein above. The contract does not contain any clause or term which would authorize
the respondent to use such drawings or disclose the same to a third party OMP(I)(COMM) 189/2017
Page 7 post termination of the contract or in the event that the petitioner, at any stage whatsoever, is
unable to supply the spares or the respondent is not willing to place an order for such spares on the
petitioner.
11. Submission of learned senior counsel for the respondent that many of the drawings would not
have any protection under Copyright Law and/or would be available in public domain and therefore
cannot be granted protection by way of an interim order against the disclosure to a third party
cannot be accepted. Where the parties to the contract have treated certain drawings to be
confidential in nature, they are bound by the same, irrespective of the fact whether, in law, the other
party can claim confidentiality over such drawings or not. In John Richard Brady and Ors. v.
Chemical Process Equipments P. Ltd and Anr., MANU/DE/0586/1987, this Court, invoking of
general rule of equity and breach of confidence, had held that injunction can follow when use of
such drawings amounts to the unauthorized use of the labour of the person who has prepared them
and thus provides a 'spring-board' by which an infringer may obtain an unfair advantage over
competitors. This Court had placed reliance on the judgment in Saltman Engineering Coy. Ld.
Ferotec Ltd. and Monarch Engineering Coy. (MITCHAM) Ld. v. Campbell Engineering Coy.
Ld.(1948) 65 RPC 203 and had extracted from the book of Patrick Hearn the following passage:

"Secrecy The maintenance of secrecy which plays such an important part in securing
to the owner of an OMP(I)(COMM) 189/2017 Page 8 invention the-uninterrupted
proprietorship of marketable know-how, which thus remains at least a form of
property, is enforceable at law. That statement may now be examined in the light of
established, rules making up the law of trade secrets. These rules may, according to
the circumstances in any given case, either rest on the principles of equity, that is to
say the application by the Court of the need for conscientiousness in the course of
conduct, or by the common-law action for breach of: confidence which is in effect a
breach of contract.
In considering these alternatives there are three sets of circumstances out of which
proceedings, may arise:
(a) where an employee comes into possession of secret and confidential information
in the normal course of his work, and either carelessly or deliberately passes that
information to an unauthorised person;
(b) where an unauthorised person (such as a new employer) incites such an employee
to provide him with such information as has been mentioned above; and
(c) where, under a license for the use of know-how, a licensee is in breach of a
condition, either expressed in an agreement or implied from conduct, to maintain
secrecy in respect of such know-how and fails to do so.
All these hypotheses fall within the general rules of equity and breach of confidence
propounded in the leading Saltman's case, Saltman Engineering Co. v.
Cambell Engineering Co. (1948) RFC 203. The facts, as far as they matter here, were that Saltman
OMP(I)(COMM) 189/2017 Page 9 Engineering owned confidential drawings concerning the design
and construction of certain specialist tools. Through an agent they purported to contract with
Campbell Engineering for the manufacture of some of these tools, and to that end they handed over
the drawings. Cambell Engineering used these drawings for their own purposes. There was
contention as to whether or not there had been a viable contract, and if not whether a breach of
confidence could in law have occurred. In the Court of Chancery the Judge held that there was in
fact no binding contract and thus no breach of confidence.
The Court of Appeal found that;
(a) there was such a contract as had been claimed, and that the documents provided by Saltman
Engineering were confidential and known to be such by Campbell Engineering,
(b) apart from contract, there was an obligation of confidence resting on Campbell Engineering by
the delivery of the drawings, which they knew to be the property of Saltman Engineering, and which
had been provided to them for a limited purpose, that is to say the manufacture of certain specific

tools;
(c) a document may be confidential if it is the result of work done by its maker, even if the matter
contained therein is public knowledge;
(d) this being so, Campbell Engineering had broken confidence by using documents for purposes
other than those for which they had been delivered, and there was no agreement releasing them
from the obligation of confidence; and (e) Saltman Engineering OMP(I)(COMM) 189/2017 Page 10
was entitled to have the documents returned to them and to receive damages for the breach.
These bald findings are more specifically explained in the judgment of Lord Greene, then Master of
the Rolls, which contains four important statements:
1. If two parties make a contract under, which one of them obtains for the purpose of the contract, or
in connection with it, some confidential matter then, even though the contract is silent on the matter
of confidence, the law will imply an obligation to treat such confidential matter in a confidential way
as one of the implied terms of the contract, but the obligation to respect confidence is not limited to
cases where the parties are in confidential relationship.
2. If a defendant is proved to have used confidential information, obtained directly or indirectly,

from a plaintiff, without the consent, express or implied, of the plaintiff, he will be guilty of an
infringement of the plaintiffs rights.
3. It seems to me that it would not matter the least bit whether there was a contract; but contract or
no contract, the defendants got those drawings into their hands knowing, or knowing shortly
afterwards, that they belonged to Saltmans that they were obviously confidential matter, and they
knew that they had got them into their hands for a strictly limited purpose.
4. Information to be confidential must 11 apprehend, apart from contract, have the necessary quality
of confidence about it, namely, it must not be something which is public property and public
knowledge.
OMP(I)(COMM) 189/2017 Page 11 It is important to note that the word, 'information' used in the
last statement of the learned Master of the Rolls refers to know-how imparted by word of mouth, by
letter or by demonstration. It does not refer to drawings or other such technical documents which
are by their nature confidential whether or not a matter of public knowledge. This is on the
established principle that the use of such drawings amounts to the unauthorized use of the labour of
the person who has prepared them, and thus provides a 'spring-board' by which an infringer may
obtain an unfair advantage over competitors."
12. In Zee Telefilms Ltd. & Anr. vs. Sundial Communications Pvt. Ltd. & Ors. 2003 (27) PTC 457
(Bom) (DB), Bombay High Court held that in appropriate cases an interlocutory injunction may be
issued restraining breach of confidentiality. It was further held that if the confidential information
was allowed to be used against the plaintiff in competition with them by the defendants, it is not

merely a matter of compensation in Pound, Shilling or Pence and, therefore, plaintiff would
certainly be entitled to have injunction for breaching confidentiality. The above judgment was
followed by the Bombay High Court in Urmi Juvekar Chiang vs. Global Broadcast News Ltd. & Anr.
2007 SCC Online Bom 471 wherein again it was reiterated that if confidential information is going to
be used in competition with the plaintiff, it is not merely a matter of compensation in terms of
money. This Court also in Daljeet Titus vs. Alfred A.Adebare & Ors. 2006 SCC Online Del 551
reiterated that a Court must step in to restrain a breach of confidence independent of
OMP(I)(COMM) 189/2017 Page 12 any right under law; such an obligation need not be express but
be implied and the breach of such confidence is independent of any other right.
13. From the above authorities, law is well settled that a party to a contract having obtained certain
information on the basis of contractual terms cannot turn around and question the confidentiality of
such information. These drawings, in my prima facie opinion, could be used by the respondent only
in working of the contract itself and not be disclosed to a third party. A party to the contract cannot
challenge such confidentiality at a later stage having taken the benefit of the same under the
contract. It is estopped from challenging confidentiality of such drawings on the basis of same not
having copyright protection.
14. Clause 16.3 of the contract provides that the confidentiality clause shall not apply to such
information which, after entering the contract enters into public domain through no fault of that
party or can be proven to have been possessed by that party at the time of disclosure and which was
not previously obtained, directly or indirectly from other party or it otherwise lawfully becomes
available to that party from a third party that has no application of confidentiality. Therefore,
exception to confidentiality envisaged under Clause 16.3 is where the drawings are in public domain
or have been obtained by the respondent not in terms of the contract in question but from some
other source. This is not the case pleaded by the respondent before me. On the other hand, Clause
16.4 again OMP(I)(COMM) 189/2017 Page 13 retreats that any of these provisions would not modify
any undertaking of confidentiality given by either of the parties, meaning thereby that where the
drawing has been obtained by the respondent which bears the disclaimer as quoted above,
confidentiality shall have to be maintained whether it is proprietary items or other items irrespective
of copyright protection. Equal protection is granted to the Respondent under Clause 16.1 quoted
above.
15. Submission of the learned senior counsel for the Respondent that no injunction be granted in the
present case as damages can act as an adequate relief in case the Petitioner ultimately succeeds,
cannot be accepted. The issue at hand is of confidential drawings and once they come in public
domain, Petitioner would suffer irreparable damage which cannot be compensated in terms of
money.
16. In my view therefore, the Petitioner has made out a good prima facie case for grant of an
injunction and shall suffer a grave irreparable injury in case interim injunction is not granted in its
favour.

17. As far as omnibus nature of prayer (i) made by the petitioner is concerned, I am in agreement
with learned senior counsel for the respondent. The order of injunction as prayed for in prayer (i)
cannot be granted in general terms. In my opinion, the injunction has to be restricted to only those
drawings and information that was relating to the proprietary items of the petitioner and/or those
which bears the disclaimer as has been quoted above.
18. Learned senior counsel for the respondent further contends that the respondent can procure
these spares from a third party and for this purpose certain information would necessarily have to
be disclosed to a third party, otherwise the entire operation of blast furnace would come to a halt. In
my opinion, however, this cannot be a ground for infringing the confidential information obtained
from the petitioner under the contract. This, in any case, can be safeguarded by clarifying that the
respondent may use all the drawings that are otherwise available in public domain and/or can be
made through its own efforts. It is true that the petitioner in its additional affidavit has submitted
that certain drawings had been copied by the respondent from its confidential drawings with small
modification, however, in my opinion, this will be a matter to be adjudicated by the Arbitrator and
cannot be commented upon at this stage. This issue is to be taken before Arbitral Tribunal, in
accordance with the arbitration agreement that has been executed between the parties. This would
adequately balance the equity between the parties for this purpose.
19. Learned senior counsel for the respondent submits that this petition was filed in May 2017,
however, in spite of six months having been passed, no steps has been taken by the petitioner to
have the Arbitration Tribunal constituted for adjudication of the disputes between the parties.
Learned Senior counsel for the petitioner, on the other hand, submits that it has already requested
the ICC for appointment of Arbitral Tribunal for adjudication of the disputes and is in the process of
filing its statement of claim. In my opinion, the OMP(I)(COMM) 189/2017 Page 15 petitioner cannot
endlessly wait for Arbitral Tribunal to be properly constituted. I would therefore restrict the
operation of my order with the condition that the petitioner must file its statement of claim with ICC
within a period of 30 days from today, failing which this order would automatically cease to operate.
In case the statement of claim is filed within 30 days from today and there is no other default on
part of the petitioner for having Arbitral Tribunal constituted with expedition, this order would
continue to operate till it is modified or vacated by the Arbitral Tribunal in accordance with the ICC
rules.
20. In view of the above, I pass an ad-interim order restraining the respondent or its agents in any
manner disclosing to a third party the proprietary drawings/information and/or
drawings/information which bears disclaimer:-
"All Rights Reserved. This is a commercial drawing and is supplied for use for an
authorised job. This drawing or any information therefrom shall not be disclosed,
used or reproduced either wholly or in part, except in conjunction with such use and
with the prior written consent of Daniel Corus. This drawing may not be used for
construction or fabrication until signed as checked and approved."

21. The petition is allowed in the above terms.
22. I may, however, hasten to add that my above observations are prima facie in nature and in no
manner bind the Arbitral Tribunal who shall adjudicate the disputes between the parties on their
own merits. Either party would be free to raise any further claims, submissions, OMP(I)(COMM)
189/2017 Page 16 defence or pray for interim relief from the Arbitral Tribunal which would be
constituted in terms of the Arbitration Agreement.
NAVIN CHAWLA, J
NOVEMBER 24, 2017/vp

Gail (India) Limited vs Newton Engineering & Chemicals ... on 24 August, 2018
Delhi High Court

$~39
Date of Decision: 24th August, 2018
+ O.M.P. 288/2009 & I.As. 6903/2009, 11011/2015
GAIL (INDIA) LIMITED ..... Petitioner
Through: Mr. Nitesh Jain, Advocate (M-
9717955168).
versus
NEWTON ENGINEERING & CHEMICALS LTD. ..... Respondent

Through: Mr. Vivek Chib, Mr. Kushal Gupta,
Mr. Asif Ahmed, Ms. Ruchira Goel,
Advocates (M-8447400234).
CORAM:
JUSTICE PRATHIBA M. SINGH
Prathiba M. Singh, J. (Oral)
1. The present petition has been preferred challenging the award dated 29th January, 2009 passed
by the Learned Sole Arbitrator Justice N.N. Goswami (Retired). The brief facts are that the
Petitioner-GAIL, awarded a contract to the Respondent, for laying of the pipeline and corporate
work of K.G. Basin-II. The arbitration clause was contained in clause 107 of the contract. The laying
of pipeline and corporate work was for a length of 9.82 Kms in District Rajamundri, Andhra
Pradesh. The Respondent was awarded the contract being the lowest bidder. The letter of
acceptance was issued on 26th June, 2001 and the total value of the contract was 2,46,76,104/-
which was subsequently reduced to 1.85 crores.
2. The date of commencement of work was 1st June, 2001 and the date of completion was four
months i.e., 30th September, 2001. The factual aspects i.e. in respect of various extensions taken by
the Respondent and the actual completion having been achieved only on 26th December, 2002, are
not in dispute between the parties.
3. However, disputes arose in respect of the various deductions made by GAIL and the Respondent
raised various claims. The Arbitral Tribunal came to the conclusion, after reviewing the entire
documentary evidence on record, that there was no reason attributable to GAIL for the delay in the
execution of the contract. Out of several claims made by the Respondent, Claims A, E and F were
partially allowed by the Ld. Arbitrator. The same are under challenge before this Court by GAIL. The
award, in respect of the claims that have been disallowed, has been accepted by the Respondent and
no challenge has been raised by the Respondent.
Claim A: Award of liquidated damages
4. This claim was raised by the Respondent on the ground that GAIL had incorrectly deducted sums

on account of liquidated damages. The Tribunal after perusing the evidence on record held that the
total delay by the Respondent was only to the extent of five weeks and accordingly, by applying the
formula for Liquidated damages, as contained in the contract, upheld the deduction in respect of
five weeks delay. The discussion of the Arbitral Tribunal is clear to the effect that GAIL was not
responsible for the delay. However, vide letter dated 6th November, 2002, extension was given by
GAIL for completion of contract by 15th November, 2002. Thus, the Tribunal considered the period
between 15th November, 2002 and 26th December, 2002 as the period of delay. The Tribunal
thereafter upheld the deduction by GAIL of liquidated damages to the extent of 1/2 % for a period of
five weeks i.e., 4,63,319/-. The Respondent was refunded a sum of Rs.13,89,958/-.
5. Mr. Nitesh Jain Ld. counsel appearing for GAIL challenges this portion of the award on two
counts:
i) that the contract contains a `No Waiver' clause which in effect means that even if the extension is
being given, GAIL had the right to levy liquidated damages. Thus, the entire period from 30th
September, 2001 till 26th December, 2002 should be counted as the period of delay and liquidated
damages are leviable for the entire period.
ii) the second ground of challenge is that the Arbitral Tribunal went by clause 27 which prescribe 1/2
% per week as the minimum levy and 10% as the maximum for levy of liquidated damages.
However, the Tribunal failed to consider the General Conditions of Contract which had amended the
said clause. As per the said clause, the minimum Liquidated damages leviable was 1% and not ½%
He relies upon Oil & Natural Gas Corporation Ltd. v. Saw Pipes Ltd. (2003) 5 SCC 705(hereinafter
known as ONGC) to argue that in the case of liquidated damages unlike penalty, actual loss need not
to be proved.
6. On the other hand, Mr. Vivek Chib, Ld. Counsel appearing for the Respondent submits that under
Section 55 of the Indian Contract Act, 1872 if a contract is voidable on account of any delay by a
contractor, and if the person awarding the work has accepted to extend the performance date, then
unless notice is given at the time of giving the extension, liquidated damages cannot be imposed. He
submits that it is a principle of public policy which is mentioned in Section 55 which cannot be
overruled by any stipulation in a contract. He relies upon Simpex Concrete Piles (India) Ltd. V.
Union of India (2010) ILR 2 Delhi 699 (hereinafter known as Simpex Concrete Piles) in support of
his submission.
7. After hearing the submission of the parties, it is clear that as per clauses 29 and 30 of the
Contract, GAIL had the option of terminating the contract if the contractor had delayed
performance. GAIL having not exercised its right to terminate and also having not put the
Respondent to notice for imposition of liquidated damages, and the extension being unconditional,
liquidated damages cannot be levied for the entire 15 weeks period. The `No Waiver' clause 47 relied
upon by GAIL reads as under:
"47.0 NO WAIVER OF RIGHTS Neither the inspection by the OWNER or EIL or any of their
officials, employees, or agents nor any order by the OWNER or EIL for payment of money or any

payment for or acceptance of the whole or any part of the Work by the OWNER nor any extension of
time, nor any possession taken by OWNER shall operate as a waiver of any provision of the
CONTRACT, or of any power herein reserved to the OWNER, or any right to damages herein
provided, nor shall any waiver of any breach in the CONTRACT be held to be a waiver of any other
or subsequent breach"
In Simpex Concrete Piles (supra), a Division Bench of this Court has clearly held that rights created
under Section 55 cannot be contractually waived. The Court observed as under:
"...Provisions pertaining to the effect of breach of contract, two of which provisions

are Sections 73 and 55, in my opinion, are the very heart, foundation and the basis for
existence of the Contract Act. This is because a contract which can be broken at will,
will destroy the very edifice of the Contract Act. After all, why enter into a contract in
the first place when such contracts can be broken by breaches of the other party
without any consequential effect upon the guilty party? It therefore is a matter of
public policy that the sanctity of the contracts and the bindingness thereof should be
given precedence over the entitlement to breach the same by virtue of contractual
clauses with no remedy to the aggrieved party. Contracts are entered into because
they are sacrosanct. If Sections 73 and 55 are not allowed to prevail, then, in my
opinion, parties would in fact not even enter into contracts because commercial
contracts are entered into for the purpose of profits and benefits and which elements
will be non-existent if deliberate breaches without any consequences on the guilty
party are permitted. If there has to be no benefit and commercial gain out of a
contract, because, the same can be broken at will without any consequences on the
guilty party, the entire sub-stratum of contractual relations will stand imploded and
exploded. It is inconceivable that in contracts performance is at the will of a person
without any threat or fear of any consequences of a breach of contract. Putting it
differently, the entire commercial world will be in complete turmoil if the effect of
Sections 55 and 73 of the Contract Act are taken away..."
It is thus clear that the `No Waiver' Clause cannot operate over and above Section 55.
8. However, insofar as it relates to the amount of liquidated damages payable, for the five weeks
delay beyond 15th November, 2002, the Arbitral Tribunal was clearly in error in ignoring the
amended clause in the General Conditions of Contract which reads as under:
"44.0 COMPENSATION FOR

DELAY/LIQUIDATED DAMAGES
44.1 The clause 27.0 of GCC is modified to
the following extent.
44.1.1 Replace ½% (Half Percent) by 1%
(One percent) in 4th line of 1st

paragraph"

9. Thus, the calculation of liquidated damages, ignoring this clause is contrary to the contract
binding the parties. As per the judgement of the Supreme Court in ONGC (supra) if the estimate of
damages is reasonable, then the party committing the breach is liable to compensate the other party.
The observations of the Supreme Court are as under:
"68. From the aforesaid discussions, it can be held that:
(1)....
(2) If the terms are clear and unambiguous stipulating the liquidated damages in case
of the breach of the contract unless it is held that such estimate of
damages/compensation is unreasonable or is by way of penalty, party who has
committed the breach is required to pay such compensation and that is what is
provided in Section 73 of the Contract Act. (3) Section 74 is to be read along with
Section 73 and, therefore, in every case of breach of contract, the person aggrieved by
the breach is not required to prove actual loss or damage suffered by him before he
can claim a decree. The court is competent to award reasonable compensation in case
of breach even if contractual damage is proved to have been suffered in consequence
of the breach of a contract."
10. Thus, a reasonable pre-estimate of damages, which is not a penalty, as stipulated in the contract
would not fall foul of Section 73 or 74 of the Contract Act. The parties having agreed to pay
liquidated damages, the said stipulation is binding. Accordingly, it is directed that instead of 1/2%,
the liquidated damages shall be payable by the Respondent at the rate of 1% as per clause 27.1, (as
amended by the General Conditions of Contract) for the delayed period of five weeks. The objections
in respect of Claim A are disposed of in these terms.
Claim F: Deduction on account of calliper pigging from the final bill of the Respondent:
11. The Respondent had engaged a sub-contractor M/s. Grafin Tech for conducting a procedure
known as `calliper pigging. Callipers are tools used to measure the internal geometry of a pipeline
which are used for ensuring that there is no blockage within the pipeline and that the pipeline is
working properly. The Respondent had submitted its final bill and GAIL had deducted a sum of Rs.
6,78,000/- from the Respondent's final bill by claiming that the amount was paid to the
sub-contractor. The Tribunal found that as per Exhibit R-12, the payment made by GAIL to the
subcontractor was lesser. The Tribunal thus awarded a refund of Rs. 2,43,094/- to the Respondent.
12. The objection in respect of Claim F, as per Ld. Counsel for the Petitioner is that the Respondent
could not have claimed 6,78,000/- if the actual invoice of the sub-contractor was for a lesser
amount. However, Ld. Counsel for the Respondent submits that the Final bill raised by the
Respondent is as per the agreed rates and thus GAIL has wrongly deducted a higher amount.
13. A perusal of the finding of the Arbitral Tribunal under Claim F clearly shows that the actual
payment as per Ex.R12 was 4,34,906/- to the contractor M/s Grafin Tech. However, GAIL sought to

deduct the sum of 6,78,000/- despite the actual payment being only 4,34,906/- from the final bill
submitted by the contractor. This is an appreciation by the Arbitrator of the facts on record and is
beyond the scope of interference under Section 34 of the Arbitration and Conciliation Act, 1996. The
finding of the Tribunal does not warrant any interference.
14. The objection in respect of Claim E is not pressed.
15. In view of the above, the present objection petition is disposed of in terms as set out above. GAIL
is directed to make payment to the Respondent within a period of eight weeks along with interest as
directed by the Tribunal. If there is any delay in payment beyond eight weeks, interest @12% per
annum would be liable to be paid on the decretal amount.
16. OMP and all pending I.As. stand disposed of.
PRATHIBA M. SINGH JUDGE AUGUST 24, 2018 Rahul

Hakam Singh vs M/S. Gammon (India) Ltd on 8 January, 1971
Supreme Court of India

Equivalent citations: 1971 AIR 740, 1971 SCR (3) 314
Author: S C.
Bench: Shah, J.C. (Cj)
PETITIONER:
HAKAM SINGH
Vs.
RESPONDENT:
M/S. GAMMON (INDIA) LTD.
DATE OF JUDGMENT08/01/1971
BENCH:
SHAH, J.C. (CJ)
BENCH:
SHAH, J.C. (CJ)
HEGDE, K.S.
CITATION:
1971 AIR 740 1971 SCR (3) 314
1971 SCC (1) 286
CITATOR INFO :
C 1989 SC1239 (18)
RF 1992 SC1514 (7)
ACT:
Contract Act 1872, s. 28-Code of Civil Procedure, 1908, s.
20(a) Explanation 11-Arbitration Act 1940, s. 41-Defendant a
company registered under the Indian Companies Acthaving,
its principal place of business at Bombay-Contract providing
for arbitration of disputes and further providing that
disputes were to be adjudicated only in Bombay Courts-
Restriction whether binding or against public policy.
HEADNOTE:
On October 5, 1960 the appellant agreed to do certain
construction work for the respondents company registered
under the Indian Companies Act and having its principal
place of business at Bombay--On the terms and conditions of
a written tender. Clause 12 of the tender provided for
arbitration in case of dispute. Clause 13 provided that
notwithstanding the place where the work under the contract
was to be executed the contract shall be deemed to have been
entered into by the parties at Bombay and the court in
Bombay alone shall have jurisdiction to adjudicate thereon.
On disputes arising between the parties the appellant

submitted a petition to the Court at Varanasi for an order

under s. 20 of the Arbitration Act, 1940 that the agreement
be filed and an order of reference be made to an arbitrator
or arbitrators appointed by the court. The respondent
contended that in view% of cl. 13 of the arbitration
agreement only the courts at Bombay had jurisdiction. The
trial court held that the entire cause of action had arisen
at Varanasi and the parties could not by agreement confer
jurisdiction on the courts of Bombay which they did not
otherwise possess. The High Court at Allahabad in exercise
of its revisional jurisdiction held that the courts at
Bombay had jurisdiction under the general law and hence
could entertain the petition. It further held that in view
of cl. 13 of the arbitration agreement the petition could
not be entertained at Varanasi. Against the order of the
High Court directing the petition to be returned for
presentation to the proper court, the appellant appealed to
this Court by special leave. The question that fell for
consideration were : (i) whether the courts at Bombay alone
had jurisdiction over the dispute; (ii) whether Explanation
11 to s. 20(a) of the Code of Civil Procedure refers only to
Government corporations and not to companies registered
under the. Indian Companies Act.
HELD : (i) The Code of Civil Procedure in its entirety
applies to proceedings under the Arbitration Act by virtue
of s. 41 of the latter Act. The jurisdiction of the courts
under the Arbitration Act to entertain a proceeding for
filing an award is accordingly governed by the provisions of
the Code of Civil Procedure. By the terms of s. 20(a) of
the Code .of Civil Procedure read with Exp. 11th thereto,
the respondent company which had its principal place of
business at Bombay, was liable to be sued at Bombay. [316 G]
It is not open to the par-ties by agreement to confer
jurisdiction on any Court which it did not otherwise possess
under the Code. But where two courts have under the Code of
Civil Procedure jurisdiction to try a suit of proceeding an
agreement between the parties that the dispute between
315
them shall be tried in one of such courts is not contrary to
Public Policy Such an agreement does not contravene s. 28 of
the Contract Act. [316 H]
Since in the present case the courts at Bombay had
jurisdiction under the Code of Civil Procedure the agreement
between-,the parties that the courts in Bombay alone shall
have jurisdiction to try the proceedings relating to
arbitration was binding between them. [318 A]
(ii) Order 29 of the Code of Civil Procedure deals with
suits by or against a corporation and there is nothing in
the Code to support the contention that a Corporation
referred to under s. 20 means only a statutory corporation
and not a company registered under the Indian Companies Act.
[317 G-H]

JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 646 of 1967. Appeal by special leave from the
judgment and order dated December 1, 1966 of the Allahabad High Court in Civil Revision No. 721
of 1964.
J. P. Goyal and G. S., Chatterjee, for the appellant. V. S. Desai and B. R. Agarwala, for the
respondent. The Judgment of the Court was delivered by Shah, C.J. On October 5, 1960 the
appellant agreed to do certain construction work for the respondent on the terms and conditions of
a "written tender". Clauses 12 & 13 of the tender were :
"12. In the event of any dispute, arising out of this sub-contract, the parties hereto
agree that the matter shall be referred to arbitration by two Arbitrators under the
Arbitration Act of 1940 and such amendments thereto as may be enacted thereafter.
13. Notwithstanding the place where the work under this contract is to be executed, it
is mutually understood and agreed by and between the parties hereto that this
Contract shall be deemed to have been entered into by the parties concerned in the
City of G Bombay and the Court of law in the City of Bombay alone shall have
jurisdiction to adjudicate thereon."
Disputes arose between the parties and the appellant submitted a petition to the Court of the
Subordinate Judge at Varanasi for an order under s. 20 of the Indian Arbitration Act 10 of 1940 that
the agreement be filed and an order of reference be made to an Arbitrator or Arbitrators appointed
by the Court to settle the dispute between the parties in respect of the construction works done by
him. The respondent contended that the Civil Courts in Bombay alone had because of the terms
contained in cl. 13 jurisdiction to entertain the petition. The Trial Judge rejected that contention
observing that the condition in cl. 13 that "the contract shall be deemed to have been entered into-by
the parties concerned in the city of Bombay has no meaning unless the contract is actually entered
into in the city of Bombay", and that there was no evidence to establish that it was entered into in
the city of Bombay. The Trial Judge concluded that the entire cause of action had arisen at Varanasi
and the parties could not by agreement confer jurisdiction on the Courts at Bombay, which they did
not otherwise possess.
The High Court of Allahabad in exercise of its revisional jurisdiction set aside the order passed by
the Subordinate Judge and declared that the Courts in Bombay had jurisdiction under the general
law to entertain the petition, and by virtue of the covenant in the agreement the second branch of cl.
13 was applicable and binding between the parties and since the parties had agreed that the Courts
in Bombay alone had jurisdiction to adjudicate upon the contract, the petition to file the arbitration
agreement could not be entertained by the Courts at Varanasi. Against the order of the High Court
directing that the petition be returned for presentation to the proper Court, the, appellant has
appealed to this Court with special leave. Section 41 of the Arbitration Act 1940 provides in so far as
it is relevant :

"Subject to the provisions of this Act and of rules made thereunder
(a) the provisions of the Code of Civil procedure, 1908, shall apply to all proceedings
before the court, and to all appeals under this Act."
The Code of Civil Procedure in its entirety applies to proceedings under the Arbitration Act. The
jurisdiction of the Courts under the Arbitration Act to entertain a proceeding for filing an award is
accordingly governed by the provisions of the Code of Civil Procedure. By cl. 13 of the agreement it
was expressly stipulated between the parties that the contract shall be deemed to have been entered
into by the parties concerned in the City of Bombay. In any event the, respondent have their
principal office in Bombay and they were liable in respect of a cause of action- arising under the
terms of the tender to be sued in the Courts at Bombay. It is not open to the parties by agreement to
confer by their agreement jurisdiction on a Court which it does not possess under the Code. But
where two courts or more have under the Code of Civil Procedure jurisdiction to try a suit or
proceeding an agreement between the parties that the dispute between them shall be tried in one of
such Courts is not contrary to public policy. Such an agreement does not contravene s. 28 of the
Contract Act.
Counsel for the appellant contended that merely because the respondent carried on business in
Bombay the Courts at Bombay were not invested with jurisdiction to entertain any suit or a partition
for filing an arbitration agreement. Section 20 of the Code of Civil Procedure provides :
"Subject to the limitations aforesaid, every suit shall be instituted in a Court within
the local limits of whose jurisdiction- (a,) the defendant, or each of the defendants
where there are more than one, at the time of the commencement of the suit, actually
and voluntarily resides, or carries on business, or personally works for gain; or
(b)..................................
(c) the cause of action, wholly or in part, arises.
"Explanation II.-A corporation shall be deemed to carry on business at its sole or

principal office in India, or, in respect of any cause of action arising at. any place
where it has also a subordinate office, at such place."
Plainly by the terms of s. 20(a) read with Explanation II, the respondent Company was liable to be
sued at Bombay where it had its principal place of business.
The argument of counsel for the appellant that the expression "corporation" in Explanation II
includes only a statutory corporation and not a company registered under the Indian Companies Act
is, in our judgment, without substance. The Code of Civil Procedure uses the expression
"corporation" as meaning a legal person and includes a company registered under the Indian
Companies Act. Order 29 of the Code of Civil Procedure deals with suits by or against a corporation
and there is nothing in the Code of Civil Procedure that a corporation referred to under S. 20 means

only a statutory corporation and not a company registered under the Indian Companies Act. Since
an application for filing an award in respect of a dispute arising out of the terms of the agreement
could be filed in the Courts in the City of Bombay, both because of the terms of cl. 13 of the,
agreement and because the respondents had their Head Office where they carry on business at
Bombay, the agreement between the parties that the Courts in Bombay alone shall have jurisdiction
to try the proceeding relating to arbitration was binding between them.
The appeal fails and is dismissed with costs.
G.C. Appeal dismissed.

Niranjan Shankar Golikari vs The Century Spinning And Mfg. Co. ... on 17 January, 1967
Supreme Court of India

Equivalent citations: 1967 AIR 1098, 1967 SCR (2) 378
Author: Shelat
Bench: Shelat, J.M.
PETITIONER:
NIRANJAN SHANKAR GOLIKARI
Vs.
RESPONDENT:
THE CENTURY SPINNING AND MFG. CO. LTD.
DATE OF JUDGMENT:
17/01/1967
BENCH:
SHELAT, J.M.
BENCH:
SHELAT, J.M.
BACHAWAT, R.S.
CITATION:
1967 AIR 1098 1967 SCR (2) 378
CITATOR INFO :
R 1980 SC1717 (6,15,19,23)
ACT:
Indian Contract Act(9 of 1872), s. 27- -Public
policy--Restraint on alternative employment during
contracted period of service when justified.
HEADNOTE:
The appellant joined the service of the respondent
company as Shift Supervisor and was given training in the
manufacture of tyre cord yarn. The contract was for five
years and it was stipulated that during the said period the
appellant would not work in similar capacity in any other
concern and would maintain secrecy as to the technical
aspects of his work. However, shortly after completing his
training the appellant joined a rival concern at higher
emoluments. The respondent company thereupon filed a suit
for an injunction against the appellant restraining him from
working elsewhere as a shift Supervisor in the manufacture
of tyre cord yarn or in similar capacity and from divulging
the trade secrets of the respondent company. The injunction
was granted. His appeal before the High Court having
failed, the appellant came to this Court under Art. 136 of
the Constitution. It was contended on his behalf that the

covenant was against public policy within the meaning of s.

27 of the Indian Contract Act, that it was unreasonable, and
that it was unnecessary for Safeguarding the trade interest
of the company.
HELD: The appeal must fail.
(i) Negative covenants operative during the period of
employment when the employee is bound to serve his employer
exclusively are not to be regarded as restraint of trade and
therefore do not fall under s. 27 of the Contract Act. A
negative covenant that the employee would not engage himself
in trade or business or would not get himself employed by
any other master for whom he would perform similar or
substantially similar duties is not a restraint of trade
unless the contract as aforesaid is unconscionable or
excessively harsh or unreasonable or one-sided [389 F]
Caselaw considered.
In the present case the injunction issued against the
appellant was restricted as to time, the nature of the
employment and as to area and could not therefore be said to
be too wide or unreasonable or unnecessary for the
protection of the interests of the respondent company. [389
G-H]
(ii) There is nothing to prevent a court from granting a
limited injunction to the extent that is necessary to
protect the employers's interests where the negative
stipulation is not void. The rule against severance applies
only to cases where the covenant is bad in law, and it is
only in such cases that the court is precluded from severing
the good from the bad [390 D]
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2103 of 1966.
Appeal by special leave from the judgment and order dated April 28, 1966 of the Bombay High
Court in First Appeal No. 526 of 1965.
A. K. Sen, Rameshwar Dial and A. D. Mathur, for the appellant.
S. V. Gupte, Solicitor-General, R.P. Bhatt, R. A. Gagrat, G.L Sanghi and B. R. Agarwala, for the
respondent. The Judgment of the Court was delivered by Shelat, J. This appeal by special leave is
against the judgment and order of the High Court of Maharashtra confirming an order of injunction
against the appellant. The respondent company manufactures amongst other things tyre cord yarn
at its plant at Kalyan known as the Century Rayon. Under an agreement dated January 19, 1961
Algemene Kunstzijde Unie of Holland (hereinafter referred to as AKU) and Vereinigte Clanzstoff
Fabrikan AG of West Germany (hereinafter referred to as VCF) agreed to transfer their technical
know-how to the .respondent company to be used exclusively for the respondent company's tyre
cord yarn plant at Kalyan in consideration of 1,40,000 Deutsche Marks payable to them by the

respondent company. Clause 4 of that agreement provided that the Century Rayon should keep
secret until the termination of the agreement and during three years thereafter all technical
information, knowledge know- how, experience, data and documents passed on by the said AKU
and VCF and the Century Rayon should undertake to enter into corresponding secrecy
arrangements with its employees. The respondent company thereafter invited applications for
appointments in its said plant including appointments as Shift Supervisors. On December 3, 1962
the appellant sent his application stating therein his qualifications. By its letter dated March 1, 1963
the respondent company offered the appellant the post of a Shift Supervisor in the said tyre cord
division stating that if the appellant were to accept the said offer he would be required to sign a
contract in standard form for a term of five years. On March 5, 1963 the appellant accepted the said
offer agreeing to execute the said standard contract. On March 16, 1963 he joined the respondent
company and executed on that day the said contract Ex. 28.
Clause 6 of the agreement provided "The employee shall during the period of his employment and
any renewal thereof, honestly, faithfully, diligently and efficiently to the utmost of his power and
skill
(a)
(b) devote the whole of his time and energy exclusively to the business and affairs of the company
and shall not engage directly or indirectly in any business or serve .Whether as principal, agent,
partner or employee or in any other capacity either full time or part time in any business whatsoever
other than that of the company."
Clause 9 provided that during the continuance of his employment as well as thereafter the employee
shall keep confidential and prevent divulgence of any and all information instruments, documents,
etc., of the company that might come to his knowledge. Clause 14 provided that if the company were
to close its business or curtail its activities due to circumstances beyond its control and if it found
that it was no longer possible to, employ the employee any further it should have option to terminate
his services by giving him three months' notice or three months' salary in lieu thereof. Clause 17
provided as follows :
"In the event of the employee leaving, abandoning or resigning the service of the
company in breach of the terms of the agreement before the expiry of the said period
of five years he shall not directly or indirectly engage in or carry on of his own accord
or in partnership with others the business at present being carried on by the company
and he shall not serve in any capacity, whatsoever or be associated with any person,
firm or company carrying on such business for the remainder of the said period and
in addition pay to the company as liquidated damages 'an amount equal to the
salaries the employee would have received during the period of six months thereafter
and shall further reimburse to the company any amount that the company may have
spent on the employee's training."

The appellant received training from March to December 1963 land acquired during that training,
knowledge of the technique, processes and the machinery evolved by the said collaborators as also of
certain documents supplied by them to the respondent company which as aforesaid were to be kept
secret and in respect of which the respondent company had undertaken to obtain secrecy
undertakings from its employees. According to the evidence, the appellant as a Shift Supervisor was
responsible for the running of Shift work, control of labour and in particular with the specifications
given by the said AKU.
No difficulty arose between the appellant and the respondent company until about September 1964.
The appellant thereafter remained absent from the 6th to the 9th October 1964 without obtaining
leave therefor. On the 10th October, he took casual leave. On October 12, he applied for 28 days'.
privilege leave form October 14, 1964. Before that was granted he absented himself from the 14th to
the 31st October, 1964. On October 31, he was offered salary for 9 days that he had worked during
that month. On November 7, 1964, he informed the respondent company that he had resigned from
October 31, 1964. The respondent company by its letter of November 23, 1964 asked him to resume
work stating that his said resignation had not been accepted. On November 28, 1964 the appellant
replied that he had already obtained another employment.
It is clear from the evidence that in October he was negotiating' with Rajasthan Rayon Company at
Kotah which was also manufacturing tyre cord yarn and got himself employed there ,at a higher
salary of Rs. 560/- per month than what he was getting from the respondent company. The
respondent company thereupon filed a suit in the court at Kalyan claiming inter alia an injunction
restraining the appellant from serving in any capacity whatsoever or being associated with any
person, firm or company including the said Rajasthan Rayon till March 15, 1968. The Company also
claimed Rs. 2410/- as damages being the salary for six months, under Clause 17 of the said
agreement and a perpetual injunction restraining him from divulging any or all information,
instruments, documents, reports, trade secrets, manufacturing process, knowhow, etc. which may
have come to his knowledge. The appellant,. while admitting that he was employed as a Shift
Supervisor, denied that he was a specialist or a technical personnel asserting that his only duty was
to supervise and control labour and to report deviations of temperature etc. He also alleged that the
said agreement was, unconscionable, oppressive and executed under coercion and challenged its
validity on the ground that it was opposed to public policy. He challenged in particular clauses 9 and
17 of the said agreement on the ground that whereas clause 9 was too wide as-it was operative not
for a fixed period but for life time and included not only trade secrets but each and every aspect of
information, clause 17 precluded him from serving elsewhere in any capacity whatsoever which
meant a restraint on his right to trade or to carry on business, profession or vocation and that such a
term was unnecessary for the protection of the respondent company's interests as an employer.
The Trial Court on a consideration of the evidence led by the parties held : (1) that the respondent
company had established that the appellant had availed himself of the training imparted by the said
AKU in relation to the manufacture of tyre cord yarn, the operation of the spinning machines and
that he was made familiar with their know-how, secrets, techniques and information; (2) that his
duties were not merely to supervise labour or to report deviations of temperature as alleged by him;
(3) that the said agreement was not void or unenforceable;- (4) that he committed breach of the said

agreement; (5) that as a result of the said breach the respondent company suffered loss and
inconvenience and was entitled, to damages under clause 17 and lastly that the company was
entitled to an injunction. On these findings the Trial Court passed the following order "(1) The
injunction is granted against the defendant and he is restrained from getting in the employ of or
being engaged or connected as a Shift Supervisor in the Manufacture of tyre cord yam or as an
employee under any title discharging substantially the same duties as a Shift Supervisor in
Rajasthan Rayon, Kotah or any other company or firm or individual in any part of India for the term
ending 15th March 1968.
(2) The defendant is further restrained during the said period and, thereafter, from divulging any of
the secrets, processes or information relating to the manufacture of tyre cord yam by continuous
spinning process obtained by him in the course of and as a result of :his employment with the
plaintiffs."
It is clear that the injunction restrained the appellant only from serving as a. Shift Supervisor and in
a concern manufacturing tyre' cord yarn; by, continuous spinning process or as an employee under
any designation substantially discharging duties of a Shift Supervisor. It was also confined to the
period of the agreement and in any concern in India manufacturing tyre cord yarn. In the appeal
filed by him in the High Court, the plea taken by him as to undue influence and coercion was given
up. The High Court, agreeing with the Trial Court, found that the evidence of Dr. Chalishhazar,
Mehta and John Jacob established that the appellant had been imparted training for about nine
months during the course of which information regarding the special processes and details of the
machinery evolved by the said collaborators had been divulged to him. It also found that as a result
of his getting himself employed in the said rival company, not only the benefit of training given to
him at the cost of the respondent company would be lost to it but that the knowledge acquired by
him in regard to the said continuous spinning process intended for the exclusive use of the
respondent company was likely to be made available to the rival company which also was interested
in the continuous spinning process of tyre cord. The High Court further found that though the
machinery employed by the said Rajasthan Rayon might not be the same as that in the respondent
company's plant the know-how which the appellant acquired could be used for ensuring continuous
spinning yarn. The High Court further found that Rajasthan Rayon started production of tyre cord
yam from January 1965, that is, two or three months after the appellant joined them along with two
other employees of the respondent company, that the Cumulative effect of the evidence was that the
appellant had gained enough knowledge and experience in the specialised continuous spinning
process in the tyre cord yarn division of the respondent company and that it was evident that he left
the respondent company's employment only because the said Rajasthan Rayon promised him a
more lucrative employment. The High Court concluded that it was not difficult to imagine why the
appellant's services were considered useful by his new employers and that the apprehension of the
respondent company that his employment with the rival company was fraught with considerable
damage to their interest was well-founded and justified its prayer for an injunction restraining him
from undertaking an employment with the said rival manufacturers. As regards the challenge to the
validity of clauses 9 and 17, the High Court held that though the said agreement was with the
respondent company and the company carried on other businesses as well, the employment was in
the business of Century Rayon. The appellant was employed as a Shift Supervisor in that business

only, the training given to him was exclusively for the spinning department of the tyre cord division
and his letter of acceptance was also in relation to the post of a Shift Supervisor in that department.
The High Court therefore concluded that Clauses 9 and 17 related only to the business in the tyre
cord division and therefore restraints contained in those clauses meant prohibition against
divulging information received by the appellant while working in that Division and that clause 17
also meant a restraint in relation to the work carried on in the said spinning department. Therefore
the inhibitions contained in those clauses were not blanket restrictions as alleged by the appellant,
and that the prohibition in clause 17 operated only in the event of the appellant leaving,
abandoning or resigning his service during the term of and in breach of the said agreement. On this
reasoning it held that clause 17, besides not being general, was a reasonable restriction to protect the
interests of the respondent company particularly as the company had spent considerable amount in
training, secrets of know-how of specialised processes were divulged to him and the foreign
collaborators had agreed to disclose their specialised processes only on the respondent company's
undertaking to obtain corresponding secrecy clauses from its employees and on the guarantee that
those processes would be exclusively used for the business of the respondent company.
Furthermore, Clause 17 did not prohibit the appellant even from seeking similar employment from
any other manufacturer after the contractual period was over. The High Court lastly found that there
was no indication at all that if the appellant was prevented 'from being employed in a similar
capacity elsewhere he would be forced to idleness or that such a restraint would compel the
appellant to go back to the company which would indirectly result in specific performance of the
contract of personal service. Counsel for the appellant raised the following three con- tentions : (1)
that the said agreement constituted a restraint on trade and was therefore opposed to public policy,
(2) that in order to be valid and enforceable the covenant in question should be reasonable in space
and time and to the extent necessary to protect the employer's right of property and (3) that the
injunction to enforce a negative stipulation can only be granted for the legitimate purpose of
safeguarding the trade secrets of the employer. He argued that these conditions were lacking in the
present case and therefore the respondent company was not entitled to the enforcement of the said
stipulation. As to what constitutes restraint of trade is summarised in Halsbury's Laws of England
(3rd ed.) Vol. 38, at page 15 and onwards. It is a general principle of the Common Law that a person
is entitled to exercise his lawful trade or calling as and when he wills and the law has always
regarded jealously any interference with trade, even at the risk of interference with freedom of
contract as it is public policy to oppose all restraints upon liberty of individual action which are
injurious to the interests of the State. This principle is not confined to restraint of trade in the
ordinary meaning of the word "trade" and includes restraints on the right of being employed. The
court takes a far stricter view of covenants between master and servant than it does of similar
covenants between vendor and purchaser or in partnership agreements. An employer, for instance,
is not entitled to protect himself against competition on the part of an employee after the
employment has ceased but a purchaser of a business is entitled to protect himself against
competition per se on the part of the vendor. This principle is based on the footing that an employer
has no legitimate interest in preventing an employee after he leaves his service from entering the
service of a competitor merely on the ground that he is a competitor. (Kores Manufacturing Co. Ltd.
v. Kolak Manufacturing Co. Ltd.(1). The attitude of the courts as regards public policy however has
not been inflexible. Decisions on public policy have been subject to change and development with
the change in trade and in economic thought and the general principle once applicable to

agreements in restraints of trade have been considerably modified by later decisions. The rule now
is that restraints 'whether general (1) [1959] Ch. 108,126.
or partial may be good if they are reasonable. A restraint upon freedom of contract must be shown to
be reasonably necessary for the purpose of freedom of trade. A restraint reasonably necessary for the
protection of the covenantee must prevail unless some specific ground of public policy can be clearly
established against it. (E. Underwood and Son Ltd. v. Barker (1). A person may be restrained from
carrying on his trade by reason of an agreement voluntarily entered into by him with that object. In
such' a case the general principle of freedom of trade must be applied with due regard to the
principle that public policy requires for men or full age and understanding the utmost freedom of
contract and that it is public policy to allow a trader to dispose of his business to a successor by
whom it may be efficiently carried on and to afford to an employer an unrestricted choice of able
assistants and the opportunity to instruct them in his trade and its secrets without fear of their
becoming his competitors. (Fitch, v. Dewes)(2). Where an agreement is challenged on the ground of
its being a restraint on trade the onus is upon the party supporting the contract to show that the
restraint is reasonably necessary to protect his interests. Once, this onus is discharged, the onus of
showing that the restraint is nevertheless injurious to the public is upon the party attacking the
contract. (See Cheshire's Law of contract, (6th ed.) 32.8, Mason v. Provident Clothing and Supply
Co. Ltd.(3). and A. G. of Common wealth of Australia v. Adelaide Steamship Co. Ltd.(4).
The courts however have drawn a distinction between restraints applicable during the term of the
contract of employment and those that apply after its cessation. (Halsbury's Laws of England (3rd
ed.) Vol. 38, p. 31). But in W. H. Milsted and Son Ltd. v. Hamp(5) where the contract of service was
terminable only by notice by the employer, Eve J. held it to be bad as being wholly one-sided. But
where the contract is not assailable on any such ground, a stipulation therein that the employee
shall devote his whole time to the employer, and shall not during the term of the contract serve any
other employer would generally be enforceable. In Gaumont Corporation v. Alexander(6) clause 8 of
the agreement provided that "the engagement is an exclusive engagement by the corporation of the
entire service of the artiste for the period mentioned in clause 2 and accordingly the artiste agrees
with the corporation that from the date hereof until the expiration of her said engagement the artiste
(1) [1899] 1 Ch. 300 C.A.
(3) [1913] A.C. 724 (5) [1927] W.N. 233.
M1 Sup Court/67-11 (2) [1921] 2 A.C. 158,162-167, (4) [1913] A.C. 781 796.
(6) [1936] 2 All.E.R. 1686.
shall not without receiving the previous consent of the corporation do any work or perform or
render any services whatsoever to any person firm or company other than the corporation and its
sub-lessees".
On a contention that this clause was a restraint of trade, Porter J. held that restrictions placed upon
an employee under a contract of service could take effect during the period of contract and are not in

general against public policy. But the learned Judge at p. 1692 observed that a contract would be
thought to be contrary to public policy if there were a restraint, such as a restraint of trade, which
would be unjustifiable for the business of the claimants in the case. He however added that he did
not know of any case, although it was possible, there might be one, where circumstances might arise
in which it would be held that a restraint during the progress of the contract itself was an undue
restraint. He also observe that though for the most part, those who contract with persons and enter
into contracts which one might for this purpose described as contracts of service, have generally
imposed upon them the position that they should occupy themselves solely in the business of those
whom they serve but that it would be a question largely of evidence how far the protection of clauses
of that kind would extend, at any rate during the existence of the contract of service. Therefore,
though as a general rule restraints placed upon an employee are not against public policy, there
might, according to the learned Judge, be cases where a covenant might exceed the requirement of
protection of the employer and the court might in such cases refuse to enforce such a covenant by
injunction. In William Robinson and Co. Ltd. v. Heuer(1) the contract provided that Heuer would
not during this engagement without the previous consent in writing of William Robinson & Co.,
"carry on or be engaged directly or indirectly, as principal, agent, servant or otherwise, in any trade,
business or calling, either relating to goods of any description sold or manufactured by the said W.
Robinson & Co. Ltd., ....or in any other business whatsoever." Lindley M.R. there observed that
there was no authority whatsoever to .show that the said agreement was illegal, that is to say, that it
was unreasonable or went further than was reasonably necessary for the protection of the plaintiffs.
It was confined to the period of the engagement, and meant simply that "so long as you are in our
,employ you shall not work for anybody else or engage in any other business". There was, therefore,
according to him, nothing unreasonable in such an agreement. Applying these observations Branson
J. in Warner Brothers Pictures v. Nelson(2) held a covenant ,of a similar nature not to be void. The
defendant, a film artist, entered into a contract with the plaintiffs, film producers, for fifty-two
weeks, renewable for a further period of fifty-two weeks (1) [1898] 2 Ch. 451.
(2) [1937] 1 K.B. 209.
at the option of the plaintiffs, whereby she agreed to render her exclusive service as such artist to the
plaintiffs, and by way of negative stipulation not to render, during the period of the contract, such
services to any other person. In breach of the agreement she entered into a contract to perform as a
film artist for a third person. It was held that in such a case an injunction would issue though it
might be limited to a period and in terms which the court in its discretion thought reasonable. A
similar distinction has also been drawn by courts in India and a restraint by which a person binds
himself during the term of his agreement directly or indirectly not to take service with any other
employer or be engaged by a third party has been held not to be void and not against section 27 of
the Contract Act. In Brahmaputra Tea Co. Ltd. v. Scarth(1) the condition under which the
covenantee was partially restrained from competing after the term of his engagement was over with
his former employer was held to be bad but the condition by which he bound himself during the
term of his agreement, not, directly or indirectly, to compete with his employer was held good. At
page 550 of the report the court observed that an agreement of service by which a person binds
himself during the term of the agreement not to take service with any one else, or directly or
indirectly take part in, promote or aid any business in direct competition with that of his employer

was not hit by section 27. The Court observed:
"An agreement to serve a person exclusively for a definite term is a lawful agreement,
and it is difficult to see how that can be unlawful which is essential to its fulfilment,
and to the due protection of the interests of the employer, while the agreement is in
force."
(See also Pragji v. Pranjiwan(2) and Lalbhai Dalpathbhai and Co v. Chittaranjan Chandulal
Pandva(3). In Deshpande v. Arbind Mills Co.(4) an agreement of service contained both a positive
covenant, viz., that the employee shall devote his whole-time attention to the service of the
employers and also a negative covenant preventing the employee from working elsewhere during the
term of the agreement. Relying on Pragji v. Pranjiwan(2), Charlesworth v. MacDonald(5), Madras
Railway Company v. Rust,(6) Subba Naidu v. Haji Badsha Sahib(7) and Burn & Co; v. MacDonald(8)
as instances where such a negative covenant was enforced, the learned Judges observed that
Illustrations (c) and (d) to section 57 of the Specific Relief Act in terms recognised such contracts
and the existence of negative covenants therein and that therefore the (1) I.L.R. (XI) Cal. 545.
(3) A.I.R. 1966 Guj 189.
(5) I.L.R. 23. Bom. 103.
(7) I.L.R. 26 Mad. 168.
(2) 5 Dom. L.R. 872.
(4) 48 Bom. L.R. 90.
(6) I.L.R. 14 Mad. 18 (8) I.L.R. 36 Cal. 354.
contention that the existence of such a negative covenant in a service agreement made the
agreement void on the ground that it was in restraint of trade and contrary to section 27 of the
Contract Act had no validity.
Counsel for the appellant, however, relied on Ehrman v. Bar- tholomew(1) as an illustration where
the negative stipulation in the contract was held to be unreasonable and therefore unenforceable.
Cleuse 3 of the agreement there provided that the employee shall devote the whole of his time
during the usual business hours in the transaction of the business of the firm and shall not in any
manner directly or indirectly engage or employ himself in any other business, or transact any
business with or for any person or persons other than the firm during the continuance of this
agreement. Clause 13 of the agreement further provided that after the termination of the
employment by any means, the employee should not, either on his sole account or jointly with any
other person, directly or indirectly supply any of the then or past customers of the firm with wines
etc. or solicit for orders any such customers and should not be employed in any capacity whatsoever
or be concerned, engaged or employed in any business of a wine or spirit merchant in which any

former partner of the firm was engaged. Romer J. held these clauses to be unreasonable on the
ground that clause 3 was to operate for a period of 10 years or for so much of that period as the
employer chose and that the word "business" therein mentioned could not be held limited by the
context to a wine merchant's business or in any similar way. So that the court, while unable to order
the defendant to work for the plaintiffs, is asked indirectly to make him do so by otherwise
compelling him to abstain wholly from business, at any rate during all usual business hours. The
other decision relied on by him was Mason v. Provident Clothing and Supply Co. Ltd.(2). This was a
case of a negative covenant not to serve elsewhere for three years after the termination of the
contract. In this case the court applied the test of what was reasonable for the protection of the
plaintiffs' interest. It was also not a case of the employee possessing any special talent but that of a
mere canvasser. This decision, however, cannot assist us as the negative covenant therein was to
operate after the termination of the contract. Herbert Morris v. Saxelby(3) and Attwood v.
Lamont(4) are also cases where the restrictive covenants were to apply after the termination of the
employment. In Commercial Plastics Ltd. v. Vincent(5) also the negative covenant was to operate for
a year after the employee left the employment and the court held that the restriction was void
inasmuch as it went beyond what was reasonably necessary for the protection of the employer's
legitimate interests.
(1) [1898] 1 Ch. 571.
(3) [1916] A.C. 688.
(2 [1913] A. C. 724.
(5) 3 AII.E.R. 546. (4) [1920] 3 K.B. 571.
These decisions do not fall within the class of cases where the negative covenant operated during
and for the period of employment as in Gaumont Corporation's Case(1) and Warner Brothers v.
Nelson(2) where the covenant ws held not to be a restraint of trade or against public policy unless
the agreement was wholly one-sided and therefore unconscionable as in W.H. Milsted and Son Ltd.
v. Hamp(3) or where the negative covenant was such that an injunction to enforce it would
indirectly compel the employee either to idleness or to serve the employer, a thing which the court
would not order, as in Ehrman v. Bartholomew(4). There is, however, the decision of a Single Judge
of the Calcutta High Court in Gopal Paper Mills v. Malhotra(5), a case of breach of a negative
covenant during the period of employment. This decision, in our view, was rightly distinguished by
the High Court as the period of contract there was as much as 20 years and the contract gave the
employer an arbitrary power to terminate the service without notice if the employer decided not to
retain the employee during the three years of apprenticeship or thereafter if the employee failed to
perform his duties to the satisfaction of the employer who had absolute discretion to decide whether
the employee did so and the employer's certificate that he did not, was to be conclusive as between
the parties. Such a contract would clearly fall in the class of contracts held void as being one sided as
in W.H. Milsted and Son Ltd. v. Hamp(3). The decision in Gopal Paper Mills v. Malhotra(5)
therefore cannot further the appellant's case.

The result of the above discussion is that considerations against restrictive covenants are different in
cases where the restriction is to apply during the period after the termination of the contract than
those in cases where it is to operate during the period of the contract. Negative covenants operative
during the period of the contract of employment when the employee is bound to serve his employer
exclusively are generally not regarded as restraint of trade and therefore do not fall under section 27
of the Contract Act. A negative covenant that the employee would not engage himself in a trade or
business or would not get himself employed by any other master for whom he would perform
similar or substantially similar duties is not therefore a restraint of trade unless the contract as
aforesaid is unconscionable or excessively harsh or unreasonable or one sided as in the case of W.H.
Milsted and Son Ltd.(3). Both the Trial Court and the High Court have found, and in our view,
rightly, that the negative covenant in the present case restricted as it is to the period of employment
and to work similar or substantially similar to the one carried on by the appellant when he was in
the employ of the respondent company was reasonable and necessary for the protection of the
company's interests and not such (1) [1936] 2 All E.R. 1686. (2) [1937] 1 K.B. 209. (3) [1927] W. N.
233. (5) A. 1. R. 1262 Cal. 61.(4) [1898] 1 Ch. 671.
as the court would refuse to enforce. There is therefore no validity in the contention that the
negative covenant contained in clause 17 amounted to a restraint of trade and was therefore against
public policy.
The next question is whether the injunction in the terms in which it is framed should have been
granted. There is no doubt that the courts have a wide discretion to enforce by injunction a negative
covenant. Both the courts below have concurrently found that the apprehension of the respondent
company that information regarding the special processes and the special machinery imparted to
and acquired by the appellant during the period of training and thereafter might be divulged was
justified; that the information and knowledge disclosed to him during this period was different from
the general knowledge and experience that he might have gained while in the service of the
respondent company and that it was against his disclosing the former to the rival company which
required protection. It was argued however that the terms of clause were too wide and that the court
cannot sever the good from the bad and issue an injunction to the extent that was good. But the rule
against severance applies to cases where the covenant is bad in law and it is in such cases that the
court is precluded from severing the good from the bad. But there is nothing to prevent the court
from granting a limited injunction to the extent that is necessary to protect the employer's interests
where the negative stipulation is not void. There is also nothing to show that if the. the negative
covenant is enforced the appellant would be driven to idleness or would be compelled to go back to
the respondent company. It may be that if he is not permitted to get himself employed in another
similar employment he might perhaps get a lesser remuneration than the one agreed to by
Rajasthan Rayon. But that is no consideration against enforcing the covenant. The evidence is clear
that the appellant has torn the agreement to pieces only because he was offered a higher
remuneration. Obviously he cannot be heard to say that no injunction should be granted against him
to enforce the negative covenant which is not opposed to public policy. The injunction issued against
him is restricted as to time, the nature of employment and as to area and cannot therefore be said to
be too wide or unreasonable or unnecessary for the protection of the interests of the respondent
company. As regards Clause 9 the injunction is to restrain him from divulging any and all

information, instruments, documents, reports etc. which may have come to his knowledge while he
was serving the respondent company. No serious objection was taken by Mr. Sen against this
injunction and therefore we need say no more about it.
The appeal fails and is dismissed with costs.
G.C. Appeal dismissed

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Altus Group India Private Limited vs Darrameks Hotels & Developers ...

Delhi High Court

Date of decision: 20th March, 2018

O.M.P. (COMM) 499/2016

ALTUS GROUP INDIA PRIVATE LIMITED ..... Petitioner

DARRAMEKS HOTELS & DEVELOPERS PRIVATE LIMITED

NAVIN CHAWLA, J. (Oral)

Indian Kanoon - http://indiankanoon.org/doc/31719091/ 1

Analysis & conclusion:

Indian Kanoon - http://indiankanoon.org/doc/31719091/ 2

Indian Kanoon - http://indiankanoon.org/doc/31719091/ 3

Indian Kanoon - http://indiankanoon.org/doc/31719091/ 4

Indian Kanoon - http://indiankanoon.org/doc/31719091/ 5

xxxxx Interpretation and meaning of the express "without any cause"

Indian Kanoon - http://indiankanoon.org/doc/31719091/ 6

Indian Kanoon - http://indiankanoon.org/doc/31719091/ 7

Indian Kanoon - http://indiankanoon.org/doc/31719091/ 8

NAVIN CHAWLA, J MARCH 20, 2018/Arya

Indian Kanoon - http://indiankanoon.org/doc/31719091/ 9

Delhi High Court

+ O.M.P.(I) (COMM.) 189/2017

Date of decision: 24th November, 2017

DANIELI CORUS BV ..... Petitioner

STEEL AUTHORITY OF INDIA ..... Respondent

NAVIN CHAWLA, J. (Oral)

"D. CONFIDENTIAL INFORMATION

Indian Kanoon - http://indiankanoon.org/doc/9647671/ 1

OMP(I)(COMM) 189/2017 Page 3

Indian Kanoon - http://indiankanoon.org/doc/9647671/ 2

Indian Kanoon - http://indiankanoon.org/doc/9647671/ 3

Indian Kanoon - http://indiankanoon.org/doc/9647671/ 4

The Court of Appeal found that;

Indian Kanoon - http://indiankanoon.org/doc/9647671/ 5

2. If a defendant is proved to have used confidential information, obtained directly or indirectly,

Indian Kanoon - http://indiankanoon.org/doc/9647671/ 6

Indian Kanoon - http://indiankanoon.org/doc/9647671/ 7

OMP(I)(COMM) 189/2017 Page 14

Indian Kanoon - http://indiankanoon.org/doc/9647671/ 8

21. The petition is allowed in the above terms.

NOVEMBER 24, 2017/vp

OMP(I)(COMM) 189/2017 Page 17

Indian Kanoon - http://indiankanoon.org/doc/9647671/ 9

Delhi High Court

NEWTON ENGINEERING & CHEMICALS LTD. ..... Respondent

Prathiba M. Singh, J. (Oral)

Claim A: Award of liquidated damages

Indian Kanoon - http://indiankanoon.org/doc/168929667/ 1

Indian Kanoon - http://indiankanoon.org/doc/168929667/ 2

"...Provisions pertaining to the effect of breach of contract, two of which provisions

"44.0 COMPENSATION FOR

(One percent) in 4th line of 1st

Indian Kanoon - http://indiankanoon.org/doc/168929667/ 3

"68. From the aforesaid discussions, it can be held that:

Indian Kanoon - http://indiankanoon.org/doc/168929667/ 4

14. The objection in respect of Claim E is not pressed.

16. OMP and all pending I.As. stand disposed of.

PRATHIBA M. SINGH JUDGE AUGUST 24, 2018 Rahul