Y.K. Sethi vs M/S Basf India Ltd. & Others
2009 Latest Caselaw 3104 Del

      IN THE HIGH COURT OF DELHI AT NEW DELHI

                                CS(OS) 1761/2006

      Y.K. SETHI                                             ..... Plaintiff
                                Through Mr. Pardeep Gupta and
                                Mr. Suresh Bharti, Advocates

                       versus

      M/S BASF INDIA LIMITED AND ORS.            .... Defendants
                     Through Mr. Ashwani Kumar with
                     Mr. Akshay Sahai, Advocates

      CORAM:
      HON'BLE DR. JUSTICE S. MURALIDHAR

        1.Whether reporters of the local newspapers
          be allowed to see the judgment?                             No

        2.To be referred to the Reporter or not?                      Yes

        3. Whether the judgment should be reported in the Digest? Yes

                                 JUDGMENT

11.08.2009

1. This is a suit for declaration that an order dated 4th July 2006 passed by the

defendants terminating the services of plaintiff is liable to be set aside with all

consequential benefits. The plaintiff has also claimed Rs. 1 crore as damages

together with interest at 24% p.a. with effect from the date of filing of the suit.

2. By an order dated 11th April 2008 this court permitted the plaintiff to amend

the prayer clause for a declaration that Clause 8 of the appointment letter dated

11th July 1997 is void under Section 23 of the Indian Contract Act, 1872 and

Article 14 of the Constitution of India.

3. After completion of pleadings, this court by an order dated 26th November CS (OS) No.1761/2006 Page 1 2008 framed the issues. The first issue was "whether clause 8 of the

appointment letter dated 11th July 1997 is null and void in view of Section 23

of the Indian Contract Act, 1872". The court further directed that this issue

should be treated as a preliminary issue. The submissions of counsel for the

parties have been heard on this issue.

4. Counsel for the plaintiff refers to the appointment letter dated 11th July 1997

and in particular Clauses 7 and 8 which read as under :

"7. Superannuation: You will retire from the services of the Company on the attainment of 60 years of age.

8. Notice of termination: After confirmation, this appointment is terminable by giving three months notice on either side or three month's basic salary in lieu thereof."

It is submitted that there is a specific averment in ground (B) that "due to

unemployment the defendant company prevailed upon the plaintiff and

forcibly incorporated the said clause 8 in the appointment letter against the will

and wishes of the plaintiff."

5. On the strength of the judgment of the Supreme Court in Central Inland

Water Transport Corporation Limited v. Brojo Nath Ganguly (1986) 3 SCC

156, it is submitted that the said Clause 8 is opposed to public policy and

therefore violates Section 23 of the Indian Contract Act, 1872. Reference is

also made to Section 14 of that Act which defines `free consent'. It is

submitted that in the context of the present case the consent of the plaintiff was

given on account of the undue influence of the employer and therefore the

CS (OS) No.1761/2006 Page 2 consent was not free. It is submitted that such a contract contained thereof by

undue influence is also voidable in terms of Section 19 and 19A of the same

Act. It is submitted by the learned counsel for the Plaintiff that with the

plaintiff having averred that he was prevailed upon to agree to the letter of

appointment, the burden of showing that the clause in question is not opposed

to the public policy shifts to the Plaintiff. It is accordingly submitted that the

preliminary issue should be answered in favour of the Plaintiff and against the

Defendants.

6. Learned counsel for the defendants submits that the appointment letter of

1997 incorporated a paragraph which gave an option to the employee to sign

the duplicate of the letter "after full and mature consideration", in agreement

and acceptance of the terms and conditions. It is submitted that this is a

standard form of contract where an appointment in the private sector is made

terminable by giving three months notice or three months basic salary in lieu of

notice. Therefore, there is nothing unconscionable about such a clause in the

contract. It is submitted that the judgment of Central Inland Water Transport

Corporation Limited (supra) was in the context of public employment

particularly given that the corporation in the said case was covered under the

definition of State under Article 12 of the Constitution.

7. It is further submitted by learned counsel for the Defendants that the

limitation for seeking a declaration was three years in terms of Article 58 of the

Schedule of the Limitation Act, 1963. As the appointment letter is dated 11th

July 1997, the suit having been filed in 2006 is clearly barred by limitation as CS (OS) No.1761/2006 Page 3 far as this prayer is concerned.

8. Having considered the submissions of learned counsel for the parties, it

appears to this court that the Plaintiff has been unable to show that Clause 8 of

the appointment letter dated 11th July 1997 is opposed to public policy and is

therefore violative of Section 23 of the Indian Contract Act, 1872. The burden

on the Plaintiff to show that Clause 8 is opposed to public policy cannot be

discharged by a mere averment that the defendant had prevailed upon the

Plaintiff and "forcibly incorporated the said clause 8 in the appointment letter

against the will and wishes of the Plaintiff." The appointment letter dated 11th

July 1997 incorporated a specific paragraph which reads as under :

"If you agree after full and mature consideration, with the terms and conditions, kindly sign the duplicate of this letter signifying your agreement and acceptance of the same."

9. There is no averment in the plaint that the plaintiff signed the duplicate of

the letter signifying his acceptance of the terms and conditions duress. By

letter dated 16th January, 1998 the plaintiff's services were confirmed and he

was given promotion from time to time. The letter of termination dated 4 th

July 2006 was a termination simpliciter. The relevant portion of the said letter

reads as under:

"As per clause 8, of your contract of employment dated 11 th July 1997, we wish to inform you that the said contract of employment is being terminated with immediate effect i.e. 4th July 2006. The salary in lieu of notice period alongwith other statutory payment including unavailed leave to your credit will be credited to your account."

CS (OS) No.1761/2006 Page 4

10. At no point in his entire tenure of over 9 years of employment, did the

Plaintiff make an issue of Clause 8 of the letter of appointment. The plea that a

certain clause is unconscionable only because it gives no option to the

employee to accept such a clause has to be based upon some factual

foundation. The plaintiff has to be specific as to in what manner and at the

instance of whom the Plaintiff was compelled to accept such a clause. On a

reading of the plaint there is no such factual foundation that has been laid to

enable this court to adjudicate whether in fact in the context and setting in

which it appears, Clause 8 of the letter dated 11th July 1997 is hit by Section 23

of the Contract Act.

11. The decision in Central Inland Water Transport Corporation Limited

(supra) involved a Government company which answered the description of a

company under Section 617 of the Companies Act, 1956. A challenge was

made in the said case in writ petitions under Article 226 of the Constitution of

validity of Rule 9 (1) of the Service, Discipline and Appeal Rules, 1979. Two

questions were formulated by the Supreme Court for consideration as reflected

in para 1 of the judgment. These read as under:

"(1) Whether a government company as defined in Section 617 of the Companies Act, 1956, is "the State" within the meaning of Article 12 of the Constitution?

(2) Whether an unconscionable term in a contract of employment is void under Section 23 of the Indian Contract Act, 1872, as being opposed to public policy and, when such a term if contained in a contract of employment entered into with

CS (OS) No.1761/2006 Page 5 a government company, is also void as infringing Article 14 of the Constitution in case a government company is "the State" under Article 12 of the Constitution."

12. There can be no manner of doubt that the question concerning Section 23

of the Act was considered in Brijo Nath Ganguly. However, the employer

was a Government company that answered the description of "State" within

the meaning of Article 12. Question 2 also indicates that the issue concerning

unconscionable term of contract in terms of Section 23 of the Act was in the

context of Article 14 of the Constitution "in case a government company is the

State under Article 12 of the Constitution". The attempt therefore to apply the

ratio of Central Inland Water Transport Corporation Limited to all

employees in the private sector, is, in the considered view of this court is

misconceived. For employees in the private sector, when an employee comes

forward to challenge a clause in the letter of appointment on the ground of it

being opposed to public policy, such challenge will have to be preceded by

some factual foundation. The Plaintiff has not been able to lay any such

factual foundation in the instant case.

13. Accordingly, issue No. 1 is answered against the plaintiff. In view of the

decision on Issue No.1 none of the other reliefs are capable of being granted.

As regards the plaintiff's claim for provident fund and other terminal benefits,

an order to this effect has been passed by this court on 11th April 2008 in IA

No.10208/2006. In addition it is reiterated by the learned counsel for the

defendant that all terminal benefits admissible to the plaintiff in terms of the

CS (OS) No.1761/2006 Page 6 appointment letter dated 11th July 1997 and the letter dated 4th July 2006 will

be made available to the plaintiff if he approaches the defendants.

14. The suit is accordingly dismissed with costs. Records be consigned.

S. MURALIDHAR, J.

AUGUST 11, 2009
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CS (OS) No.1761/2006                                                      Page 7