Delhi High Court

M/S. Niit Limited vs Mr. A.L. Mehta on 13 October, 2009

Author: Manmohan Singh

*          HIGH COURT OF DELHI : NEW DELHI

+          I.A. No.9602/2009 in C.S. [OS] No.1553 /2007

                                 Reserved on:     14th September, 2009

%                                Decided on:         13th October , 2009

M/s. NIIT Limited                                     ...Plaintiff
                       Through : Mr. Sandeep Sethi, Sr. Adv. with
                                 Mr. Rajat Navet and Mr. Mohit
                                 Bakshi, Advs.

                       Versus

Mr. A.L. Mehta                                         ....Defendant
                       Through : Defendant in person
Coram:

HON'BLE MR. JUSTICE MANMOHAN SINGH

1. Whether the Reporters of local papers may
   be allowed to see the judgment?                                   No

2. To be referred to Reporter or not?                                Yes

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

MANMOHAN SINGH, J.

1. The plaintiff has filed the present suit for declaration,

injunction, recovery and damages of Rs.1,31,60,000/-. The plaintiff

prayed for a decree of declaration against the defendant declaring that

the defendant has violated the terms and conditions of the MOU dated

11th July, 2006 and the arbitral award dated 15th July, 2006. The

plaintiff also prayed for a permanent injunction against the defendant

restraining him, his agents, representatives, nominees, executors and

assignees from making any complaints or pursuing any complaints

before any government authority against the plaintiff company.

2. The plaintiff is a company duly incorporated under the

Companies Act, 1956, having its registered office at C-125, Okhla

Industrial Area, Phase-I, New Delhi-1100 20. Ms. Dipika Singh, is the

Executive (Legal) of the plaintiff company having authority to institute,

file, sign, and verify the suit for and on behalf of the plaintiff company

by virtue of resolution passed by the plaintiff company dated 23 rd July,

2004.

3. The case of the plaintiff is that the plaintiff company was

established in 1981 and is a Global Training Corporation providing

learning and knowledge solutions and imparting computer education

and training to clients in over 30 countries. It is the leading service

producer in information technology training in India and the only

Indian IT Training Institute outside Europe and US having 20 global

IT training institutes. The plaintiff delivers education courses through

over 2000 Education Centres in India and abroad. It has an alumnus

of over two million Indian students, which indicates the plaintiff‟s

progressive growth and its popularity and acceptance in the IT market.

The plaintiff is also providing computer education in thousands of

Government schools in many states in India, under contracts with the

respective State Governments. It has to its credit the honour of

becoming the first institute to receive the ISO 9001 certification for its

Quality Processes, Acknowledgements from the Guinness Book of

World Records and the Limca Book of Records, recognition from

Microsoft Corporation as their "best training partner in Asia" etc.

4. Mr. A.L. Mehta, the defendant herein is an ex employee of

the plaintiff company who was employed with the plaintiff company

from 1995 till December, 2001 as Deputy General Manager who

thereafter resigned from the plaintiff company. The defendant was

subsequently associated with the plaintiff company on a retainer ship

basis w.e.f. 3rd December, 2001 till March, 2002.

5. It is averred that the defendant raised certain exorbitant and

totally uncalled for and irrelevant demands, which were not acceded to

by the plaintiff company. The defendant also requested the plaintiff

company to compensate him for loss of emoluments for the last

approximately 5 years.

6. It is also alleged that the defendant had been trying to

blackmail the plaintiff company and has been making illegal demands

with threats. The defendant had written certain e-mails/letters to the

officers and directors of the plaintiff company. The defendant had also

filed false and frivolous complaints against the plaintiff, amongst others,

before the Enforcement Directorate and the Department of Income Tax.

The defendant had also indulged in making false complaints against the

concerned authorities to their superior authorities and central vigilance

commission thereby putting pressure on them to pass adverse orders

against the plaintiff company.

7. The matter was thereafter referred to Arbitration vide an

Agreement dated 26th June, 2006.

8. During the pendency of the arbitration proceedings, a

Memorandum of Understanding was entered into between the plaintiff

company and defendant on 11th July, 2006, wherein it was agreed that a

sum of Rs.69 lac would be paid by the plaintiff company to the

defendant as full and final settlement of all and every claims, rights and

entitlements of the defendant qua the plaintiff company. It was also

stipulated in the Memorandum of Understanding that the defendant

would not do any acts which would be prejudicial to the interest of the

plaintiff company and/or any of its subsidiary companies or group

companies and/or against any employees or Directors thereof and/or

could cause any harm to their image.

9. It was also stipulated in the MOU that the defendant would

keep undisclosed all the confidential information that he had

received/procured during his employment with the plaintiff company. It

was also stated that the defendant would not pursue the complaints

that he had filled against the plaintiff company in various government

departments and that the same would stand abandoned and withdrawn.

10. The relevant clauses of the MOU dated 11th July, 2006 are

reproduced hereunder :

"2. It has been mutually agreed upon between Mr. Mehta and the company as per this Memorandum of Understanding that on the passing of the arbitral award :

a) Mr. Mehta will not do any acts, things and deeds which are prejudicial to the interest of the company, NIIT Technologies Limited and any of their subsidiary companies, any of their employees or and directors or which may cause harm to the image of the above companies, their employees and directors;

b) Mr. Mehta shall keep confidential all the information he had received from the company whether during the term of his employment or otherwise and shall not divulge such information. Mr. Mehta represents that as on date there are no original documents in his possession, which is relating to the affairs of the company or its subsidiary

company or any of its directors‟ companies;

c) Mr. Mehta will not pursue the complaints, if any, filed by him against the company, its subsidiaries, employees and directors and the companies of the directors with certain government departments and the same shall stand abandoned and withdrawn;

d) In the event Mr. Mehta violates any or all these undertakings, the current compromise shall become null and void as if it never existed and there shall be an Award in favour of the company and against Mr. Mehta for an amount of Rs.69 lac and the company shall have the right to take appropriate steps to execute the Award and recover the Awarded amount representing all monies paid to Mr. Mehta under this compromise."

11. From the above, it is clear that in the MOU it is provided that

in case of any violation by the defendant of any of the undertakings

mentioned, the compromise affected by way of the MOU would become

null and void as if it never existed and there would be an award in

favour of the plaintiff company and against the defendant for an

amount of Rs.69 lac and the plaintiff company would have the right to

take appropriate steps to execute the award and recover the awarded

amount.

12. In furtherance of the MOU dated 11th July, 2006 the sole

arbitrator passed an award on 15th July, 2006 in terms of the

Memorandum of Understanding entered into between the parties. The

terms and conditions of the MOU were specifically incorporated in the

award and it was reiterated therein that the conditions stipulated in the

MOU were part of the award and binding on both the parties.

13. The plaintiff asserted that pursuant to the passing of the

arbitral award, it paid the entire amount of Rs.69 lac in full and final

settlement of the award to the defendant. Thus, award became final and

was not challenged by the defendant.

14. The plaintiff company alleged that the defendant has

continued to proceed with his nefarious designs and has been making

false and frivolous complaints and pursing the same before various

government authorities, just as he had been doing prior to the passing

of the arbitral award, thus violating the terms and conditions of the

MOU and the award.

15. It is submitted that in May 2007 the plaintiff company came

to know that the defendant was filing applications before the Income

Tax Authorities not only on his own behalf but also on behalf of his

wife, seeking information and copies of Assessment Orders passed

subsequent to the search and seizure operation of the plaintiff group of

companies. In the applications/appeals filed by the wife, it is the

defendant who has been appearing before the authorities as the

authorized representative of his wife, Ms. Alka Mehta.

16. It is stated that the derogatory and defamatory statements

made in the abovesaid complaints by the defendant were read and

discussed by a number of employees. The plaintiff company has been

defamed on account of the defamatory remarks/statements made and

published by the defendant.

17. Per contra, the defendant submitted that plaintiff itself did

not strictly abide by the Memorandum of Understanding (MOU) in so

far as the aforesaid MOU dated 11th July, 2006 required the plaintiff to

make payment of Rs.69 lac strictly in accordance with schedule „A‟

attached to the MOU, the plaintiff has not paid the complete amount of

Rs.69 lac but only an amount of Rs.45,77,460/-. It is contended that the

aforesaid MOU did not state that the payment to the defendant was

towards arrears of salary and what was received by the defendant were

in fact arrears of salary for the period December 2001 to July 2006 as

per TDS certificate dated 7th March, 2007 issued to him for tax

deducted at source from income chargeable under the head "Salaries"

and cheque No.050716 dated 15th January, 2007 which was issued by

the plaintiff from its Staff Schemes Account. Thus the payment

received by the defendant towards arrears of salary was not covered by

the aforesaid MOU. The Memorandum of Understanding dated 11th

July, 2006 is therefore, not enforceable.

18. The defendant contended that the MOU is unlawful, void,

has no legal force or binding effect and is opposed to public policy,

therefore, it is void ab initio.

19. The defendant submitted that per understating reached with

the plaintiff, the defendant has refrained from providing further

information to the government authorities regarding evasion of

Customs duty, sales tax and other violations committed by the plaintiff

company. The defendant only sought information under the Right to

Information Act, 2005, from the Director of Income Tax Investigation

and from the Commissioner of Income Tax, Central-III, New Delhi

about the taxes recovered pursuant to searches carried out on the NIIT

Group of companies in 2004, so that the case of the defendant could

be considered for payment of reward by the Directorate of Income Tax

Investigation. He denied that he has violated any of the terms of MOU

dated 11th July, 2006.

20. It is contended that the said MOU is an unconscionable

contract insofar as it takes away the right of the individual to provide

information regarding the illegalities committed by a company with the

government authorities. The defendant submitted that there cannot be

any injunction against the law and the claim of the plaintiff is wholly

illegal.

21. No individual can be restrained from providing information

to the concerned authorities with regard to the evasion of taxes and

other illegal activities. Any such restraint imposed upon an individual,

if incorporated in an Award, does not make the said Award binding on

the individual. No individual can be bound by illegal undertakings as

comprised in the Memorandum even though the defendant has not

violated any such term.

22. By way of the said relief, the plaintiff is praying before this

court that the illegalities which have been committed by the plaintiff

company be not brought before the concerned authorities for the

necessary and suitable legal action.

23. Summons were issued in the present suit on 24 th August,

2007, returnable n 22nd October, 2007. Issues were framed on 21st May,

2008. Ad interim order was passed against the defendant on 9th

February, 2009.

24. After thoughtful consideration of the matter and having gone

through the pleadings and documents placed on record by the plaintiff,

this court is of the view that the interim order granted on 9 th February,

2009 is made absolute till the disposal of the suit due to the following

reasons :

(a) That the defendant has not disputed the factum of execution

of the MOU dated 11th July, 2006 nor the award passed on

15th July, 2006 on the basis of matter referred to arbitration

vide agreement dated 26th June, 2006.

(b) That the defendant has received Rs.69 lac pursuant to the said

award.

(c) That the award passed between the parties has become final.

(d) It is not denied by the defendant that in view of the MOU,

particularly Clause 2(a) to (d) the defendant was not to

pursue the complaints etc. filed against the plaintiff company.

25. In view of admitted facts between the parties, the defendant

has no option but to comply with the clauses of MOU reached between

the parties, therefore, an interim order is necessary to be passed against

the defendant.

26. As regard the other defences raised by the defendant in the

matter, those are to be decided at the time of trial as per their own merit.

If any finding is given in this regard at this stage, it will prejudice the

case of one of the parties. Therefore, this Court is of the view that

the plaintiff has made a good prima facie case in its favour for grant of

interim order. The balance of convenience also lies in favour of the

plaintiff. In case the interim orders are not passed, the plaintiff will

suffer irreparable loss and injury. In view of the facts and circumstances