Delhi High Court
M/S Paramount Coaching Centre Pvt ... vs Rakesh Ranjan Jha on 24 August, 2017
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Reserved on: 2nd August, 2017
Decided on: 24th August, 2017
+ I.A. No. 7890/2017 (under Order XXXIX Rule 1 and 2 CPC)
in CS (COMM) 465/2017
M/S PARAMOUNT COACHING
CENTRE PVT LTD. .... Plaintiff
Represented by: Mr. P.V. Kapur, Sr.
Advocate with Mr.
Murari Tiwari, Mr. Rahul
Kumar, Mr. Purva Mehta,
Mr. Vimal Nagrath, Mr.
Sidharth Kapur, Ms.
Divya Kapur, Ms.
Prathibha Sridhar and
Ms. Kaveri Gupta,
Advocates.
versus
RAKESH RANJAN JHA ..... Defendant
Represented by: Mr. C.M. Lall, Sr.
Advocate with Ms.
Rajeshwari H, Mr.
Kumar Chitranshu and
Mr. Tahir A.J.,
Advocates.
CORAM:
HON'BLE MS. JUSTICE MUKTA GUPTA
1. Plaintiff has filed the present suit inter alia praying for a decree
of permanent injunction in favour of the plaintiff and against the
defendant restraining him from teaching students in any other
educational institution including, but not limited to M/s K.D. Campus
CS(COMM) 465/2017 Page 1 of 24
Pvt. Ltd. and a further decree of mandatory injunction directing the
defendant to teach exclusively in the plaintiff's institute till the
Memorandum of Understanding (in short MOU) dated 6th January,
2017 subsists, that is, till 5th January, 2020. In the application, plaintiff
prays for an ad-interim injunction in respect of the first prayer
mentioned above.
2. As per the plaint, plaintiff institute is an educational institute
imparting education to the aspiring students of various competitive
examinations having its branches throughout India. On 6th January,
2017 defendant entered into an agreement with the plaintiff company
through its Director with regard to rendering service for the purpose of
imparting education particularly in the subject of English for the
students aspiring to appear in the competitive exams of SSC for a
further period of three years w.e.f. 6th January, 2017 to 5th January,
2020. It is stated that the defendant had earlier also been associated
with the plaintiff company for a period of more than three years
without any break and in this regard an earlier Memorandum of
Understanding dated 10th May, 2014 was entered into between the
plaintiff and the defendant. Renewal of three years was granted on the
request of the defendant vide MOU dated 6th January, 2017. Plaintiff
took admissions of thousands of students in several batches and
advertised the name of the defendant as part of faculty for English.
Further the students of the plaintiff institute also invested huge amount
of their parents' earnings believing that the defendant would be
teaching them English to help them complete the course within the
stipulated period. Since the defendant was facing a rough phase in his
CS(COMM) 465/2017 Page 2 of 24
life the plaintiff granted a loan of ₹10 lakhs to the defendant on
account of his sister's marriage in good faith in the month of
September, 2016. However, on 28th June, 2017 the plaintiff saw a
Facebook post by defendant stating that he had left the plaintiff
company. There was no intimation by the defendant to the plaintiff
and he illegally joined rival competing teaching institute namely M/s
K.D. Campus Pvt. Ltd. That till 27th June, 2017 the defendant was
taking classes at the plaintiff institute and all of a sudden on 28th June,
2017 he joined the competing company in greed of money, leaving the
career of thousands of students in dark. Because of the defendant
leaving the plaintiff company on 29th June, 2017, the students at the
Patna Centre of the plaintiff became furious and staged revolt for
which a complaint was lodged at PS Kadam Kuan, Patna against the
defendant.
3. In reply to the application defendant has stated that he had
joined the plaintiff company around 20th June, 2012 and taught few
batches of students but had to leave on account of certain personal
reasons. Thereafter the defendant was once again invited by the then
Director of the plaintiff company Ms. Neetu Singh and accordingly
the defendant rejoined the plaintiff company on 20 th June, 2013.
Defendant was coaching the students who were appearing in various
competitive exams and he had agreed to teach in the plaintiff institute
based on the understanding that he would be paid on hourly basis and
the said rate per hour would be revised from time to time. Initially
when the defendant joined on 20th June, 2013 he was paid
approximately ₹400/- per hour which was revised to ₹650/- per hour
CS(COMM) 465/2017 Page 3 of 24
and then to ₹1,200/- per hour and lastly around November, 2016 to
₹1,500/- per hour. In May, 2014 the defendant was forced to sign on
certain blank pages by the plaintiff and he was warned that if he did
not sign the blank pages he would be denied his salary and would not
be permitted to teach at the plaintiff's institute. Under this extreme
threat, coercion and due to difficult circumstances defendant signed
the blank pages which now transpires to him having been used by the
plaintiff company for preparing its agreements with defendant. Copies
of the said agreements were never supplied to the defendant. This
practice of the plaintiff is being followed with all the teachers teaching
in plaintiff institute. MOUs dated 10th May, 2014 and 6th January,
2017 relied upon by the plaintiff are self-serving and fabricated.
Defendant further claims that in March to May, 2015 there was a split
in the plaintiff company after which Ms. Neetu Singh left the
plaintiff's company and things at the plaintiff company started
deteriorating. In June, 2017 the situation became unbearable, forcing
the defendant to leave the plaintiff company. The defendant was
subjected to humiliation and harsh circumstances after May-June,
2015 and constantly sidelined and ill treated. The defendant was not
compensated proportionate to the hours taught and only part payments
of the actual sum were paid in November-December, 2016. The
defendant was not paid for service rendered for the months of January
to June, 2017 either in cash or through cheque and the only amount
received by the defendant from the plaintiff between November, 2016
to June, 2017 was ₹2.40 lakhs in installments including cash and
CS(COMM) 465/2017 Page 4 of 24
cheque payment. Thus the defendant owes a sum of ₹9 lakhs towards
the plaintiff for the period November, 2016 to June, 2017.
4. In August, 2016 the defendant was in dire need of the money
due to the proposed marriage of his sister and was given loan by the
plaintiff for a sum of ₹10 lakhs subject to it being adjusted against the
salary of the defendant. The marriage could not take place in August,
2016 and was re-scheduled to July, 2017. Since the defendant was not
being paid as per his dues, defendant drew the attention of the plaintiff
several times however, no payment was made. On 27th June, 2017 Mr.
Saumitra, Director of the plaintiff promised that the amount of the
defendant would be released on 28th June, 2017 however, on 28th June,
2017 he virtually refused to make the payment and thereafter avoided
all calls by the defendant. Defendant had to leave to Patna on the
same day for solemnizing the marriage of his sister which could not
take place without the sum of ₹9 lakhs which was due towards the
plaintiff. It is in these circumstances that the defendant had no option
but to leave the plaintiff and seek help from the former Director of the
plaintiff company, that is, Ms. Neetu Singh and thus he joined M/s
K.D. Campus Pvt. Ltd. on or about 6th July, 2017.
5. Learned counsel for the plaintiff submits that the contention of
defendant that he was made to sign blank pages cannot be accepted.
The defendant in terms of the MOU had been regularly receiving the
payments, copies of the vouchers whereof have been placed on record
by the plaintiff. Referring to the decision of this Court in 2012 VI AD
(DELHI) 321 Suresh Kumar vs. Satish Mehra & Anr., it is contended
that merely filling up some blank spaces of a signed document would
CS(COMM) 465/2017 Page 5 of 24
not render the document fabricated or tampered. Further the
defendant does not deny his signatures on the two MOUs, thus
presumption is required to be raised that he signed the written
documents. Reliance is placed on the decision reported as 106 (2003)
DLT 187 Corporation Bank vs. Sushil Enterprises & Ors. Referring
to the decision of the Supreme Court reported as 2010 (4) SCC 753
Karam Kapahi & Ors. vs. Lal Chand Public Charitable Trust & Anr.
learned counsel for the plaintiff contends that one who accepts the
benefit under a deed or will or other instrument must conform to all its
provisions and cannot selectively choose to act on part thereof.
6. Referring to the decision of the Supreme Court reported as AIR
1967 SC 1098, Niranjan Shankar Golikari vs. The Century Spinning
and Manufacturing Co. Ltd. it is contended that a negative covenant
operating during the period of contract of employment when the
employee is bound to serve his employer exclusively is generally not
regarded as restraint of trade and therefore, is not prohibited under
Section 27 of the Contract Act. It is further contended that driven by
the greed of more money defendant did not adhere to the MOU arrived
at between the parties and joined M/s K.D. Campus Pvt. Ltd. as
admitted by him. Plea in the arguments that since the contract was
unconscionable/excessively harsh/unreasonable/one-sided is based on
the decision of Niranjan Shankar Golikari (supra) and bereft of the
pleadings. In the absence of it being pleaded that the contract was
unconscionable, refuge to the exception laid down in Niranjan
Shankar Golikari (supra) is not permissible. Relying upon the decision
reported as 1995 (5) SCC 545 Gujarat Bottling Co. Ltd. & Ors. vs.
CS(COMM) 465/2017 Page 6 of 24
Coca Cola Co. & Ors. it is contended that a negative stipulation in the
contract which is operational during the subsistence of the agreement
cannot be regarded as one in restraint of the trade.
7. Learned counsel for defendant on the other hand referring to the
various paragraphs of the reply affidavit contends that even if not
specifically stated in so many words that the contract is
unconscionable/unreasonable and unfair the defendant in his pleadings
elaborated as to how the contract which assuming though not
admitting to be signed by the defendant, is unconscionable/
unreasonable and thus unenforceable. It is contended that the MOU
dated 6th January, 2017 itself reveals that it is a standard form contract
leaving no scope of negotiation with the defendant and such a standard
form contract which is harsh and unconscionable cannot be enforced.
Relying upon the decision reported as AIR 1986 SC 1571 Central
Inland Water Transport Corporation Limited & Anr. vs. Brojo Nath
Ganguly & Anr. it is contended that where the contract is
unconscionable it is not only voidable but void. The present standard
form contract amounts to slavery with no minimum hours of work and
no minimum payment provided. From the documents placed on
record by the plaintiff itself, it is evident that for the last three months
the defendant received only ₹20,000/- to ₹25,000/- per month.
8. Since admittedly, as per the pleadings of the plaintiff itself the
defendant was indebted towards the plaintiff having taken loan for the
sister's wedding, the defendant was made to sign the blank papers in
January, 2016 which falls in the category of "undue influence" as
defined under Section 16 of the Contract Act. Reliance is placed on
CS(COMM) 465/2017 Page 7 of 24
the decision reported as AIR 1963 SC 1279 Ladli Prasad Jaiswal vs.
Karnal Distillery Co. Ltd. & Ors. Referring to Section 41 (e) of the
Specific Relief Act it is contended that if the contract is not
specifically enforceable, no injunction can be granted. Referring to
the two decisions of the Bombay High Court reported as 2000 (4)
BomCR 487 Jet Airways (I) ltd. vs. Mr. Jan Peter Ravi Karnik and
2003 (3) BomCR 563 Star India Pvt. Ltd. vs. Laxmiraj Seetharam
Nayak & Anr. it is contended that the law denounces compelling an
employee to work against his will for a particular employer and the
courts should not issue an injunction if by doing so the effect would be
of granting specific performance of contract of personal service.
9. Contention of learned counsel for the plaintiff that driven by the
greed, defendant joined M/s K.D. Campus Pvt. Ltd. is bereft of any
evidence or pleadings for the reason there is no material that the
defendant is earning more at M/s K.D. Campus Pvt. Ltd. Defendant
was actually driven to leave the job for the reason the defendant was
not being paid and taking recourse to the negative covenant the
plaintiff cannot be permitted to enforce on the defendant to sit idle till
2020. No original document has been placed on record and only
photocopies of the documents have been placed.
10. Bone of contention between the parties is the Memorandum of
Understanding dated 6th January, 2017 relevant Clauses whereof are
Clauses 2, 4, 6, 7 and 8 as reproduced herein under:
"2. That the Teacher shall be entitled to a sum of
₹450/- Per Month/per Hour. The teacher agrees
that he will at all times faithfully and
industriously to the best of his skill, ability,
CS(COMM) 465/2017 Page 8 of 24
experience and talent perform all of the duties
required of his position. In carrying out these
duties and responsibilities the teacher shall
comply with all Coaching Institute Policies,
procedure, rules and regulations both written and
oral as are announced by Coaching institute
policies, procedure, rules and regulation both
written and oral as are announced by the
Coaching Institute from time to time.
3. ...
4. That the institute shall pay the teacher, during the
duration of this agreement, as per the negotiation
at the time of joining within annual increment as
per the norms.
5. ....
6. That the Teacher shall not do any private tuition
to any student whether of this coaching institute
or other coaching institute nor be interested in
any other educational Coaching Institute nor be
interested in any other educational Coaching
Institute unless otherwise expressly permitted by
the Coaching Institute nor be concerned in plots
in conspiracies against the Coaching Institute in
any matter till this agreement exists.
7. That the Teacher agrees that the present MOU
will Continue for a Minimum period of 3 (Three)
years and the same way be extended with mutual
consent of both the parties. In case the teacher
violates any terms and condition of this MOU the
coaching institute will be entitled to get, as the
teacher is also aware that the classes for the
students in the institute are arranged by the
institute for a specific duration and leaving the
institute in between causes huge loss to the
institute, it is agrees that the teacher has
undertaken not to leave the institute minimum for
the period of 3 (Three) years.
CS(COMM) 465/2017 Page 9 of 24
8. That the present MOU has been executed without
any pressure, force and coercion. It is agreed by
both the parties that the aforesaid terms and
conditions has been settled with their consent."
11. Though the defendant has pleaded that he was made to sign
blank pages however, for the sake of arguing the present application,
learned counsel fairly stated that since it would be for the defendant to
lead evidence to prove this fact, at this stage even assuming that the
defendant had signed the agreement, the terms of the agreement are
unconscionable and harsh and thus the agreement is void. Though the
words unconscionable and harsh are not stated in the reply to the
application, defendant has elaborated the circumstances he was made
to suffer in para 7 of the reply affidavit. Defendant has stated that after
May to June, 2015 he was humiliated, sidelined and made to face
harsh circumstances. His self respect was slowly, steadily and
systematically eroded at the plaintiff's company through various
means including back-biting, spreading false rumors about the
defendant, not giving sufficient number of hours or batches to the
defendant, making the defendant run from pillar to post and literally
beg on a monthly basis for his rightful dues being his compensation
besides threatening with dire consequences. The defendant was
unsure on daily basis as to whether he would get sufficient hours to
teach and whether at the end of the month he would be able to make
his ends meet. The defendant was never compensated proportionate to
the hours taught and he was given part payment of the actual sums due
in the month of November-December, 2016. The defendant was
CS(COMM) 465/2017 Page 10 of 24
further not paid for services rendered for January to June, 2017 either
in cash or through cheques and the only amount received by the
defendant from the plaintiff between November, 2016 to June, 2017
was ₹2.40 lakhs in installments including cash and cheque payments.
Despite reminders through chat messages for sorting out the issues no
efforts were made by the plaintiff company. It is in these
circumstances that the performance of teaching obligations by the
defendant at the centre of the plaintiff became impossible and
involved extreme and untold hardship, which the defendant never
anticipated.
12. Indubitably an agreement for personal service is
unenforceable that is why in the application the prayer of the plaintiff
for an ad-interim injunction restraining the defendant from teaching at
any other educational institute including but not limited to M/s. K.D.
Campus Pvt. Ltd. and its branches till the disposal of the suit.
13. On the contentions raised by learned counsel for the parties it is
required to be thus considered whether the negative covenant in
Clause 6 of the MOU dated 6th January, 2017 is (a) contrary to Section
27 of the Indian Contract Act, (b) is void being unconscionable and
harsh thus driving the defendant to idleness and/or (c) was got entered
into under "undue influence", thus void in terms of Section 10 and 16
of the Indian Contract Act.
14. Section 27 of the Indian Contract Act holds an agreement
restraining a person from exercising a lawful profession, trade or
business of any kind to be void, subject to the exception wherein a
person sells the goodwill of a business thereby agreeing to refrain
CS(COMM) 465/2017 Page 11 of 24
from carrying on a similar business. Teaching is a lawful profession
and any agreement which restrains a person from exercising a lawful
profession would be void to the said extent.
15. Learned counsel for the plaintiff has heavily relied on the
decision of the Supreme Court in Niranjan Shankar Golikari (supra)
wherein dealing with the negative covenant in a contract of
employment it was held:
"20. 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 & Son Ltd. 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 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 therefore against public policy.
21. 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 17 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 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.
16. The negative covenant as noted in Clause 6 of the MOU dated
6th January, 2017 restrains the defendant from imparting private tuition
to any student whether of the plaintiff's coaching institute or any other
coaching institute or having any interest in any other educational
coaching institute unless otherwise expressly permitted by the
coaching institute till the agreement subsists. Thus clause 6 of the
MOU dated 6th January , 2014 does not fall foul of the decision of the
Supreme Court in Niranjan Shankar Golikari (supra) to the extent it
does not restrain the defendant from carrying out the profession after
the expiry of the period of agreement.
17. Supreme Court in the decision reported as (1981) 2 SCC 246
Superintendence Company of India (P) Ltd. Vs. Shri Krishan Murgai
reiterated the law laid down in Niranjan Shankar Golikari (supra) and
held:
"58. The drafting of a negative covenant in a contract
of employment is often a matter of great difficulty. In the
employment cases so far discussed, the issue has been
as to the validity of the covenant operating after the end
of the period of service. Restrictions on competition
during that period are normally valid, and indeed may
be implied by law by virtue of the servant's duty of
fidelity. In such cases the restriction is generally
reasonable, having regard to the interest of the
employer, and does not cause any undue hardship to the
employee, who will receive a wage or salary for the
period in question. But if the covenant is to operate after
the termination of services, or is too widely worded, the
court may refuse to enforce it.
59. It is well settled that employees covenants should
be carefully scrutinised because there is inequality of
bargaining power between the parties; indeed no
bargaining power may occur because the employee is
presented with a standard form of
contract to accept or reject. At the time of
the agreement, the employee may have given
little thought to the restriction because of his eagerness
for a job; such contracts "tempt improvident persons,
for the sake of present gain, to deprive themselves of the
power to make future acquisitions, and expose them to
imposition and oppression."
60. There exists a difference in the nature of the
interest sought to be protected in the case of
an employee and of a purchaser and, therefore, as
a positive rule of law, the extent of restraint permissible
in the two types of case is different. The essential line of
distinction is that the purchaser is entitled to protect
himself against competition on the part of his vendor,
while the employer is not entitled to protection against
mere competition on the part of his servant. In addition
thereto, a restrictive covenant ancillary to a contract of
employment is likely to affect the employee's means or
procuring a livelihood for himself and his family to a
greater degree than that of a seller, who usually receive
ample consideration for the sale of the goodwill of his
business.
61. The distinction rests upon a substantial basis,
since, in the former class of contracts we deal with the
sale of commodities, and in the latter class with the
performance of personal service-altogether different in
substance; and the social and economic implications
are vastly different.
62. The Courts, therefore, view with disfavour a
restrictive covenant by an employee not to engage in a
business similar to or competitive with that of the
employer after the termination of his contract of
employment.
63. The true rule of construction is that when a
covenant or agreement is impeached on the ground that
it is in restraint of trade, the duty of the Court is, first to
interpret the covenant or agreement itself, and to
ascertain according to the ordinary rules of
construction what is the fair meaning of the parties. If
there is an ambiguity it must receive a narrower
construction than the wider. In Mills v. Dunham, L.R.
[1891] 1 Cha 576 Kay, LJ. observed: If there is any
ambiguity in a stipulation between employer and
employee imposing a restriction on the latter, it ought to
receive the narrower construction rather than the
wider-the employed ought to have the benefit of the
doubt. It would not be following out that principle
correctly to give the stipulation a wide construction so
as to make it illegal and thus set the employed free from
all restraint. It is also a settled canon of construction
that where a clause is ambiguous a construction which
will make it valid is to be preferred to one which will
make it void.
64. The restraint may not be greater than necessary
to protect the employer, nor unduly harsh and
oppressive to the employee. I would, therefore, for my
part, even if the word 'leave' contained in Clause 10 of
the agreement is susceptible of another construction as
being operative on termination, however, accomplished
of the service e.g. by dismissal without notice, would,
having regard to the provisions of Section 27 of the
Contract Act, 1872, try to preserve the covenant in
Clause 10 by giving to it a restrictive meaning, as
implying volition i.e. where the employee resigns or
voluntarily leaves the services. The restriction being too
wide, and violative of Section 27 of the Contract Act,
must be subjected to a narrower construction."
18. In the decision reported as 2015 (149) DRJ 88 Arvinder Singh
& Anr Vs. Lal Path Lab Pvt. Ltd. & Ors. the Division Bench of this
Court dealing with a non-compete covenant in the agreement held:
4. The appellants incorporated the company M/s.
Amolak Diagnostics Pvt. Ltd. 100% equity of which
was held by them. On November 24, 2009 M/s. Amolak
Diagnostics Pvt. Ltd. acquired the assets and liabilities
of M/s. Piramal Diagnostics Services Pvt. Ltd. It was
followed by a share purchase agreement dated January
21, 2011 under which the first respondent: Dr. Lal
Pathlabs Pvt. Ltd. acquired all the shares of M/s.
Amolak Diagnostics Pvt. Ltd. and took over the
business and assets of M/s. Amolak Diagnostics Pvt.
Ltd. This agreement has a non-compete covenant
(10.4.1) which reads as under:-
"10.4.1 Non-Compete. From the Completion
Date, the Sellers shall not, directly or indirectly,
at any point of time, whether through partnership
or as a shareholder, joint venture partner,
collaborator, employee, consultant or agent or
through relative or in any manner whatsoever,
whether for profit or otherwise, carry on any
business which competes directly or indirectly
with the whole or any part of the business carried
on by the Company on the Completion Date. The
Sellers expressly agree that they shall not engage
in any business which competes directly or
indirectly with the Company, whether during the
continuance of their agreement for providing
their services to the Company or thereafter. It is
hereby made clear that going forward at any
point of time the Sellers whether they are
associated or not with the Purchaser will engage
directly or indirectly in any business which
competes with the business of the Purchaser."
28. ...
29. ...
30. Concerning the decisions cited by learned counsel
for Dr. Lal Pathlabs Pvt. Ltd. to urge that law draws
no distinction between a profession and a business, we
note that S. Mohan Lal's case (supra) was concerned
with Section 10(3)(a)(iii) of the Andhra Pradesh
Buildings (Lease Rent and Eviction) Control Act, 1960
which conferred a right on the landlord to evict the
tenant on the ground that the landlord requires the
premises for the purposes of carrying a 'business'. The
landlord was an advocate and had sought to evict the
tenant on the ground that he needed the premises for
his professional activity. The tenant urged that there
was a clear distinction between 'business' and
'profession' and highlighted that the practice of a
liberal profession like that of a doctor was not
commercial like a business. The court held that the
expression 'business' and 'profession' had not been
defined under the Act and that they are common
expressions used by themselves and sometimes in the
collocation of words as in 'business', 'profession', and
'trade'. The Court held that the word 'business' had
large and wide implication, capable of various
meaning, depending upon its use in the statute. In the
broadest sense, business meant everything that
occupies the time, attention and labour of men for the
purpose of profit. In the narrow sense it is confined to
commercial activity. The court held that the meaning of
a word in a statute must be gleaned from the context in
which it is used. With reference to the context in which
the word 'business' occurred in the statute the Court
held that the scheme of the Act was to prevent
unnecessary eviction of a tenant by a landlord and that
in the context of the purpose of the statute carrying on
business would be in the wider sense of the meaning of
the word 'business'.
66. ...
67. ...
68. The injunction granted by the learned Single Judge
against the appellants is: 'are restrained from carrying
on practice/business/profession as a Pathologist or as
a Radiologist in the city of Udaipur in any manner
whatsoever including by providing consultancy
services or by associating with any other person or
body providing such services'.
69. The reasoning of the learned Single Judge is
obviously on the basis that the activity of a profession
is akin to that of a business, for if this was not the
reasoning, the exception to Section 27 of the Contract
Act would not even apply. Such agreements not to
carry on business if goodwill of a business is sold,
subject to the restriction being reasonable, are alone
carved out from the general embargo embossed by
Section 27 of the Contract Act.
70. The sweep of the span of the injunction to prohibit
the appellants to carry on their profession as
Pathologist or Radiologist in any manner whatsoever
would render the appellants incapable of working as a
Pathologist or Radiologist in any capacity whatsoever,
and this would be contrary to Section 27 of the
Contract Act.
71. Of course, the appellants cannot overtly or covertly
carry on a business of running a Pathlab or a X-ray
Diagnostic Centre by forming a venture where the
organizational structure has the essential attributes of
a business i.e. employing workmen, laboratory
technicians, paramedics etc; what we mean to say a
hierarchal structure where work is assigned to
different people, all working towards a common goal
to earn profit.
19. As noted above, Clause 6 of the MOU dated 6th January, 2017
which incorporates the negative covenant does not extend beyond the
period of agreement and further it does not restrain the defendant from
carrying out his lawful profession as a teacher. What is restricted is
that during the subsistence of the agreement between the parties, the
defendant would not impart private tuitions to any student whether of
the plaintiff's coaching institute or any other coaching institute. Thus
de-hors a coaching institute, the defendant would be within his legal
right to carry on his professional activities even during the subsistence
of the period of agreement.
20. The next claim of the defendant that the negative covenant in
the MOU is unconscionable and harsh is based on the pleadings in the
reply to the application wherein the defendant has claimed that despite
understanding that the defendant would be paid on hourly basis and
the rate would be revised from time to time, the same was not adhered
to. However, defendant in para 4 of the reply has admitted that when
the defendant joined the plaintiff company initially on 20th June, 2013
he was paid approximately ₹400 per hour, which was increased to
₹650 per hour and then to ₹1200 per hour and lastly around
November, 2016 the same was revised to ₹1500 per hour.
21. The grievance of the defendant is that after May 2015 on the
split in the management of the plaintiff company, the defendant was
sidelined and the situation at the plaintiff company became unbearable
forcing the defendant to leave the plaintiff company. It is pleaded by
the defendant that the defendant was humiliated and ill-treated through
various means like backbiting, spreading false rumours, not giving
sufficient hours or batches to the defendant, making defendant run
from pillar to post and literally beg on a monthly basis for his rightful
dues and threatened to dire consequences. It is to be noted that
according to defendant these circumstances started after May 2015
and continued till July 2017 when the defendant left the plaintiff
company and joined the rival company M/s. K.D. Campus Pvt. Ltd.
For the purposes of addressing arguments in this application learned
counsel for the defendant fairly submitted that though the case of the
defendant is that he did not enter into any such agreements and
signatures were taken on blank pages, however for the present
application it be deemed that he had entered into a MOU vide 6 th
January, 2017 with the plaintiff. If that be so the defendant having
been sidelined since May 2015 he ought not to have and would not
have entered into the MOU dated 6th January, 2017 for a further period
of three years, since it is the case of defendant himself that the
circumstances for him turned hostile after May 2015. In view of the
foregoing discussion it cannot be said that the negative covenant was
void being unconscionable and harsh.
22. Contention of learned counsel for the defendant that the
circumstances in the plaintiff institute being harsh and the defendant
not being able to carry on any work at the plaintiff institute an
injunction on the teaching activity of the defendant would drive him to
idleness ignores the specific terms of Clause 6 of the MOU wherein
imparting private tuition to a student of the plaintiff institute or other
coaching institute is prohibited, however the defendant is not
restrained from carrying out his professional activity of teaching
students who are not enrolled with any coaching institute. Thus the
negative covenant cannot be said to be contrary to Section 27 driving
the defendant to idleness and thus void ab-initio.
23. It is further urged by learned counsel for the defendant that the
MOU dated 6th January, 2017 is a standard form contract obtained by
'undue influence' as merely the blanks have been filled and the
defendant was in no position to negotiate the terms of settlement
between the parties.
24. In Central Inland Water Transport Corporation (supra) relied
upon by Learned Counsel for the defendant, Supreme Court dealing
with the term 'undue influence' as defined under Sub-Section 1 of
Section 16 of the Indian Contract Act held that if a contract falls under
the head of 'undue influence' it would be voidable but if it falls under
the head of "being opposed to Public Policy" the same would be void.
Noting the history and how at common law contracts contrary to
Public Policy or to commit a legal wrong were considered illegal or
void, Supreme Court noted the emergence of theory in the recent years
in the sphere of law of contracts based on the test of reasonableness or
fairness of a Clause in a contract where there is inequality of
bargaining power. The test applied was that the Clause in the contract
should be so unreasonable or applies so unreasonably so as to be
unconscionable. Setting out some of the illustrations where the Court
will not enforce such an unconscionable contract, Supreme Court held
that it may apply to situations in which the weaker party is in a
position to obtain goods or services or means of livelihood only upon
the terms imposed by the stronger party or go without them, thus
leaving to a man no choice or rather no meaningful choice but to give
his assent to a contract or to sign on the dotted line in a prescribed
form contract, however unfair, unreasonable and unconscionable a
clause in that contract or form or rules may be.
25. In the entire pleadings there is no averment of the defendant that
when he agreed to enter into MOU dated 6th January, 2017 he was left
with no choice but to sign the present contract. The plea of the
defendant that he had taken loan from the plaintiff company and was
under obligation is also defied by the averment that a huge amount of
his remuneration was due towards the plaintiff. Thus there is no prima
facie material before this court to come to the conclusion that the
contract was entered into under undue influence and thus void in terms
of Sections 10 and 16 of the Contract Act.
26. Though learned counsel for the plaintiff has vehemently
submitted that defendant's leaving the plaintiff's institute has
adversely affected the coaching of the students, who had enrolled with
the plaintiff's institute on the assurance that the defendant would be
teaching them, however no such material has been placed on record to
prove this assertion. Moreover, this Court cannot direct the defendant
to continue teaching at the plaintiff institute as a contract for personal
service is unenforceable.
27. Considering the nature of the contract including the Clause 6 of
the MOU dated 6th January, 2017 and the discussion aforesaid, this
Court deems it fit to pass a partial restraint order against the
defendant. The defendant is restrained from imparting private tuition
to any student of the plaintiff's coaching institute or any other
coaching institute till 5th January, 2020 i.e. till the MOU dated 6th
January, 2017 subsists. This injunction order would however not be a
restrain on the defendant teaching students who are neither enrolled
with the plaintiff's institute or any other coaching institute.
28. Application is disposed of.
(MUKTA GUPTA)
JUDGE
AUGUST 24, 2017
'vn
