Delhi High Court
Deepayan Mohanty vs Cargill India Pvt Ltd & Ors. on 3 August, 2018
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on :19th July, 2018
Date of Decision: 3rd August,, 2018
+ CS (OS) 1157/2014& I.As.317/2016, 1042/2016, 3045/2016,
3047/2016
DEEPAYAN MOHANTY ..... Plaintiff
Through: Mr. Neeraj Malhotra, Senior
Advocate with Mr. Rohit Puri and
Mr. Aditya Chhibber, Advocates (M-
9810646822).
versus
CARGILL INDIA PVT LTD & ORS. ..... Defendants
Through: Ms. Rashmi Chopra, Advocate for
Defendant No.1 (M-9810311218)
Mr. Shadan Farasat and Mr. Ahmed
Said, Advocates for D-2 & 3(M-
9818009824).
CORAM:
JUSTICE PRATHIBA M. SINGH
JUDGMENT
Prathiba M. Singh, J.
1. The Plaintiff, Mr. Deepayan Mohanty (hereinafter „Plaintiff‟) has
filed the present suit under Order XXXVII CPC seeking recovery of a sum
of Rs. 3,25,56,496/- along with interest against the Defendants which are the
Cargill Group of Companies (hereinafter together referred as „Cargill).
Cargill India Pvt. Ltd (Defendant No. 1) is the Indian subsidiary of the
Cargill Group. The Plaintiff was employed in Defendant no.1 and was
reporting to Cargill, TSF Asia Pvt. Ltd based in Singapore (Defendant No.
3), which is in turn a part of the Cargill Financial Services Company, a
company incorporated in Delware, USA (Defendant No. 2).
2. The Plaintiff joined Bharat Cargill Holdings Pvt. Ltd. in November,
1996 and was transferred to Cargill India Pvt. Ltd in 1997. He was drawing
his salary from the Indian company i.e. Defendant No.1. Within the Cargill
Group, the Plaintiff belonged to a business unit called Trade and Structured
Finance (TSF business) and was looking after the business of the group in
India, Sri Lanka and Bangladesh. He was reporting to the head of the TSF
business for Asia and Europe, who was employed by the Singapore
Company, who in turn reported to the global head of TSF business based in
the U.S. working in Defendant No. 2.
3. According to the plaint, in view of the business generated by the TSF
unit, which was headed by the Plaintiff, he was awarded a bonus of USD
510,000 for the year 2007-08. The award of the said bonus was
communicated to him by an internal memo dated 24th July, 2008. The award
was split 50-50. 50% comprised a cash award, which was paid to the
Plaintiff and 50% was retained as a deferred incentive award. USD 255,000
was paid to the Plaintiff at the relevant time and the remaining was deferred
over a period of three years and was to be given to him with interest.
4. Though the award was in U.S. dollars, the same was paid in Indian
rupees and was reflected in the salary slip of the Plaintiff. During the time
that the deferred incentives were yet to be paid by Cargill to the Plaintiff, he
was awarded another incentive award for the fiscal year 2008-09. The bonus
of USD 575,000 was awarded on 27th July, 2009 out of which USD 287,500
was the cash award and the balance USD 287,500 was the deferred incentive
award.
5. According to the Plaintiff, the amounts which were awarded to him
and stood vested in him were as follows:
"(a)USD 525,000 for the fiscal year 1st June, 2006 -
31st May, 2007;
(b)USD 510, 000 for the fiscal year 1st June, 2007 -
31st May, 2008; and
(c)USD 575,000 for the fiscal year 1st June, 2008 - 31st
May, 2009."
6. From the said amounts, 83.33% of the amount for 2006-07, 66.67% of
the amount for 2007-08 and 50% of the amount for 2008-09 was paid and
the balance remained outstanding. The balance, according to the Plaintiff,
was USD 545,000 along with USD LIBOR1 + 1%.
7. The Plaintiff resigned from Defendant No.1 on 7th December, 2009
which was accepted on the same day and he was relieved from duty on 7 th
January, 2010. In January, 2012, when the Plaintiff approached the
Defendants for payment of the balance incentive award, he was informed
that he had to sign a statutory declaration as per the terms and conditions
specified by the U.S/Singapore Company. He furnished the declaration on
24th January, 2012. On 8th February, 2012, he received an undated letter
stating that upon review it was found that the Plaintiff did not comply with
the terms and conditions of the incentive award and hence the payment was
not liable to be made.
8. A legal notice dated 23rd May, 2012 was issued on behalf of the
Plaintiff calling upon the Defendants to pay the outstanding amount. Vide
letter dated 6th June, 2012, the Defendants refused to pay the said amount. A
further letter was written on behalf of the Plaintiff dated 10th September,
(LIBOR or the London Interbank Offered Rate is a benchmark rate for short-term interest rates
which is used by some of the leading banks of the world. It is used for pricing of interest rate
swaps, currency rate swaps and mortgages.)
2012. Attention was sought to be drawn to a decision of the Singapore Court
of Appeal in a similar fact situation, and a plea was made for the payment of
the outstanding sums. Thereafter, a letter of notice dated 12th September,
2012 under Sections 433 and 434 of the Companies Act, 1956 was also
issued, seeking winding up. However, vide letter dated 4th October, 2012,
the Plaintiff was informed that the deferred incentive amount was forfeited
as per the forfeiture provisions of the incentive awards. Thus, the Plaintiff
filed the present suit praying for a decree in Indian Rupees equivalent to
USD 5,45,000 along with USD LIBOR+ 1%. All the Defendants have put in
their appearances and they have also filed the applications for leave to
defend being I.As.1042/2016, 3045/2016 and 3047/2016.
Stand / submissions of parties
9. Defendants No. 2 and 3 have filed leave to defend through one Mr.
Nitesh Kumar and the leave to defend on behalf of Defendant No.1 is filed
by the Director, Human Resources, Mr. Ravi Parmeshwar. Defendant No.1
challenges the territorial jurisdiction of this court, though the same was not
pressed in oral arguments. Reliance is also placed on an internal memo and a
note therein which reads as under:
"Employees must be currently employed by Cargill as
of the date of the distribution of an Award"
Cargill India pleads that the claim in respect of the award should be made
against Defendant No.2 i.e. Cargill USA. It is further argued that the
Plaintiff seriously and materially breached the terms of his employment
during his employment with Defendant No.1 by establishing a competing
company and misusing his position. The same was without the approval of
the Cargill Group. It is argued that the Plaintiff set up a company by the
name M/s. Kredence Global Services Private Limited which was named as
Hemera India Private Limited and then changed to Hemera Global Trade
Private Limited. According to Defendant No.1, there are various e-mails on
record which show that he was running a parallel business during his
employment with the Defendant No.1 company and that he also used the
services of his colleagues in Cargill to set up his parallel business.
Defendant No.1 also relied on the forfeiture provisions in the incentive
award to argue that since the Plaintiff is doing a competing business within a
period of two years after his resignation, the Defendant is entitled to forfeit
the amount. Defendant No.1 also argues that the registered office of Hemera
Group and Kredence Group are the same and since the Hemera Global
Trade Private Limited incorporated prior to the Plaintiff leaving the
Defendants, the Plaintiff had breached his fiduciary obligations towards the
Defendants. It is further pleaded that the 50% deferred incentive is in the
nature of loyalty bonus payment and since the Plaintiff breached his loyalty
obligation after leaving employment, he is not entitled to the deferred
incentive payment. It is further argued that the unpaid amount, as per the
forfeiture provisions is a genuine and reasonable pre-estimate of the loss
which would be suffered by the Defendant group upon the employee
violating the forfeiture provision. Defendant No.1 further states that the
forfeiture provision is valid in law and is not in restraint of trade and that the
Plaintiff had also given a false declaration, having not clarified with the
Defendants about his business interest with Hemera.
10. The leave to defend applications were taken up for hearing on 5th July,
2018. Mr. Neeraj Malhotra, Ld. Senior Advocate appeared on behalf of the
Plaintiff and submitted that the deferred incentive is nothing but an amount
which was to be paid to the Plaintiff even though he had resigned from the
company. The Plaintiff, who was an excellent employee, headed a crucial
business unit of Trade and Structure Finance (TSF). He continuously earned
incentives due to the performance of his unit. Due to the revenues earned by
the unit for the group, financial incentives are given to people who occupy
high positions within the group and produce good results during their
employment. It is further submitted that the clauses in the incentive award
do not permit forfeiture of this nature and the amounts are due for all the
three fiscal years. It is also submitted by Mr. Malhotra that the forfeiture
clause relied upon by Cargill is hit by Section 27 of the Indian Contract Act,
1872 and is in restraint of trade. He relies upon the decision of the Singapore
Court of Appeal in Mano Vikrant Singh v Cargill TSF Asia Pte Ltd., Civil
Appeal No. 149/2011 decided on 7th August, 2012 which interpreted the
identical contract in respect of Defendant No.3. Cargill Singapore, holding
that the clause which stipulated withholding of incentives is not enforceable.
11. On the other hand, Mr. Shadan Farasat and Ms. Rashmi Chopra
appearing for the Defendants submit that the Plaintiff was a high ranking
official with Cargill and both in law and in equity, a person who runs a
parallel competing business during his employment ought not to be
permitted to earn his incentives. It is submitted that the forfeiture clause
clearly applies in the present case inasmuch as the Plaintiff is doing
competing business within the period of two years after leaving Cargill. The
question whether he is in fact conducting a competing business or not is a
triable issue and the e-mails placed on record prima facie show that he was
indulging in wrongdoings both during his employment and thereafter with
the Cargill Group. He further argues that the bonus is not a part of the wages
and hence it cannot be claimed as a matter of right. Counsels have shown to
the court various e-mails to show how the Plaintiff‟s conduct has been
extremely suspicious and unbecoming of a person holding such a senior
position. They relied on the following judgments:
i). Mechelec Engineers & Manufacturers v. Basic Equipment
Corporation (1976) 4 SCC 687
ii). IDBI Trusteeship Services Ltd. v. Hubtown Ltd. (2017) 1 SCC 568
iii). Niranjan Shankar Golikari v Century Spinning and Manufacturing
(1967) 2 SCR 378
iv). Braithwaite & Co. India Ltd. v. Employees' State Insurance
Corporation AIR 1968 SC 413
v). Regional Director, Employees State Insurance Corporation v. Bata
Shoe Co. (1985) 4 SCC 460
vi). Pandian Roadways Corporation v. Principal Labour Court 2002
ILLJ III Mad
vii). Rameshbhai Dabhai Naika v. State of Gujrat & Ors. (2012) 3 SCC
viii). Wipro Ltd. V Beckman Coulter (2006) 131 DLT 681
ix). Chittaranjan Das v Durgapore Project Ltd. (1995) 2 LL.N. 563
Analysis and Findings
12. Before proceeding further, it is pertinent to examine the terms and
conditions of the incentive award. The Plaintiff was awarded the incentive
award for the first time in the fiscal year 2006-07. The terms and conditions
of the said award state that the individual incentive awards are discretionary
and are based on individual team and business unit results. The award is
determined by the business unit leader with the approval of the platform
leaders and that all levels of employees, namely, salaried, exempt level
traders and key contributors are eligible participants in this deferred
incentive plan. The relevant provision of the plan is set out herein below:
"DEFERRED INCENTIVES
Deferred Incentives will be deferred for a period of one
(1) to three (3) Fiscal Years measured from the Grant
Date of the award, as a function of the Individual
Incentive Award amount, in accordance with the
schedule below. Deferred Incentives will be paid out in
annual installments over the deferral period. Each
annual installment is computed by dividing the total
outstanding Deferred Incentive balance (plus accrued
interest thereon) as of May 31 preceding the relevant
distribution date, by the years remaining in the deferral
period.
Individual Incentive Deferred Incentive Percentage
Award and Deferral Period
$74,999 and below 0% -No Deferred Incentive
$75,000 -$199,999 50% of Individual Incentive
Award deferred for 1 Fiscal
Year from Grant Date
$200,000- $399,999 50% of Individual Incentive
Award deferred over 2 Fiscal
Years from Grant Date(2
annual payments)
$400,000and greater 50% of Individual Incentive
Award deferred over 3 Fiscal
Years from Grant Date(3
annual payments)
Interest Rate Applied to Deferred Incentives
Deferred Incentive amounts will earn interest at the one-
year USD LIBOR plus one percent per annum spread,
which will be compounded annually. The USD LIBOR +
1% will be set each Fiscal Year based on the prevailing
one year USD LIBOR as quoted by Cargill Treasury on
June 1st (or the next working day) of each succeeding
Fiscal Year. Interest will be calculated annually over the
remaining deferral period based on the remaining
unpaid balance (including previous interest amounts
calculated but not paid).
FORFEITURE PROVISIONS
Deferred Incentives that have been awarded but not yet
distributed will be forfeited if the Participant (1) is
Terminated for Cause, or (2)(a) voluntarily separates
from service with the Company or is Terminated for
Sub-standard Performance, and (b) continues a career
within the financial or commodity trading industry
outside of the Company within a period of 2 years from
the date of termination (referred to as the Two-year,
Non-compete period). Continuance of a career within the
financial or commodity trading industry is defined as
employment by, consulting with, establishing, or having
a substantial ownership interest in any organization,
which competes with the Company for employees,
customers, clients, market share, or financial/commodity
resources or deals.
Deferred Incentives will not be forfeited under the
following circumstances:
A Participant's Reduction In Force (RIF), Disability or
death.
A Participant who voluntarily separates from service
with the Company, Retires from the Company, or is
Terminated for Sub-standard Performance and who does
not compete within the Two-year, Non-compete period.
In the event that a Participant seeks to engage in activity
or an employment relationship that may violate the Two-
year Non-compete period. Participants may seek
clarification relative to the acceptability of this
relationship from the Business Unit or Platform leader.
PAYMENT SCHEDULE
Cash Awards
Cash Awards will be paid no later than August 15th after
the Grant Date. For Non-US Participants, payment will
be based on the foreign exchange rates in effect on the
date to be specified in accordance with corporate policy.
Non-U.S. Participants should confirm the payment date
and foreign exchange rate with local Human Resources.
Deferred Incentives
1. For current Participants:
Deferred Incentive awards will be paid in one or more
installments (as applicable) over the Participant's
respective deferral period. Payments will begin one
Fiscal Year end following the Grant Date, and each
payment will be distributed within 60 days of each Fiscal
Year end.
2. For terminated Participants due to a RIF, Disability,
or death:
Deferred Incentive amounts will be paid within sixty (60)
days of the date of RIF, Disability, Retirement or death
("Qualifying Event Date") as a lump sum payout of
outstanding Deferred Incentive amounts due plus any
accrued interest as of the Qualifying Event Date.
3. For all other terminated Participants, including
Retirees, whose Deferred Incentives have not been
forfeited in accordance with the Forfeiture provisions:
Deferred Incentives will be paid within 60 days after the
Two-year Non-compete Period expires at which time the
Participant will receive a lump sum payout of
outstanding Deferred Incentives and accrued interest.
The final period accrual is calculated based on the
timeframe between June 1st of the prevailing Fiscal Year
and the day the Two-year Non-compete period expires.
Participants will be required to complete a statement to
certify that they have successfully fulfilled the Two-year
Non-compete period before they will be eligible for
payment. The determination of whether or not the non-
compete provisions have been successfully fulfilled will
be determined at the sole discretion of the Business Unit
Leader and Platform Leaders.
No Participant will be eligible to receive a distribution of
any Individual Incentive Award other than as specified in
this Plan."
13. A perusal of this clause showed that it has various elements i.e.
i) It is awarded on the basis of performance during the course of
employment;
ii) 50% is paid as an immediate cash award;
iii) The remaining 50% is paid in a period of one year or two year or
three year period. The higher the amount, the longer the deferred
period;
iv) Every deferred payment earns interest at the end of the year, of
USD LIBOR + 1% per annum spread to be compounded annually;
v) The cash award is payable before 15thAugust after the grant date;
vi) For non-US participants, foreign exchange rates would be
applicable as per the corporate policy.
vii) For those persons who leave employment, the deferred incentive
has to be paid in lumpsum along with interest, within 60 days after the
two years non-competing period expires;
viii) At the end of the 60 days period after two years, the person
receives a lumpsum payment of their entire deferred incentive along
with accrued interest.
14. Thereafter the Plaintiff is awarded for the year 2007-08. The award
dated 24th July, 2008 clearly recognizes the Plaintiff‟s performance for the
year 2007-08 fiscal by an internal memo. On 27th July, 2009, a further award
for 2008-09 was made. These documents are not disputed by the
Defendants. The resignation of the Plaintiff was accepted vide letter dated
7th December, 2009 in the following terms:
"December 7, 2009
Mr. Deepayan Mohanty
Sub- Acceptance of your Resignation
Dear Deepayan,
Kindly refer to your letter dated December, 7, 2009
resigning from the service of Business Head - TSF and
Country Treasurer.
This is to inform you that your resignation has been
accepted and you will be relieved from your duty w.e.f.
January 7, 2009.
Please acknowledge receipt of this letter by signing
and returning the duplicate copy of this letter.
Wishing you success in your future endeavours.
With regards.
Yours sincerely,
For Cargill India Pvt. Ltd.
(Sd/-)
Director HR
(Ravi Paremeshwar)"
Thereafter, when the period of two years expired, the Plaintiff sent a claim,
on 11th January, 2012. He was asked to sign the statutory declaration form
duly notarized. The Plaintiff then submitted his statutory declaration and
clearly disclosed that he was appointed as a Director in Hemera India
Private Limited and Hemera Global Trade Private Limited. Thereafter, by an
undated letter, he was informed as under:
"Dear Deepayan,
1. We refer to our letter dated 11 January 2012, and
your statutory declaration dated 24 January 2012.
2. The Business Unit Leader and Platform Leaders,
having reviewed the matter, have determined that you
have not complied with the Terms and Conditions of
Incentive Award.
3. Therefore, we regret to inform you that you are not
eligible to receive your Deferred Award.
4. For the avoidance of doubt, all of our rights are
reserved.
Your sincerely.
For Cargill India Private Limited
Ross Hamou- Jennings
Managing Director, TSF Europe & Asia"
15. The facts, thus far, are not in dispute. The sequence of events shows
that at the time when the Plaintiff resigned from the Cargill Group, the
Defendants did not have any complaint against him. Further, the incentive
awards were also given after assessing the performance during his
employment. The argument now made to refuse the disbursement of the
remaining portion of the incentive awards is that the Plaintiff violated his
obligations with Cargill by engaging in competing business:
a) during the course of employment; and
b) within the period of two years after the cessation of employment.
16. The violation if any as per (a) above i.e. during the course of the
employment is not the subject matter of this suit, in as much as no issue was
raised at the time of accepting his resignation and the forfeiture clause does
not recognize conduct during the course of employment as being one of the
reasons for forfeiting the deferred incentive. The only reason that can be
given by Cargill to justify forfeiture is that the Plaintiff has engaged in a
competing business within the two year period after his employment ceased
with Cargill. Further, the note in the internal memo as extracted in para 9
above, only means that the award of the incentive cannot be made after a
person ceases to be an employee. As per the scheme, those employees who
leave the company who have already been awarded, can receive 50% after
they leave employment.
17. The first and foremost question is whether the forfeiture clause is
valid and enforceable in law.
18. The forfeiture clause is clear: If a person engages in a competing
business/service within the two years period after leaving Cargill, the
outstanding amount can be forfeited. It is the settled position, in India at
least, that no employer has a right to restrain an employee from taking up
competing employment after the term of employment. Such a clause is
invalid and unenforceable as per Section 27 of the Indian Contract Act,
1872. But what Cargill is doing in the present case is not restraining him
from pursuing his competing business but refusing to disburse the balance
incentive award amount to him since he allegedly engaged in a competing
business. Can such a clause be held to be valid and enforceable? The answer
to this question depends upon the nature of the sum being withheld. The
deferred incentive is an amount which was awarded to an employee as a
reward for good performance `during the course of employment‟. The said
amount is awarded in full in favour of the employee. Only the payment is
postponed partially and for the postponement of the payment, interest is also
paid by Cargill to the employee. Thus, the amount belonging to the
employee is being withheld by Cargill. Ideally, the entire amount ought to
be disbursed at the time when it was awarded but as a part of Cargill‟s
company policy it is being deferred. If the deferment is to enforce a clause
which is otherwise unenforceable, the forfeiture based on the said clause, is
itself illegal. The amount does not belong to Cargill. It belongs to the
employee and Cargill is merely making the employee agree to take the
amount with interest after the period of two years. That does not mean that
under the garb of paying interest, Cargill can forfeit something on the basis
of an invalid and unenforceable clause in the agreement. The terms used in
the clause, namely, "forfeiture", and "awarded but not yet distributed"
clearly show that the amount vests in the employee and only the
disbursement is deferred. The fact that interest is being paid on the unpaid
incentive amount also shows that the intention of Cargill seems to be merely
enforce conditions on employees which cannot otherwise be enforced in
law, at least in India. The condition in an employment contract that an
employee cannot engage in competing business after employment for any
period is, in restraint of trade, as is clear from a reading of Percept D'Mark
India Pvt. Ltd. v Zaheer Khan, (2006) 4 SCC 227(hereinafter referred as
„Percept D‟Mark India‟) , and Niranjan Shankar Golikari (supra).
The Supreme Court in Percept D'Mark India (supra), held as under:
"54. On the pleadings contained in the arbitration
petition, there can be no escape from the conclusion
that what the appellant sought to enforce was a
negative covenant which, according to the appellant,
survived the expiry of the agreement. This, the High
Court has rightly held is impermissible as such a
clause which is sought to be enforced after the term of
the contract is prima facie void under Section 27 of the
Contract Act.
...
56. The legal position with regard to post-contractual
covenants or restrictions has been consistent,
unchanging and completely settled in our country. The
legal position clearly crystallised in our country is that
while construing the provisions of Section 27 of the
Contract Act, neither the test of reasonableness nor the
principle of restraint being partial is applicable, unless
it falls within express exception engrafted in Section
27.
...
63. Under Section 27 of the Contract Act: (a) a
restrictive covenant extending beyond the term of the
contract is void and not enforceable, (b) the doctrine of
restraint of trade does not apply during the
continuance of the contract for employment and it
applies only when the contract comes to an end, (c) as
held by this Court in Gujarat Bottling v. Coca-
Cola [(1995) 5 SCC 545] this doctrine is not confined
only to contracts of employment, but is also applicable
to all other contracts."
In Niranjan Shankar Golikari(supra), the Court held
as under:
"17. 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 ..."
Thus, the obligation not to join a competitor or run a competing business,
after the term of employment being contrary to Indian law, the forfeiture
clause to the said extent is unenforceable and is in restraint of trade.
19. There is yet another dimension to the forfeiture clause: By the said
clause, the company seeks to abrogate money which vests in the employee.
This would also be in restraint of trade. The Court of Appeal in Singapore
had the occasion to deal with this very clause in the case of an employee of
Defendant No.3. The said Court in Singapore discusses the nature of the
very same Deferred incentive scheme of Cargill in the context of the laws of
Singapore. While in Singapore, a reasonable covenant, post-employment
may be enforceable, the decision goes on to hold that even under the law in
Singapore, a clause which forfeits something which is awarded but not
distributed is in restraint of trade inasmuch as the analysis of the court is that
the money already vests with the employee and does not belong to Cargill.
The relevant portion of the said judgment is set out below:
"31. ...Indeed, the Forfeiture Provision expressly
states that it relates to "Deferred Incentives [viz, the
Deferred Incentive Award] that have been awarded but
not yet distributed" [emphasis added]. The fact that
interest would apply to these deferred awards further
suggests that the money was the employee‟s and he had
a right to collect the interest from the deferred sum.
The Respondent‟s argument that the monies were
merely being offered to the employee and were thus not
vested cannot be reconciled with the wording and
substance of both the letter announcing the bonus
award and the accompanying T&Cs. It is clear that the
Forfeiture Provision pertains to monies which were
vested at the time the bonus was declared by way of the
internal memo.
32. Further, it is also expressly stated in the
Forfeiture Provision that the Deferred Incentive Award
would be "forfeited" if the Appellant, inter alia,
"continues a career within the financial or commodity
trading industry outside of the Company [the
Respondent] within a period of two years from the date
of such Separation from Service (referred to as the
"Two Year Non Compete Period")" [emphasis added].
It bears repeating, in this regard, that the heading of
the Forfeiture Provision reads - significantly, in our
view - "Forfeiture Provisions" [emphasis added]. In
our view, if the Deferred Incentive Award had not
already vested in the Appellant, there would have been
nothing to "forfeit" in the first instance. Put simply,
the express words of the Forfeiture Provision mean
precisely what they say, and one would have to be a
linguistic contortionist, so to speak, to arrive at a
different interpretation of this particular provision.
...
35. Given the fact that the Deferred Incentive Award
was already vested in the Appellant, this would mean
that the Appellant should, in principle, have been
entitled to that award even if he had decided to leave
the employment of the Respondent forthwith at the end
of his contract with the Respondent. In the
circumstances, to interpret - as the court below did -
the Forfeiture Provision as still giving the Appellant
the choice whether he wanted to continue in the
employment of the Respondent, albeit subject only to
the fact that he would forgo the Deferred Incentive
Award should he decide not to, with respect, does not
reflect the actual situation which the Appellant faced.
It was not, in our view, a real choice. The Forfeiture
Provision was akin to a sword of Damocles hanging
over the Appellant‟s head - programmed to fall should
the Appellant decide to leave the employment of the
Respondent and join a competitor. In point of fact,
however, such a sword ought never to have been there
in the first place given the fact that the Deferred
Incentive Award had already vested in the Appellant.
Put simply, the Forfeiture Provision operated, a
fortiori, to restrain the Appellant from leaving the
employment of the Respondent to join a competitor, by
way of a threat to forfeit a not insubstantial financial
reward which had already vested in the Appellant
should he (the Appellant) in fact leave the employment
of the Respondent to join a competitor
...
41. We have, in fact, already set out our views on the
nature of the Forfeiture Provision. In particular, we
have found that, given that the Deferred Incentive
Award was already vested in the Appellant and that the
Forfeiture Provision operated to restrain the Appellant
from leaving the employment of the Respondent to join
a competitor, by way of a threat to forfeit a not
insubstantial financial reward which had already
vested in the Appellant should he (the Appellant) in
fact leave the employment of the Respondent to join a
competitor (see, especially, above at [35]), the
Forfeiture Provision is, in our view, indeed a
"restraint" that brings that clause within the ambit of
the doctrine of restraint of trade (indeed, we pause to
observe, parenthetically, that such a situation is no
different, in substance, from that in the Australian
Privy Council decision of Stenhouse Australia Ltd v.
Marshall William Davidson Phillips [1974] 1 AC 391
(the only difference, if at all, consisting in the fact that
this last mentioned case constituted an even more
obvious situation since the commission sought to be
forfeited pursuant to the clause concerned would in
fact be earned independently by the former employee
post employment)..."
A perusal of the above extracts shows that the condition by which the
contract seeks to impose a power of forfeiture would by itself be in restraint
of trade as the amount belongs to the employee. This Court concurs with the
above view. Abrogation of the amount would be in restraint of trade.
20. Ld. Counsel Mr. Farasat has relied vehemently on various decisions to
distinguish between `Bonus‟ and `Wages‟. The said decisions are rendered
under various enactments such as Employees‟ State Insurance Act, 1948
Payment of Wages Act,1936 and the Industrial Disputes Act, 1947. It is true
that Bonus cannot be claimed as a matter of right. But that is not the issue
arising in the present case. In the present case, the incentive has already been
awarded and only its part disbursement is postponed. The said decisions are
thus not applicable.
21. On the basis of the above discussion, it is clear that even if all the
documents filed by Cargill are taken to be admitted and the conduct of the
Plaintiff is also to be taken as admitted i.e., he joined Hemera Global post
his employment, even then there is no triable issue. The Plaintiff himself
disclosed that he was working with Hemera Group. Kredence Global which
is the earlier name of Hemera Group was within the knowledge of the
Cargill Group as is evident from the e-mail dated 16th February, 2009, which
has been placed on record. The said email shows that Kredence was known
to the senior management of Cargill and was procuring clients for Cargill.
22. It is nigh possible that during the course of employment, the Plaintiff
may have been in a competing business which could be violative of the
terms of employment. However, those facts are not before the court. If the
Plaintiff has in fact indulged in any conduct which was in breach of the
employment agreement, it is for Cargill to take action in accordance with
law, if permissible at this stage. So far, as per Ld. Counsel for the
Defendants no action has been taken. This court is not commenting on the
Plaintiff‟s conduct which is reflected in the various e-mails inasmuch as the
only issue raised in this suit is in respect of the outstanding deferred
incentive amount which has been awarded to him. The factum of the award
has not been disputed and the conditions of the deferred incentive are also
not disputed. The resignation and the acceptance thereof are also not
disputed. Under these circumstances, the court is thus not embarking on an
adventure which is completely alien to the dispute in hand i.e. the payment
of the outstanding deferred incentive amount. The arguments on behalf of
Cargill i.e. that the conduct of the Plaintiff raises a triable issue may not be
correct inasmuch as the court in this case is not adjudicating the violation of
the employment contract or the alleged breach of fiduciary relationship
between the Plaintiff and the Defendants. The same would have to be
considered and adjudicated in appropriate proceedings if Cargill chooses to
file any.
23. As on date, when the court enquired as to whether the Defendants
took any action against the Plaintiff in respect of allegations made by them
in the leave to defend application or if they had sought refund of the cash
part of the incentive already given to him, the answer was a categorical no.
If the cash part of the incentive has not been withdrawn and the amount has
vested in the Plaintiff, there can be no reason to withhold disbursement of
the same. The forfeiture clause is clearly not enforceable, as it is in restraint
of trade.
24. Thus the Plaintiff is entitled to a decree for a sum of Rs.3,25,56,496/-
along with USD LIBOR + 1% as on 22nd April, 2014 which is the date of
filing of the suit. The Plaintiff shall also be entitled to interest @ 6% per
annum from 10th January, 2012 i.e. the date from when the amount became
due. Payment of the decretal amount is directed to be made within eight
weeks. If the payment is not made within the said period, interest @12% per
annum on the decretal amount shall be payable upon the expiry of eight
weeks till date of actual payment. The leave to defend applications are
dismissed.
25. Suit is, accordingly, decreed. All pending applications are disposed
of. Decree sheet be drawn. No order as to costs.
PRATHIBA M. SINGH
JUDGE
AUGUST 03, 2018
Rahul
