Delhi High Court
Cargill India Pvt Ltd & Ors vs Deepayan Mohanty on 9 December, 2019
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment Reserved on: 09th July 2019
Judgment pronounced on: 9 December 2019.
+ RFA(OS) 72/2018
CARGILL INDIA PVT LTD & ORS ..... Appellants
Through: Mr. Sandeep Sethi, Sr. Advocate
with Mr. Shadan Farasat, Mr.
Atif Shamim, Mr. Jasmeet Singh
& Ms. Rashmi Chopra,
Advocates.
versus
DEEPAYAN MOHANTY ..... Respondent
Through: Mr. Rohit Puri, Ms. Pragya Puri,
Mr. Mizan Sidiqqui, Advocates.
CORAM:
HON'BLE MR. JUSTICE G.S. SISTANI
HON'BLE MS. JUSTICE JYOTI SINGH
G.S. SISTANI, J.
1. This is an appeal against the judgment passed by a learned Single Judge
of this Court in a suit instituted by the respondent under the provisions of
Order XXXVII of the Code of Civil Procedure, 1908 (hereinafter referred
to as "the Code") for recovery of Rs. 3,25,56,496/- along with interest.
For the sake of convenience, the appellant shall be referred to as 'Cargill'
and the respondent/plaintiff as 'DM'.
2. On 17.10.1996, DM joined the services of Bharat Cargill Holding Pvt.
Ltd. as a Manager, Trade Finance. He completed his probation in the
year 1997. Post confirmation, his services were transferred to Cargill.
DM continued to serve Cargill till he resigned on 07.12.2009.
3. The suit of DM was based on a claim for bonus, which was guaranteed
to him for the years 2006-2007, 2007-2008 and 2008-2009. The relevant
clause on which the deferred incentive was to be provided to an employee
is extracted below along with the forfeiture provisions:
"DEFERRED INCENTIVES
Deferred incentives will be deferred for a period 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 deferred 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 Deferred Incentive Percentage and
Incentive Award Deferral Period
$74,999 and 0% No Deferred Incentive
below
$75,000-$199,999 50% of Individual Incentive Award
deferred for 1 Fiscal Year from Grant
Date
$200,000- 50% of Individual Incentive Award
$399,999 deferred for 2 Fiscal Years from Grant
Date (2 annual payments)
$400,000 and 50% of Individual Incentive Award
greater deferred for 3 Fiscal Years from Grant
Date (3 annual payments)
Interest Rate Applied to Deferred Incentive
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
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 organisation, 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 an 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-US. 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
instalments (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 Nan-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 r ' 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."
4. According to the respondent, the following incentive awards for the 3
financial years as detailed above, stood vested in him and formed the
basis of the suit filed under Order XXXVII of the Code:
"9. Thus, in order to summarize, the following Incentive Awards
for the following years stood vested in Plaintiff:
(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."
5. After a period of two years came to an end, a communication dated
11.01.2012 was addressed to the respondent by the appellant calling upon
him to provide details to enable the company to access his eligibility to
receive the deferred award. However, no favourable response was
received thereafter, and thus a legal notice was issued by the respondent
on 23.05.2012 calling upon the company to release the incentive. This
communication was replied to by a letter dated 06.06.2012 by which the
appellants refused to pay the said amount. The respondent again vide
letter dated 10.09.2012 called upon the appellant to release the amount
of the incentive. The respondent was informed on 04.10.2012 that the
deferred incentive amount was forfeited as per the forfeiture provisions
of the grant of incentive awards. The appellant thus disputed and denied
the incentive to the respondent relying on the forfeiture provision.
6. Respondent was dissatisfied with the denial of the incentives, and this led
to filing of the suit under the provisions of Order XXXVII of the Code.
The appellant No.1 filed an application seeking leave to defend which
was dismissed and the suit was decreed in favour of the respondent with
interest at the rate of 12%. The present appeal arises out of the denial of
leave to defend and passing of the decree.
7. Mr. Sethi, learned senior counsel appearing for the appellants submits
that post the resignation of the respondent on 07.12.2009, the appellant
learnt that during the period of employment, the respondent had indulged
in carrying out business activities and that too competing business
activities. This fact came to light when in a routine scan of the company's
laptop, which was handed back by the respondent, it was discovered, on
the basis of some e-mails that two companies had been floated by the
respondent. These companies were established in the last few years of his
employment with the appellant, to carry out competing business activities
without the knowledge, consent and concurrence of the appellant and
thus, a fraud was being played by the respondent upon the appellant,
where he was gainfully employed.
8. In the leave to defend, emails exchanged between the respondent with
one Divya Dhawan, who was a Director of the competing company were
relied upon, certain other emails were also produced in support of the
stand taken and defence raised seeking unconditional leave to defend. It
was submitted that a company by the name of Kredence was floated, with
two independent Directors. Another company by the name of Hamera
Consulting India Pvt. Ltd., of which father of the respondent and one
Divya Dhawan were the Directors, was also floated. Reliance was placed
on an email dated 16.02.2009, more particularly a portion, which reads
as: "Kredence was known to Cargill and was procuring clients for
Cargill". In fact, the said e-mail shows that Kredence was introduced as
an arms-length third party, along with other such third-parties, and not as
a company in which the respondent had any stake. The fact that the
respondent ran Kredence means that the respondent was, at a minimum,
making Cargill's clients pay his own company for doing business with
Cargill, which was a conflict of interest of the highest order and never
disclosed. Further, in the said email, the respondent stated that "this
group is known to me for the last nine years", which suggests that this
Group was independent of him.
9. Strong reliance was placed before us by Mr. Sethi, learned senior counsel
appearing for the appellants, on an email dated 03.01.2008 sent by the
respondent to Divya Dhawan, which we reproduce below:
"I could do only half work today--Have a look at the gantt
chart. You would need to monitor the chart on venture
progress and responsibility and keep remind people. As we
move on we would need to fine tune the chart with various
other milestones and targets and responsibilities. I have put
my name as SK for hiding my name."
10. Mr. Sethi submits that the abovementioned e-mail would conclusively
show that the respondent was simultaneously working for another
company and he had every intention to conceal this fact which is evident
by reading the last line of this e-mail, i.e. "I have put my name as SK for
hiding my name". In the Gantt chart which forms part of this email,
reliance is placed to show column 2 of the responsibilities and in almost
every column, the name of SK figures either individually or along with
DD which Mr. Sethi submits is none else but Divya Dhawan and one DK,
who is D.K. Goswami. Another e-mail dated 07.04.2008 has been
brought to our notice from the respondent to Divya Dhawan forwarding
Air Tickets to her. Another email dated 15.09.2008 is relied upon which
has been received by the respondent from one Bhushan which reads as
"Sir, go through the revised structure. Once Divya Dhawan puts her nod
to this, we will put it on a formal paper". An attachment to this email is a
salary structure of Divya Dhawan which is relied upon to show the
connect between the respondent and Divya Dhawan. Subsequent emails
have also been shown to us in support of the plea that prior to resignation
and post the resignation, the respondent was carrying out competing
business and thus, would be disentitled to the claim of bonus. Rather if
the fact of the respondent indulging in a competing business had been
unearthed by the appellant earlier it would have led to the termination of
the services of the respondent and the respondent is not entitled to the
claim raised by him in the suit filed under Order XXXVII of the Code.
11. Learned senior counsel submits that the appellant had raised a substantial
defence; a plausible defence; a triable issue and thus was entitled to an
unconditional leave to defend, a relief which could have only been denied
in case the defence was illusionary, sham or moonshine.
12. Learned senior counsel for the appellant places reliance on the judgment
rendered by the Supreme Court in State Bank Hyderabad v. Rabo Bank,
(2015) 10 SCC 521, more particularly paras 13, 17, 18, 20, 22, which we
reproduce as under:
"13. We have further noticed in the affidavit that the defendant
has levelled an allegation that drawer and drawee of the Bills
had perpetrated fraud on the defendant with the collusion of
some officials of the plaintiff Bank and the CBI inquiry on this
issue is also pending. Pertinently, the Reserve Bank of India has
also been informed on this matter reporting that a fraud had
taken place. It is also important to note the strong allegation
raised in the affidavit that besides the Suit being barred by
limitation, the persons who signed the plaint were not
authorized or empowered to file the Suit.
17. An analysis of the above principles makes it clear that in
cases where the defendant has raised a triable issue or a
reasonable defence, the defendant is entitled to unconditional
leave to defend. Leave is granted to defend even in cases where
the defendant upon disclosing a fact, though lacks the defence
but makes a positive impression that at the trial the defence
would be established to the plaintiff's claim. Only in the cases
where the defence set up is illusory or sham or practically
moonshine, the plaintiff is entitled to leave to sign judgment.
18. Insofar as the question of maintainability of the Suit in
question under Order 37, CPC is concerned, this Court has in
Neebha Kapoori Vs. Jayantilal Khandwala, 2008 (3) SCC 770
observed that where the applicability of Order 37 itself is in
question, grant of leave to defend may be permissible. The Court
before passing a decree is entitled to take into consideration the
consequences therefor. The Courts dealing with summary trials
should act very carefully taking note of the interests of both the
parties. Merely on the ground that the defendant may resort to
prolonged litigation by putting forth untenable and frivolous
defences, grant of leave to defend cannot be declined. At the
same time, the Court must ensure that the defendant raises a
real issue and not a sham one. The Court cannot reject the
defence on the ground of implausibility or inconsistency. Before
recording a finding of granting leave to defend, the Court
should assess the facts and come to the conclusion that if the
facts alleged by the defendant in the affidavit are established,
there would be a good or even a plausible defence on those
facts.
20. We are in total agreement with the view taken by this Court
in Raj Duggal Vs. Ramesh Kumar Bansal, 1991 Suppl.(1) SCC
191 that leave to defend the Summons for Judgment shall always
be granted to the defendant when there is a triable issue as to
the meaning or correctness of the documents on which the claim
is based or the alleged facts are of such nature which entitle the
defendant to interrogate or cross-examine the plaintiff or his
witnesses.
22. Apart from these, the substantial revelations of the
defendant (appellant) in the affidavit coupled with the views
expressed by the Division Bench of the High Court makes it
clear that there are certain triable issues for adjudication and
the defendant/appellant is entitled to defend the Suit. The
appellate side of the High Court ought to have taken into
consideration the factual matrix of the case before recording its
finding. Taking into consideration the totality of the facts and
circumstances of the case, we are of the opinion that the
defendant/appellant has made out a prima facie case of triable
issues in the Suit which needs to be adjudicated. Therefore, the
defendant is entitled to grant of unconditional leave to defend
the Suit."
13. Learned counsel for the appellant has also placed reliance on the
judgment rendered by the Supreme Court in State of Saurashtra v. M/S
Ashit Shipping Services (Pvt.) Ltd. ,2002) 4 SCC 736, more particularly
paras 12, 13, 15, 16, which we reproduce hereinunder:
"12. In this case, as already set out hereinabove, there is a
dispute as to whether the document is a guarantee or merely an
Indemnity. The 1st Respondent termed the document to be an
indemnity/guarantee. The Appellants denied that the document
was a Guarantee. On the face of it the document appears to be
an Indemnity and not a Guarantee. The Court was therefore
required to consider the nature and meaning of the document.
This by itself necessitated granting of leave to defend.
13...The Appellants have made serious allegations of fraud and
collusion. They had stated that such a document did not exist in
their records. This was not a defence which could be
characterised, at this stage, as sham or illusory or practically
moonshine. These triable issues should not have been
summarily rejected by the trial Court and/or the High Court.
15.. In the present case, it is not clear whether the document is
an indemnity or a guarantee. In any event, there is no
unconditional bank guarantee. Even if the document is held to
be a guarantee it is only on proof of loss. Also in this case fraud
has been alleged. Thus the authority is of no assistance to the
1st Respondent.
16. In our view, for the aforesaid reasons, leave to defend could
not have been refused to the Appellants. We therefore set aside
the impugned Judgment dated 18th April, 2001 and the trial
Court Order dated 30th October, 1996 and grant the Appellants
leave to defend the suit. They shall file their written statement
within a period of 8 weeks from today. The parties are at liberty
to disclose documents within 4 weeks thereafter. The parties are
at liberty to apply to the trial Court for expeditious hearing of
the suit."
14. Reliance is also placed on the judgment rendered by the Supreme Court
in Raj Duggal v. Ramesh Kumar Bansal reported at 1991 Supp. (1)
SCC 191 wherein it was held that summary judgments under Order
XXXVII of the Code should not be granted where serious conflict as to
matter of fact or on issues as to law arise and the court should not reject
the defence of the defendant merely because of its inherent implausibility
or inconsistency.
15. Reliance is also placed by the learned senior counsel for the appellants
on Sunil Enterprise v. SBI Commerical and International Bank Ltd,
(1998) 5 SCC 354; S.P. Chengalavarya Naidu (Dead) by LRs. v.
Jagannath (Dead) by LRs, (1994) 1 SCC 1; IDBI Trusteeship Services
Ltd. v. Hubtown Ltd., (2017) 1 SCC 568; Percept D'Mark India Pvt.
Ltd. v. Zaheer Khan ,(2006) 4 SCC 227; Patel Roadways v. Prasad
Trading, (1991) 4 SCC 270 and a judgment rendered by the Court of
Appeal of Singapore, Mano Vikrant Singh v. Cargill TSF Asia Pte. Ltd.,
[2011] SGCA 42.
16. It is also submitted by the learned senior counsel for the appellants that
the incentive awards did not contain any clause pertaining to the
jurisdiction or choice of law and the said awards were issued by
appellants No.2 and 3 having no operational business in India. Therefore,
with respect to any disputes arising out of the said incentive awards,
neither Indian law would apply nor Indian courts would have jurisdiction.
It is further submitted that the respondent never worked in New Delhi
and all the communications received by him were at the office of the
appellants at Gurgaon. Thus, the learned Single Judge erred in not
granting a leave to defend to the appellants to try whether or not any part
of cause of action arose in New Delhi.
17. Per contra, Mr. Puri, learned counsel for the respondent submits that
there is no infirmity in the impugned order. The Single Judge has rightly
dismissed the application seeking leave to defend filed by the appellant
herein and has rightly decreed the suit.
18. Learned counsel for the respondent submits that the respondent worked
with Cargill Group for thirteen years and three months and was the head
of the TSF Business at the time of his resignation. During his
employment, appellant No. 2 awarded Incentive Award of USD 525,000
for the fiscal year 2006-07. In recognition of the hard work, long hours
and dedication of the respondent, the appellants informed the respondent
that he shall be receiving a bonus award of USD 510,000.00 for the fiscal
year 2007-08. Despite the financial crisis of 2008-09, the TSF Business
headed by the respondent in India earned globally USD 226 million.
Therefore, in recognition of the respondent's commitment, the appellants
by a communication dated 27.07.2009 informed the respondent that he
shall be receiving a bonus award of USD 575,000.00 for fiscal year 2008-
09. The terms and conditions of all three Incentive Awards are identical.
As per the intimation letter, 50% of the award was paid upfront and the
balance 50% was paid over the next two years. The payments were made
by appellant No. 1 from its office in Delhi to the respondent in Delhi.
19. Learned counsel further submits that the respondent resigned from the
appellant No. 1 on 07.12.2009. The resignation was accepted effectively
on 07.01.2010. On 11.01.2012, the appellants called upon the respondent
to verify his compliance with the Terms and Conditions of the Incentive
Award. The respondent submitted a declaration dated 24.01.2012
wherein he informed the appellants about his appointment in Hemera
Global Trade Private Limited and Hemera India Private Limited.
Thereafter, by an undated letter, the appellant refused to pay the Deferred
Incentive award. No reasons were given by the appellant for refusing to
give the deferred amount which already stood vested in the respondent,
much less the reason of forfeiture or alleged fraud.
20. It is further contended by the learned counsel for the respondent that the
respondent issued a legal notice dated 23.05.2012 to the appellant
demanding the outstanding amount. The appellant refused to pay as
stated in their reply dated 06.06.2012. In order to avoid litigation and to
prevail upon the appellants, the respondent by letter dated 10.09.2012
again reiterated his request for release of the deferred amount. Thereafter,
a notice dated 12.09.2012 under Sections 433 and 434 of the Companies
Act, 1956 was issued by the respondent. The appellant by a letter dated
04.10.2012 refused to pay the outstanding amount and for the first time
informed the respondent that his deferred amount has been forfeited as
per the forfeiture provision of the Incentive Awards. Thus, the respondent
filed a civil suit for recovery of Indian Rupee equivalent of USD
545,000.00, along with USD LIBOR+1%.
21. It is submitted by the learned counsel for the respondent that the
Forfeiture Provision is violative of Section 27 of the Contract Act, 1872
and thus, was rightly declared as unenforceable by the learned Single
Judge. It is submitted that the Forfeiture Provision restrains the
respondent from continuing his career after quitting the job with the
appellant. The said provision provides that if the respondent works in
financial or commodity trading within two years of leaving the appellant,
the deferred incentives, which stood vested in him, shall be forfeited.
This is in clear violation of Section 27 of the Contract Act, 1872 as it
restrains the respondent from working in the industry of his skill and
expertise. Reliance is placed on paras 56 and 63 in the case of Percept D'
Mark India Private Ltd v. Zaheer Khan, (2006) 4 SCC 227.
22. Reliance is also placed on the judgment rendered by the High Court of
Andhra Pradesh in C.C.C Appeal No. 215 of 1982 in the case of Bakelite
Hylam Ltd v. S.J. Hasan, wherein the Court declared a rule which
allowed the employer to forfeit gratuity in a case where the employee
engages in competitive activity as void, as it was violative of Section 27
of the Contract Act, 1872.
23. It is further submitted that once the appellants declared that the
respondent shall receive the Incentive Award, the Incentive Award
vested with the respondent. It belonged to the respondent. The appellants
recognised that the Incentive Award belongs to the respondent and
agreed to pay interest on the portion of the amount retained by the
appellants till such time it was released. The appellant could not place
fetters in releasing the Award, especially those which are unenforceable.
24. Reliance is placed on a judgment rendered by the Court of Appeal,
Singapore in the case of Mano Vikrant Singh v. Cargill TSF Asia Pte
Ltd, [2011] SGCA 42, wherein the appellant No. 3 herein was one of the
appellants therein. The Court dealt with identical clauses as in the present
case and held that the same are in restraint of trade. Subsequent to this
judgment, Cargill TSF Asia Pte Ltd has released such vested amount of
all ex-employees in Singapore including the said Mano Vikrant Singh. It
is contended by the learned counsel for the respondent that by not
applying the same rule for respondent, the discriminatory mindset of the
appellant is demonstrated for their Indian employees.
25. It is contended by the learned counsel for the respondent that although
the appellants allege that they learnt about the respondent incorporating
a competing company "few weeks after January 2010", however, no
action was taken by them against the respondent either for recovery of
50% of the Incentive Award already paid or for alleged breach of
contract. Instead, the appellants under their usual process for payment of
deferred vested amount, called upon the respondent on 11.01.2012 for
submitting the necessary affidavit for such payment. It is contended that
the refusal to pay the Deferred Incentive was not on the ground of alleged
fraud. Even in the pre-lis communications, the appellants never alleged
that Deferred Incentive has been denied because respondent allegedly
incorporated competing companies during his employment. In the reply
by the appellants, dated 07.06.2012, more than two years after they
supposedly discovered the alleged actions of the respondent, not a
whisper was made that the respondent incorporated companies during his
employment. Again, in the reply dated 04.10.2012, no such allegation
was made by the appellant. It is contended by the learned counsel, that
the said allegation is an afterthought and made only to deny the amount
rightly entitled by the respondent.
26. It is further contended by the learned counsel for the respondent that
Kredence Global Services Private Limited (now known as Hemera
Global Trade Private Limited) was incorporated on 30.03.2009 by
Sangeeta Lekhi and Sanjay Israni, people unrelated to the respondent. In
so far as Hemera Consulting India Private Limited is concerned, the same
was established on 28.07.2008 by Mr. Sibaram Kumar Mohanty and
Divya Dhawan. The respondent became a Director in Hemera Global
Trade Private Limited on 01.07.2010, long after leaving the appellants.
The respondent never worked for Kredence during his employment with
the appellants. The respondent introduced Kredence Global to the
appellants by his e-mail dated 16.02.2009. It is contended that the role of
Kredence was to introduce clients to the appellants and that no money
was paid by the appellants to Kredence.
27. It is thus submitted by the learned counsel for the respondent that there
is no triable issue raised by the appellants. The issues raised by the
appellants are sham, and are purely aimed at frustrating the respondent,
who is an individual with limited resources, by delaying justice. The
Single Judge rightly dismissed the application of the appellants for leave
to defend the suit.
28. With regard to the plea of territorial jurisdiction, it is contended by the
learned counsel for the respondent that the plea of territorial jurisdiction
was not pressed by the appellants before the Single Judge and thus the
appellant is now estopped from raising the said plea at the appellate stage.
Further, he submits that this Court has territorial jurisdiction because not
only was the respondent working in the Delhi office of the appellant, but
the payments were made to the respondent from the office of appellant
in Delhi. The payment was made from the bank account of the appellant
in Delhi to the bank account of the respondent in Delhi. This Court, thus,
has a territorial jurisdiction. In any event, it is submitted that a plea of
jurisdiction is not a defence to seek leave to defend a summary suit.
29. Reliance is placed by the learned counsel for the respondent on a decision
rendered by this court in Punjab and Sind Bank v. S.K. Tulshan, ILR
1991 Delhi 293, wherein it was held as under:
"12. So, no benefit can be taken from the law prevalent in
England as the provision of summary suits in England appear
to be different from the provisions contained under Order 37,
Civil Procedure Code. It is also to be kept in view that the
defendant is not legally bound to file any counter-claim.
Assuming for the sake of argument that the defendant is granted
leave to defend on the assumption that he has some prima facie
good case for raising a counter-claim against the plaintiff and
the defendant, after the grant of leave to defend, fails to file the
counter-claim. In that situation, it is not explained by learned
counsel for the defendants as to what the court could do if no
trial is to take place in respect of the counter-claim; the grant
of leave to defend to the defendant becomes illusory causing
unnecessary delay in the disposal of the summary suit. As
already mentioned above, the provision of Order 37, on the face
of it, did not contemplate entertainment of any counter-claim
from the defendant. If the defendant has any such counter-claim
against the plaintiff, he can very well bring a separate suit in
that respect. If the Legislature had intended that the plea of the
defendant regarding his counter-claim should also be taken
note of while deciding the application for leave to defend, it
would have made its mind clear by incorporating the same
language under Order 37(3) (5) as it appears in the English law.
So the omission of the Legislature to use the same language
under Order 37, Civil Procedure Code, as is there under the
English law, would rather support the contention of learned
counsel for the plaintiff that the Legislature did not intend that
the plea of a counter-claim should be entertained in a suit
brought under Order 37, Civil Procedure Code
13. It is also pertinent to mention that, in the case of Krishan
and Company v. Bank of India (RIA) (O.S. No. 10 of 1981 -
decided on August 25, 1982), the single judge has held that
there could be no adjustment of the claim for damages against
the loan meaning thereby that no counter-claim was
entertainable in a summary suit under Order 37, Civil
Procedure Code, till leave to defend the application is allowed.
The Division Bench did not express any view on this aspect of
the case because the Division Bench held that the counter-claim
on the face of it was barred by limitation. Hence the Division
Bench did not go into the question whether the plea of counter-
claim should be entertained while deciding the leave to defend
application in a summary suit or not.
16. I am of the view that, in any suit brought under Order 37,
Civil Procedure Code, while considering the facts mentioned in
the affidavit of the defendant seeking leave to defend the suit,
the court is not to consider the facts which may entitle the
defendant to file any suit for damages against the plaintiff's
claim or a counter-claim on the same aspect."
30. It is contended by the learned counsel for the respondent, that in the
present appeal, the issue before this Court is entirely separate. The
appellants herein, did not seek leave to defend on the ground that they
had a right to file the counter-claim, nor did they make an averment to
the effect that they wished to file a counter-claim. The grounds on which
the appellant herein had sought leave to defend was that the respondent
herein was not entitled to the amount claimed by him in the summary suit
as he had violated the terms of the agreement on the basis of which he
was claiming the said amount, and that he had committed fraud against
the appellants by running two companies while being in the employment
of the company.
31. Mr. Sethi, learned senior counsel for the appellants, in rejoinder, submits
that the judgment rendered by this court in the case of S.K. Tulshan
(supra) is inapplicable to the facts of the present case, as it concerns a
distinct and unrelated issue of law. In the said judgment, the defendants
therein sought leave to defend on the ground that they were entitled to a
counter claim, and hence they should be granted unconditional leave to
defend. The defendants therein sought to file a counter-claim, and
submitted that their action in filing such a counter-claim in itself was the
ground on which unconditional leave to defend the suit brought against
them should be granted. This Hon'ble Court, in the said judgment, held
on this specific question that the defendants could not be granted
unconditional leave to defend on the ground, that a counter-claim could
be filed by the defendant. The Hon'ble Court did not consider any other
legal issue as no other issue was raised.
32. We have heard the learned counsel for the parties and considered their
rival submissions.
33. The defence of the appellants (defendants before the Single Judge) is
based on the Forfeiture Provisions of the Terms and Conditions of the
Incentive Awards, which we have extracted in the foregoing paragraph
3. It is our considered opinion Order XXXVII of the Code is a very
stringent provision. The important aspect is that the defendant loses his
right to file the written statement and lead evidence unless he is able to
establish triable issues and a reasonable defence. Therefore, while the
application for leave to defend should be bona fide, the provision has
been introduced to dissuade a litigant with no defence or a defence which
is frivolous, sham, moonshine, vague or simply with a view to prolong
the litigation to prevent the plaintiff from an early decree. The Apex
Court has repeatedly held that untenable and frivolous defence should be
rejected and a speedy decision should be rendered in the interest of trade
and commerce. However, the court must carefully examine the
application seeking leave to defend.
34. In this backdrop, the short question which arises for our consideration is
whether the appellant has been able to raise a reasonable defence giving
rise to a triable issue or not.
35. The present appeal is to be decided on the touchstone of law laid down
by the Apex Court in the case of IDBI Trusteeship Services Limited
(supra), in regard to the scope of Order XXXVII Rule 3 of the Code. The
relevant paragraph 17 read as under:
"17.1. If the defendant satisfies the court that he has a
substantial defence, that is, a defence that is likely to succeed,
the plaintiff is not entitled to leave to sign judgment, and the
defendant is entitled to unconditional leave to defend the suit.
17.2. If the defendant raises triable issues indicating that he has
a fair or reasonable defence, although not a positively good
defence, the plaintiff is not entitled to sign judgment, and the
defendant is ordinarily entitled to unconditional leave to
defend.
17.3. Even if the defendant raises triable issues, if a doubt is left
with the trial Judge about the defendant's good faith, or the
genuineness of the triable issues, the trial Judge may impose
conditions both as to time or mode of trial, as well as payment
into court or furnishing security. Care must be taken to see that
the object of the provisions to assist expeditious disposal of
commercial causes is not defeated. Care must also be taken to
see that such triable issues are not shut out by unduly severe
orders as to deposit or security.
17.4. If the defendant raises a defence which is plausible but
improbable, the trial Judge may impose conditions as to time or
mode of trial, as well as payment into court, or furnishing
security. As such a defence does not raise triable issues,
conditions as to deposit or security or both can extend to the
entire principal sum together with such interest as the court
feels the justice of the case requires.
17.5. If the defendant has no substantial defence and/or raises
no genuine triable issues, and the court finds such defence to be
frivolous or vexatious, then leave to defend the suit shall be
refused, and the plaintiff is entitled to judgment forthwith.
17.6. If any part of the amount claimed by the plaintiff is
admitted by the defendant to be due from him, leave to defend
the suit, (even if triable issues or a substantial defence is
raised), shall not be granted unless the amount so admitted to
be due is deposited by the defendant in court."
36. As per para 17.1 of the aforesaid decision, in case, the defendant satisfies
the court that he has a substantial defence and he is likely to succeed, he
would be entitled to an unconditional leave to defend the suit. However,
in case, the defendant raises a triable issue indicating that he has a fair or
reasonable defence, although not a positively good defence, the
defendant would ordinarily be entitled to an unconditional leave to
defend. The Supreme Court has further held that in case the defendant
raises a triable issue and there is a doubt in the mind of the trial Judge
about the good faith of the defendant or genuineness of the triable issue,
the trial Judge may impose conditions both as to time or mode of trial, as
well as payment into court, or furnishing security, keeping in mind that
the object of the provision to assist expeditious disposal of commercial
causes is not defeated while taking into consideration that such triable
issues are not shut out by unduly severe orders as to deposit or security.
37. As per para 17.4, it has been held by the Supreme Court that should the
defendant raise a defence which is plausible but improbable, the trial
Judge may impose conditions as to time or mode of trial, as well as
payment into court, or furnishing security. It is only in cases where no
substantial defence is raised or no genuine triable issues are raised and
the court finds such defence to be frivolous or vexatious, then leave to
defend the suit would be refused and the plaintiff would be entitled to
judgment forthwith.
38. In the present case, the learned Single Judge reached a conclusion that
the defendant has not raised any substantial defence much less any triable
issue, and the defence being frivolous and vexatious, the application for
leave to defend stood rejected.
39. The appellants have raised a defence that the respondent, while being an
employee of appellant No. 1, engaged himself in a competing business
activity with other companies, thereby acting in gross violation of the
terms of the employment i.e. the Employee Confidential Information and
Invention Agreement dated 14.10.1996, Employee Confidential
Information, Inventions and Original Works of Authorship Agreement
dated 02.07.2003, the Terms and Conditions of the Incentive Awards for
each of the three years. The defence was also that the respondent had
played fraud on the appellants by concealing the fact of establishing a
competing company and directing business opportunities away from the
appellants towards the competing company, without the knowledge or
approval of any of the appellant companies. It is further stated in the leave
to defend that the appellants became aware of the said actions of the
respondent after scanning the laptop on the basis of e-mails, that the
respondent had established a company in the beginning of 2008, by the
name of M/S Kredence Global Services Pvt. Ltd, acting through his close
associates Mr. D.K. Goswami and Ms. Divya Dhawan, the Directors in
the company. The e-mails dated 03.01.2008, 08.01.2008, 19.02.2008,
07.04.2008, 15.09.2008, 08.02.2009, 09.02.2009, 14.03.2009,
18.03.2009, 20.03.2009, 15.05.2009 29.06.2009, 15.07.2009,
17.09.2009, 23.09.2009, 11.12.2009 are directed either to or from the
respondent to various individuals and entities, which prove that the
respondent had the main role in the establishment of M/S Kredence
Global Services Pvt. Ltd.
40. As per the averments made in para 5 of the plaint filed by the respondent
herein before the learned Single Judge, it is the case of the respondent
that in recognition of the respondent's hard work and commitment
towards defendant No.1 (appellant No.1 herein), the respondent was
given an incentive award for the fiscal period commencing from 1st June
to 31st May each year, depending upon the revenue generated by the TSF
business. The payment of the said incentive award was in two parts as
50% of the incentive was paid in cash and the balance 50%, although
stood vested in the respondent, was deferred over a period of three years.
It has also been averred in the plaint that on account of hardwork, long
hours and dedication of the respondent, TSF business generated USD 335
MM of revenue and accordingly, in recognition of the commitment of the
respondent, he was awarded by the Group a bonus of USD 510,000 for
2007-2008 fiscal year. It is in this backdrop that the learned Single Judge
reached a conclusion that the amount claimed by the respondent against
the appellant No.1 is a 'Deferred Incentive' which was awarded to an
employee as a reward for good performance during the course of his
employment. It is an admitted position that the amount was awarded in
full in favour of the respondent, only the payment was postponed
partially; and for the postponement of the payment, interest was also to
be paid by the appellant to the respondent. Therefore, the learned Single
Judge observed that the amount, in fact, belonged to the respondent and
stood vested in him.
41. Per contra, the stand of the appellant (defendant in the suit) is that this
amount would be payable as an incentive as averred in paras 5 and 6 of
the plaint in recognition of the respondent's hard work, dedication and
commitment towards the appellant. The stand of the appellant herein is
that the respondent played a fraud upon the company while working for
the company and during the working hours with the company, carried out
competing business against the employment agreements dated
24.10.1996 and 02.07.2003 and thus, it cannot be said that this amount
lawfully vested with the respondent.
42. There cannot be a quarrel with the proposition laid down in para 18 of
the judgment dated 03.08.2018 that that there is no bar for the employee
to engage in a competing business after the employment period is over
and any covenant, in restraint of trade, would be bad in law. The said
proposition has been elaborately discussed in a decision rendered by the
Apex Court in the case of Percept D'Mark (supra). Paragraphs 54, 56
and 63 are reproduced hereunder:
"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
...
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.
CocaCola [(1995) 5 SCC 545] this doctrine is not confined
only to contracts of employment, but is also applicable to all
other contracts."
43. However, this proposition cannot help the respondent as the case of the
appellants was that if the appellants were aware about the gainful
association of the respondent in a competing business during his
employment, the respondent would have been terminated and there
would be no question of his entitlement for the incentives. We are of the
view that the said defence falls under paragraphs 17.3 and 17.4 of the
judgment in the case of IDBI Trusteeship Limited (supra). Thus, the
defence of the appellants is a plausible defence comprising of a triable
issue and is not sham or moonshine. Thus, the appellants should be given
an opportunity to prove their defence. In regard to the objection of the
appellants pertaining to the territorial jurisdiction of this Court, we deem
it appropriate to leave the same open for consideration before the Single
Judge.
44. In our considered view, the learned Single Judge erred in dismissing the
application seeking leave to defend. Since the defence of the appellant is
a plausible defence and it has raised a triable issue. The appellants herein
are granted a conditional leave to defend the suit, subject to deposit of
Rs.3,25,56,496/- within 8 weeks from today with the Registrar General
of this Court and on deposit, the amount shall be converted into FDR for
one year with an automatic clause of renewal. If the deposit of Rs.
3,25,56,496/- is not made within the stipulated period of time, the leave
to defend shall be deemed to be rejected and the suit shall stand decreed
in favour of the respondent for the same amount along with interest @6%
per annum from the date when the amount became due i.e. 10.01.2012,
till the date of realisation.
45. List before the Single Judge for further directions on 30 January 2020.
CM APPL Nos. 39259-39260 & 54464/2018
46. In view of the order passed in the appeal, the applications also stand
disposed of.
G.S.SISTANI, J
JYOTI SINGH, J
DECEMBER 9, 2019//
