Delhi High Court
Epsilon Eduventures Private ... vs Bikash Dash on 5 May, 2022
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 05.05.2022
+ ARB.P.938/2021
EPSILON EDUVENTURES PRIVATE LIMITED ..... Petitioner
Through: Mr. Gautam Swarup with Mr.
Kartikeya Jaiswal, Ms. Gunjan Jindal
& Mr. Rishab Kanojia, Advocates.
versus
BIKASH DASH ..... Respondent
Through: Mr. Ankit Virmani, Advocate.
CORAM:
HON'BLE MR. JUSTICE ANUP JAIRAM BHAMBHANI
% J U D G M E N T
ANUP JAIRAM BHAMBHANI J.
Brief Background
By way of the present petition filed under section 11(6) of the
Arbitration & Conciliation Act, 1996 ('A&C Act'), the petitioner
seeks appointment of a sole arbitrator to adjudicate the disputes that
are stated to have arisen with the respondent.
2. The petitioner is a company engaged in providing virtual educational
services to schools and other similar institutions. The respondent was
previously employed with the petitioner and held the position of Chief
Technology Officer.
3. The disputes between the petitioner and the respondent are stated to
have arisen from a settlement-cum-waiver agreement dated
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11.09.2019, (the 'agreement') whereby, accordingly to the petitioner,
the respondent was entitled to represent himself as co-founder and
Chief Technology Officer of the petitioner i.e. the company M/s.
Epsilon Eduventures Pvt. Ltd.; and not as co-founder of 'Classplus',
which the petitioner contends, is a product developed by the petitioner
during the respondents tenure as its employee.
Petitioner's Arguments
4. In support of the petitioner's contention that the settlement-cum-
waiver agreement with the respondent prohibits him from
representing himself as co-founder of 'Classplus' software (the
'software'), Mr. Gautam Swarup, learned counsel appearing for the
petitioner has drawn the attention of this court to the following
provisions contained in the agreement :
"1. Gainful Employment with the Company. The Party and the
Company agree that the Party has provided valuable service to the
Company during the period from January 27, 2016 to March 31,
2018, and that the Company agrees to allow the Party to represent
itself as the Co-Founder and Chief Technology Officer of the
Company, and that his services were valuable to the growth and
development of the Company during the course of his employment.
The Company agrees that it shall not object to the use of the
aforementioned designation/capacity by the Party.
*****
"3. Settlement and Waiver of claims and disputes. The Party
hereby acknowledges and agrees, that for valuable consideration
provided to it as described herein :
a. The Party waives any claims it may have against the
Company, its Directors and Promoters, including in
relation to present claims, arising either out of its
employment or in its capacity as a shareholder of the
Company, and waives its claims under any disputes
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against the Company by any party, including any
present or future shareholder or employee of the
Company.
b. The Party unequivocally and unconditionally agrees
that it has no claims and disputes on its behalf against
the Company, its Promoters, Directors and
shareholders in lieu of valuable consideration not
restricted to the pay and emoluments during their
service to the Company, the payment of consideration
of Rs. 10,77,240 (Rupees Ten lakhs, Seventy Seven
Thousand, Two Hundred and Forty Only), towards the
first tranche consideration, by the Purchaser to the
Party under the Share Purchase Agreement dated
September 07, 2019 ("SPA"), and as also mutual
considerations under this Agreement.
c. The Company also hereby waives any claims it may
have against the Party that may have arisen either out
of or in relation to such Party's employment or in its
capacity as a shareholder of the Company, and the
Company hereby unequivocally and unconditionally
agrees that no claims/disputes exist in this regard
against the Party.
d. The settlement and waiver of claims by the Party
under this Clause 3 also extends, pari materia, to
waiver of claims against related parties and group
companies of the Company, including specifically M/s
Bunch Microtechnologies Private Limited, and its
Promoters and Directors, as the case may be."
(bold in original; under-scoring supplied)
5. It is the petitioner's contention that, in his 'LinkedIn' profile, the
respondent has posted the following text and content representing and
claiming that he is co-founder of the software :
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6. For clarity, Mr. Swarup explains that the software is a product used
by the petitioner for providing on-line educational services inter-alia
to manage coaching institute and sell on-line classes.
7. It is the petitioner's case that at the time of severance of their
employment relationship, the respondent was permitted by the
petitioner only the restricted right to represent himself as co-founder
of the petitioner company, which was a limited right; and such
permission contained an implied, negative covenant enjoining the
respondent from claiming any rights or interests whatsoever in
relation to the individual software products developed by the
petitioner, including the Classplus software. The petitioner's
grievance is, that by reason of the misrepresentation made by the
respondent, the petitioner is unable to commercially exploit the
intellectual property in the software products, whether by assignment
or licensing to third parties.
8. It is argued on behalf of the petitioner, that the dispute as to whether
the respondent is permitted under the terms of the agreement to
represent that he was co-founder of the software in question, is a
dispute that is arbitrable and falls within the ambit of clause 5 of the
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settlement-cum waiver-agreement, whereby parties have agreed to
refer their disputes to arbitration. Clause 5 reads as under :
"5. Dispute Resolution. The Party and the Company agree that any
and all disputes under this agreement, and pertaining to the validity
of this Agreement, or of the terms of settlement and waiver of claims
hereunder, shall be exclusively adjudicated by reference to
arbitration by a sole arbitrator appointed mutually between the
parties hereto. In the event, the parties fail to mutually appoint the
sole arbitrator with thirty (30) day from notice of dispute given by
either party, the arbitrator shall be appointed as per the provisions
of the Arbitration and Conciliation Act, 1996 read with rules framed
thereunder. The arbitration proceedings shall be conducted in Delhi
in accordance with applicable laws of India and specifically with
reference to the Arbitration and Conciliation Act, 1996. The
arbitration proceedings shall be in the English language. The award
of the arbitrator shall be substantiated in writing. The arbitrator
shall also be entitled to decide on the costs of the arbitration
proceedings. The award of the arbitrator shall be binding on the
parties subject to the applicable laws, and the award shall be
enforceable in any competent court of law."
(emphasis supplied)
9. It is submitted that there is no dispute as to the fact that the territorial
jurisdiction in relation to the arbitral process lies with the courts of
law in Delhi; and therefore there is no impediment to the disputes
being referred to arbitration by this court appointing an arbitrator in
the present proceedings.
Respondent's Arguments
10. Opposing the appointment of an arbitrator however, Mr. Ankit
Virmani, learned counsel appearing for the respondent submits that
clause 1 of the settlement-cum-waiver agreement specifically and
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Signing Date:05.05.2022
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expressly states that the services of the respondent were valuable to
the growth and development of the company and permits the
respondent to represent himself as co-founder and Chief Technology
Officer; and that the petitioner cannot object to the respondent using
the designation/capacity that he held at the company. It is argued that
as a sequitur, there is no negative covenant or prohibition on the
respondent asserting what he was engaged in doing in the course of
his employment; and that therefore, the respondent is well within his
rights to represent himself as a co-founder of the Classplus software,
in the making of which he was engaged.
11. Alternatively, it is submitted, that even if the petitioner entertains the
grievance that the respondent cannot do so, such grievance is not a
dispute that arises from the settlement-cum-waiver agreement and is
therefore not amenable to arbitration under clause 5 thereof.
12. It is Mr. Virmani's submission that the theory of an implied negative
covenant has been conjured-up by the petitioner only to bring the
alleged dispute within the purview of the settlement-cum-waiver
agreement.
13. Counsel also argues, that as is evident from the relevant portion of
his. 'LinkedIn' profile (as extracted above), the respondent is only
claiming to be a 'co-founder' of Classplus software and not as a 'co-
owner' of the software. It is argued that therefore, even if there is a
negative covenant, as the petitioner contends but the respondent
denies, that negative covenant only prohibits the claim of 'ownership'
in respect of the software; but the respondent has not made any such
claim to ownership. It is also pointed-out that in legal notice dated
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28.09.2020 issued by the petitioner to the respondent, the petitioner
itself said that the brand and trademark 'Classplus' belongs solely and
exclusively to another company called M/s Bunch Microtechnologies
Pvt. Ltd; which means that neither the petitioner nor any of its
employees have any rights whatsoever in or to the software. Absent
any rights in the software belonging to the petitioner, it has no locus
standi to make any claim or even to file the present petition.
14. It is also argued, that assuming all circumstances against the
respondent, it is inexplicable how an assertion that the respondent is a
co-founder of the software can tarnish the reputation or dilute the
prestige of the petitioner or of M/s Bunch Microtechnologies Pvt. Ltd.
or their trademark or brand name or cause any financial loss. Other
contentions, which ex-facie appear to relate to the merits of the
disputes between the parties, have also been raised on behalf of the
respondent.
15. Mr. Virmani has also stressed that in the backdrop of what the
respondent contends are inconceivable grievances against him, the
petitioner is attempting to drag the respondent into arbitration
proceedings, which would entail huge costs, which the respondent can
ill-afford; pointing-out that the petitioner on the other hand is a well-
funded corporate entity. The respondent would therefore be hard put
to defend wholly unnecessary and futile arbitration proceedings.
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Judgments relied upon by the Petitioner
16. In support of its position, the petitioner cites Mcdermott
International Inc vs. Burn Standard Co. Ltd.,1and Sudarshan
Trading Co. vs. Government of Kerala2, to contend that any dispute
or conflict in the interpretation or construction of a contractual term
itself constitutes a dispute arising from or pertaining to a contract.
17. It is submitted that an inquiry into the legal tenability and scope of a
claim is the sole prerogative of the arbitral tribunal under section 16
of the A&C Act inter-alia under the principle of kompetenz-
kompetenz. It is argued that in Vidya Drolia vs. Durga Trading
Corporation3 and in Saksham Impex Pvt. Ltd vs. Akshat Kumar
Anchan4the principles laid down are that a dispute is to be referred to
arbitration where :
(i) The contentions relating to non-arbitrability are plainly
arguable;
(ii) When a summary consideration of rival contentions by the
referring court would be inconclusive and inadequate;
(iii) When facts are contested; and/or
(iv) When parties appear to adopted dilatory tactics or hinder the
conduct of arbitral proceedings.
Judgments relied upon by the Respondent
18. On the other hand, it is the respondent's contention that Vidya Drolia
(supra) holds that ex-facie meritless proceedings ought to be weeded-
(2006) 11 SCC 181
(1989) 2 SCC 38
(2021) 2 SCC 1
(2021) SCC Del 3999
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out at the threshold; and that in DLF Home Developers vs. Rajpura
Home Pvt. Ltd and Anr.5, the Hon'ble Supreme Court has mandated
that the limited jurisdiction under section 11 does not denude the
court of its judicial functions to look beyond the bare existence of the
arbitration clause and to cut the dead-wood and conduct a prima-facie
review at the stage of reference, to weed-out any frivolous and
vexatious claims to prevent wastage of public and private resources.
19. It is argued that in DLF Home Developers (supra), the Hon'ble
Supreme Court has said that the High Court is not expected to act
mechanically to deliver a purported dispute raised by the applicant to
the doorstep of the arbitrator; and the court is not prevented from
declining the prayer of reference if a dispute in question does not
relate to the arbitration agreement.
Analysis & Conclusions
20. This court has perused the arbitration clause and the relevant
provisions of the settlement-cum-waiver agreement signed between
the parties; and has given serious thought to the essential disputes
raised by the petitioner with the respondent as to the respondent's
alleged claim of being co-founder of the software in question; and has
tested it on the anvil of the scope and ambit of the arbitration
agreement contained in clause 5.
21. Without delving deeper into the factual disputes and without
expressing any opinion as to the merits or demerits of the contentions
raised, what is seen on a prima-facie perusal of clause 1 is that that
covenant expressly permits the respondent to representing himself as
2021 SCC OnLine SC 781
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co-founder and Chief Technology Officer of the petitioner and says
that the petitioner shall not object to such use by the respondent. The
question whether the respondent was engaged and involved in the
development of 'Classplus' software in question in his capacity as co-
founder and Chief Technology Officer is a question of fact, that
requires detailed consideration on merits, based upon evidence to be
led by the parties. The question whether the petitioner permitting the
respondent to represent himself as co-founder and Chief Technology
Officer of the company also included the permission to represent
himself as co-founder of the software, is again one of interpretation of
the settlement-cum-waiver agreement, which is within the remit only
of the arbitrator.
22. Broadly, the legal principle is that if one party asserts that there is a
dispute; and the other party denies that there is such dispute, that itself
is a dispute between the parties.
23. Whether or not the disputes alleged fall within the scope and ambit of
the arbitration agreement has to be seen by a referring court but
purely on a prima-facie basis, addressing the following questions :
(i) Is the arbitration agreement restricted only to certain specified
disputes or is it worded in a manner so as to include within its
fold any and all disputes arising from an agreement?
(ii) Do the contentions and counter-contentions raised by the
parties emanate from their relationship under the agreement or
outside of it? and
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(iii) Are the disputes per-se non-arbitrable, which would be so if the
disputes are such that they are required to be dealt with in-rem
and not in-personam?
24. To be sure, in the present case, even the respondent does not dispute
that it is not the owner of intellectual property rights in the software.
In fact, if anything, it is the respondent's own contention that by
claiming in his 'LinkedIn' profile that he was co-founder of the
software, he is not claiming ownership but only that he was engaged
in the development of the software during his employment with the
petitioner. Accordingly, this is not a dispute relating to intellectual
property rights that would be non-arbitrable. This answers question
No. (iii) above.
25. Insofar as the question No. (ii) is concerned, the respondent's
relationship with the petitioner in respect of his past employment, is
governed entirely by the settlement-cum-waiver agreement; and any
disputes arising from or in relation to such past employment, is
therefore governed by the said agreement. It is therefore far-fetched
for the respondent to contend that the dispute raised by the petitioner
against his representing to be co-founder of the software does not
arise from the settlement-cum-waiver agreement.
26. Addressing question No. (i) therefore, as a sequitur it cannot be
contended that such dispute is not amenable to arbitration under the
arbitral mechanism provided in clause 5 of the settlement-cum-waiver
agreement, which clause is cast in the widest possible words, to
include " ... any and all disputes under this agreement, ... or of the
terms of settlement and waiver of claims ...".
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By:SUNITA RAWAT
Signing Date:05.05.2022
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27. In view of the above discussion, the present petition is allowed.
28. Accordingly this court proposes to appoint Mr. B.B. Sawhney, Senior
Advocate (Cellphone No.9810041533) to act as sole arbitrator to
adjudicate the disputes between the petitioner and the respondent.
29. The arbitrator shall be entitled to fee as stipulated in Fourth Schedule
to the A&C Act or as may be agreed to by the parties with the learned
sole arbitrator.
30. The petitioner is directed to approach the proposed sole arbitrator
within 01 week; seek disclosures in terms of section 12 of the A&C
Act; and to file the same before this court, before next date of hearing,
with a copy to the opposing counsel.
31. List for further consideration on 31st May 2022.
ANUP JAIRAM BHAMBHANI, J.
MAY 05, 2022/uj
Signature Not Verified
Digitally Signed
By:SUNITA RAWAT
Signing Date:05.05.2022
15:48:34
