2005 (3) TMI 799 - HC - Companies Law

Court denies ad interim injunction, favors defendant seeking employment. Damages available for breach. Decision preliminary.

The court dismissed the application for an ad interim injunction, finding no prima facie case in favor of the plaintiff. The court emphasized that the ... - Issues:- Application for ad interim injunction to restrain defendant from employment with another company and divulging trade secrets.Analysis:1. The plaintiff sought an ad interim injunction to prevent the defendant from continuing employment with another company and disclosing trade secrets acquired during his employment. The plaintiff alleged that the defendant violated the agreement by joining a client of the plaintiff, causing wrongful loss. The plaintiff requested a permanent injunction against the defendant from dealing with its customers.2. The defendant contested the injunction, arguing that the agreement was terminable by either party with notice. He claimed he had no access to confidential information and did not misuse his position. The defendant emphasized that the agreement with the client had ended, and he had the right to seek new employment.3. The court referred to the law on contracts in restraint of trade, stating that employees are free to pursue other opportunities after leaving an employer. However, during employment, restrictions on engaging in other work or disclosing trade secrets are permissible. Trade secrets are confidential information acquired during employment that should not be shared.4. The court found that the agreement's provision prohibiting the defendant from working with the plaintiff's customers for two years was void under Section 27 of the Indian Contract Act. The court viewed the restriction as against public policy and unconscionable, especially considering the defendant's need for employment and career advancement.5. Additionally, the court noted that granting an injunction under Section 41(e) of the Specific Relief Act would not be enforceable, as the defendant could join another company or continue sharing information. The court emphasized that damages could be sought if there was a breach of the agreement, rather than granting an injunction.6. Ultimately, the court dismissed the application for an ad interim injunction, finding no prima facie case in favor of the plaintiff. The balance of convenience favored the defendant, who needed to seek employment in his field. The court highlighted that the plaintiff could claim damages if there was a breach of the agreement.7. The court clarified that its decision did not reflect an opinion on the pending suit's merits, as the observations made were provisional.