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Issues: (i) whether a negative covenant in a contract of service, restraining an employee during the period of employment from serving another employer or engaging in similar work, was void as being in restraint of trade under Section 27 of the Contract Act; (ii) whether an injunction could be granted to enforce the covenant and to protect confidential information and trade secrets acquired during employment.
Issue (i): whether a negative covenant in a contract of service, restraining an employee during the period of employment from serving another employer or engaging in similar work, was void as being in restraint of trade under Section 27 of the Contract Act.
Analysis: A restraint operative during the subsistence of a contract of employment stands on a different footing from a restraint after termination. A covenant requiring exclusive service and prohibiting the employee from taking up substantially similar employment during the contractual term is generally valid and does not amount to a restraint of trade unless it is unconscionable, excessively harsh, unreasonable, or one-sided. The restriction here was confined to the period of employment, was linked to the specialized work and training of the employee, and was found necessary to protect the employer's interests.
Conclusion: The covenant was not void under Section 27 of the Contract Act and was enforceable; the finding was against the appellant.
Issue (ii): whether an injunction could be granted to enforce the covenant and to protect confidential information and trade secrets acquired during employment.
Analysis: The employee had been given specialised training and had acquired knowledge of confidential processes, machinery, and information intended to remain secret for the employer's business. Where a negative stipulation is valid and limited in scope, the Court may grant a tailored injunction to protect the employer's legitimate interests, including secrecy and specialised know-how. The restraint here was confined in time, nature of work, and area, and there was no basis to say that enforcement would force the employee into idleness or compel specific performance of personal service.
Conclusion: The injunction was properly granted, including the restraint against disclosure of confidential information; the finding was against the appellant.
Final Conclusion: The appeal was rejected on the merits, and the employer's protection against breach of the exclusive-service and confidentiality obligations was upheld.
Ratio Decidendi: A negative covenant in a contract of service that operates only during the term of employment and is reasonably necessary to protect the employer's legitimate interests, including confidential know-how and trade secrets, is not a restraint of trade and may be enforced by injunction.
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