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Kuoni Travel (India) Private Limited v. Ashish Kishore
Factual and Procedural Background
The plaintiff initiated proceedings seeking ad-interim relief based on contractual terms relating to employment, specifically invoking non-compete and garden leave clauses. The defendant tendered resignation on 2.4.2007, which the plaintiff accepted subject to conditions outlined in a letter dated 18.4.2007. The garden leave period was divided into two phases: Phase I from 2.4.2007 to 16.5.2007, and Phase II from 17.5.2007 to 30.6.2007. The plaintiff contended the defendant had not fully complied with Phase I obligations but this issue was reserved for later consideration. The current dispute concerns the defendant's compliance with restrictions during Phase II of the garden leave period. The plaintiff also undertook to compensate the defendant during this period, and assurances were given regarding payment of outstanding amounts and bonuses. The defendant was present in court and stated he was not employed elsewhere.
Legal Issues Presented
- Whether the plaintiff is justified in enforcing the garden leave clause during the second phase (17.5.2007 to 30.6.2007), which restricts the defendant from engaging in any business competing with the plaintiff's tour and travel services.
- Whether such post-termination restrictions, including non-compete and garden leave obligations, are enforceable and consistent with public policy.
- Whether the plaintiff's failure to pay remuneration as per the contractual obligation affects entitlement to relief.
Arguments of the Parties
Plaintiff's Arguments
- The plaintiff relied on the contractual non-compete and garden leave clauses to restrict the defendant from engaging in competing business during the specified period.
- The garden leave clause is intended to protect trade secrets and business interests, and the plaintiff is obligated to pay full remuneration during this period, which it undertook to do.
- The plaintiff argued that the defendant’s engagement with a competing business during the garden leave period would cause irreparable harm by diverting clientele and confidential business information.
- The plaintiff assured the court that all outstanding payments, including remuneration and bonuses, would be deposited in court promptly.
Defendant's Arguments
- The defendant contended that once employment has terminated, enforcing conditions applicable during employment, such as garden leave, is against public policy.
- The defendant relied on precedents, including Superintendence Company of India Ltd. Vs. Sh. Krishan Murgai, Percept DMark (India) (P) Ltd. Vs. Zaheer Khan, and Gopal Paper Mills Vs. S.K.G. Malhotra, arguing that restrictive covenants cannot extend beyond the employment period.
- The defendant also argued that the plaintiff had failed to compensate him as per the contractual obligation since May 2007, which should disentitle the plaintiff from relief.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Superintendence Company of India Ltd. Vs. Sh. Krishan Murgai, (1981)2 SCC 246 | Limits on enforcing post-termination restrictive covenants and public policy considerations. | The court acknowledged the precedent but held that garden leave restrictions related to trade secrets can be enforced post-termination. |
| Percept DMark (India) (P) Ltd. Vs. Zaheer Khan, (2006)4 SCC 227 | Doctrine of restraint on trade secrets can apply after employment ends; restrictive covenants during employment. | The court relied on this to affirm that restrictions to protect trade secrets after employment are valid contractual obligations. |
| Gopal Paper Mills Vs. S.K.G. Malhotra, AIR 1962 Calcutta 61 | Enforcement of restrictive covenants related to trade secrets post-employment. | Supported the court’s view that such restrictions can extend beyond the employment period to protect confidential information. |
Court's Reasoning and Analysis
The court examined the contractual clauses and the relevant case law to determine the enforceability of the garden leave clause during the post-termination period. It recognized that while restrictive covenants typically operate during employment, the doctrine of restraint concerning trade secrets justifies their continuation after termination. The court rejected the defendant’s public policy objection, holding that the plaintiff’s obligation to pay remuneration during the garden leave period legitimizes the restriction. The court also noted the plaintiff’s undertaking to deposit all outstanding payments in court, thereby addressing the defendant’s claim of non-payment. The court accepted that the defendant’s restriction is limited to competing businesses in the tour and travel sector and does not prohibit employment in unrelated fields. The court further acknowledged the defendant’s statement that he was not employed elsewhere, supporting the continuation of interim relief. Finally, the court directed the defendant to hand over specified items to the plaintiff’s authorized representative, facilitating compliance with contractual obligations.
Holding and Implications
The court continued the ad-interim relief in terms of the garden leave clause and non-compete obligations till 30.6.2007.
The order enforces the defendant’s compliance with contractual restrictions during the second phase of garden leave, emphasizing the protection of the plaintiff’s trade secrets and business interests. The plaintiff’s obligation to remunerate the defendant during this period legitimizes the restrictions. The decision does not set a new precedent but confirms the applicability of established principles regarding restrictive covenants and garden leave clauses post-termination. The defendant is restrained from engaging in competing business activities during the specified period but remains free to work in unrelated sectors. The plaintiff must deposit all outstanding remuneration and bonuses in court, ensuring the defendant’s contractual rights are protected. The order facilitates an equitable balance between protecting business interests and safeguarding employee rights.
Cases referred :
Superintendence Company of India Ltd. Vs. Sh. Krishan Murgai, (1981)2 SCC 246 [ 5 ]
Percept DMark ( India ) (P) Ltd. Vs. Zaheer Khan, (2006)4 SCC 227 [ 5 ]
Gopal Paper Mills Vs. S.K.G. Malhotra , AIR 1962 Calcutta 61 [ 5 ]
Advocates appeared :
Mr. RAFIQ DADA with Mr. ASHISH KAMAT, Ms. MITTA DAS and Ms. MEENAKSHI MHAPANKAR i /b. M/s. V. Deshpande & Co., for the Plaintiff.
Mr. PRAVIN SAMDANI with Mr. SIMIL PUROHIT i /b. Trilegal for the Defendant.
:- Heard the counsel for the parties. Perused the relevant pleadings and documents on record. This order will dispose of prayer for ad-interim relief.
2. The plaintiff prays for ad-interim reliefs on the basis of the contractual terms and conditions of employment. That has non-compete and Garden Leave clauses. Non-compete clause reads thus :-
You shall be bound and undertake that you shall not during the course of your employment with the Company and for such period after the termination of Employment or resignation, directly or indirectly, whether through partnership or as a shareholder, joint venture partner, collaborator, employee, consultant or agent or in any other manner whatsoever, whether for profit or otherwise carry on any business which competes directly or indirectly with the whole or any part of the business of organizing tours and travel related services or having/conducting business similar to the business conducted by the Company for a period of 3 months after termination or resignation.
Garden leave clause reads thus :-
The Company reserves the right to require you to remain away from work/employment for the period of 3 (three) months after termination or resignation of your services with the Company. You shall agree to comply with all conditions that may be laid down by the Company at the time of such resignation or termination. The Garden Leave period shall commence after you have served the notice period and have ceased to be on the rolls of the Company.
3. It is not in dispute that the defendant tendered resignation by e-mail communication on 2.4.2007. In response, the plaintiff accepted the resignation on condition specified in the letter dated 18.4.2007 which is exh.G at pages 33 & 34. It is provided that the garden leave clause of three months is divided into two phases. Phase I to operate from 2.4.2007 to 16.5.2007 and phase II from 17.5.2007 to 30.6.2007. During this period, the defendant was expected to discharge certain functions referred to in the communication. It is not necessary to dwell upon those matters in detail. Inasmuch as, the obligation under the first Phase has been substantially complied with. Indeed, according to the plaintiff, the defendant has not fully discharged the obligation under the first Phase. That is a matter which will have to be considered at the appropriate stage.
4. Suffice it to observe that the question that needs to be addressed for the purpose of grant or non-grant of ad-interim relief in terms of prayer clauses (b) and (c) of the Motion is, whether the plaintiff is right in insisting that the defendant during the second phase of garden leave clause which has commenced from 17.5.2007 and will operate till 30.6.2007 is not entitled to directly or indirectly, whether through partnership or as a shareholder, joint venture partner, collaborator, employee, consultant or agent or in any other manner whatsoever, whether for profit or otherwise to carry on any business, which competes directly or indirectly with the whole or any part of the business of organizing tours and travel related services or having/conducting business similar to the business conducted by the company. In my opinion, the plaintiff is justified in insisting upon compliance of the said obligation by the defendant during the second phase of garden leave clause, which condition is nothing but invoking the doctrine of restraint in regard to trade secrets of the plaintiff.
5. The counsel for the defendant, however, submits that once the defendants services have been terminated and have come to an end, the question of forcing the defendant to comply with certain conditions which could have been relevant while the defendant was in service, if insisted upon, would be against public policy. The learned counsel would rely on the exposition of the Apex Court in the case of Superintendence Company of India Ltd. Vs. Sh. Krishan Murgai [(1981)2 SCC 246], in particular paragraph 53 thereof. The counsel for the defendant has also pressed into service the exposition of the Apex Court in Percept DMark (India) (P) Ltd. Vs. Zaheer Khan [(2006)4 SCC 227], in particular paragraphs 58 and 63 as also the decision of the Calcutta High Court in the case of Gopal Paper Mills Vs. S.K.G. Malhotra (AIR 1962 Calcutta 61), in particular paragraphs 18 and 20 thereof. On an analysis of the aforesaid decisions, it is not as if there is complete bar to impose condition such as garden leave even after the employment period has ended. From the exposition of the Apex Court in the case of Percept DMark ( India ) (P) Ltd., as well as the decision of the Calcutta High Court pressed into service by the defendant, it is obvious that the doctrine of restraint on trade secret can be invoked even after the service or employment period has come to an end. Indeed, a restrictive covenant can operate only during the employment period. But, that does not mean that restrictions cannot be imposed so as to ensure that doctrine of restraint regarding the trade secrets after the employment or service period has come to an end. Such restrictions can be part of a contractual obligation, which the defendant in this case, having agreed while entering the service, will have to abide. The relief claimed in the suit is very limited, for a declaration that the defendant is bound not to make use of, disseminate or in any way disclose any confidential information of the plaintiff-company and is also bound not to join any other tour company or organisation which is in the business of organising tours and travel related services or conducting business similar to the business conducted by the plaintiff-company till 30.6.2007 and is also bound not to solicit the customers, employees of the plaintiff for a period of three months from the date of completion of all resignation formalities as accepted and signed by the defendant in the letter dated 11.9.2006. This condition has not come free for the plaintiff. The plaintiff is required to pay full remuneration to the defendant for the relevant period when the garden leave clause would operate. The amount which is paid to the defendant, it is stated across the Bar, is not less than Rs.1,22,000/- per month to compensate the defendant for requiring him to abstain from disseminating trade secrets of the plaintiff or affecting the business of the plaintiff, in any manner, during the said period. It is not the case of the plaintiff that the defendant cannot work at all in any other organisation which is unrelated to tour or travel related service or conducting business similar to the business of the plaintiff-company. It cannot be disputed that the period till 30th June is a crucial period for tour and travel business. If the defendant were to join some other competing organisation , he would be able to divert the prospective and even regular clientele of the plaintiff with whom negotiations were inconclusive. Indeed, all this is a matter of guess work. But to obviate any such loss being caused to the plaintiff, the plaintiff is entitled to invoke the restrictions provided by the garden leave clause for the specified period on payment. Thus understood, I find no substance in the objection taken on behalf of the defendant for continuing the ad-interim relief which was granted on 8.6.2007, which was obviously ex parte in nature, though the defendant was represented by the Advocate on that date of hearing.
6. There is one more plea raised on behalf of the defendant. According to the defendant, the plaintiff is not entitled for any relief inasmuch as the plaintiff has not compensated the defendant in terms of the contractual obligation. No payment has been made since May, 2007. This position, however, is rightly countered by the plaintiff. According to the plaintiff, they are more than keen to discharge their financial obligations in terms of the contract. The amount which is payable to the defendant in view of garden leave clause which is still unpaid as well as the amount payable in future till 30.6.2007 will be deposited in this Court forthwith. Besides, even the other amount payable to the defendant in the form of bonus or otherwise shall be deposited in this Court. The plaintiff through counsel has also assured that the amount payable to the defendant as bonus will be computed after 30.6.2007 from which date, the relationship between the plaintiff and the defendant will finally get terminated in all respects. As soon as the amount of bonus is computed, that will be deposited in this Court not later than 2nd July, 2007. That assurance is accepted.
7. Accordingly, I have no hesitation in continuing the ad-interim relief in terms of prayer clauses (b) and (c) till the hearing of the Motion. The Motion be listed on 3.7.2007 for hearing. It is made clear that the ad-interim relief in terms of prayer clause (b) will operate till 30.6.2007 only. Whether ad-interim relief in terms of prayer clause (c) ought to be continued further will be a matter to be considered at the hearing of the Motion.
8. At this stage, the counsel for the plaintiff has produced one Pay Order dated 31.5.2007 drawn in favour of the defendant in the sum of Rs.92,231/- being the net amount due and payable to the defendant for the month of May. The counsel for the defendant, on instructions, accepts the said Pay Order without prejudice to the rights and contentions of the parties. The counsel for the plaintiff has also produced another Pay Order drawn in favour of the defendant dated 9.6.2007 for the same amount of Rs.92,231/- which amount is payable to the defendant on 30.6.2007. That Pay Order will be made over to the defendant on or before 30.6.2007.
9. The counsel for the defendant has stated, on instructions of the defendant, who is personally present in Court, that the defendant is not employed anywhere till now. That statement is accepted.
10. At this stage, the counsel for the defendant has brought to my notice that the defendant is eager to hand over the items specified in the list at page 36 of the plaint paper-book. However, the plaintiff has not accepted the same so far. The counsel for the plaintiff submits that the defendant may hand over those items to the authorised representative of the plaintiff who will accept the same, if found to be in order.
Order accordingly.
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