Skip to main content

Employer Can’t Restrain Trade In Guise Of Confidentiality Clause

The Delhi High Court through Justice Vibhu Bakhru struck down a ‘non compete‘ clause in M/s Stellar Information Technology Private Ltd. Vs. Rakesh Kumar & Ors and decided in favour of the ex-employees who were restrained from carrying on their own business. The plaintiff is a private company engaged in the business of providing data recovery, data migration and data erasure solutions to its clients in India and abroad. They claimed that three of their former employees were stealing their confidential data, information, trade secrets and know how, and are now using the same for securing business from the plaintiff’s clients to run their own company called Techchef and contended that it was in breach of the “Confidentiality and Invention Assignment Agreement” and “Employee Confidentiality Agreement” entered into by the ex-employees with the plaintiff. The defendants were restricted only from engaging in competing business and that too for a limited time, which was held to be reasonable, by the plaintiff company. The court observed that the only grievance of the plaintiff appeared to be that the defendants approached the plaintiff’s customers. Clarifying the issue, the Delhi High Court opined that the defendants could not be reasonably restrained from approaching the customers since the identity of the customers is known on public domain (available on the plaintiff company’s website). The defendants also could not be prevented from using the experience and knowledge, which is gained by them during the course of employment with the plaintiff. The software used by the plaintiff company was licensed software and not proprietary software. The court reached the conclusion that the plaintiff’s case is essentially not one of infringement of copyright but one for enforcement of a non-compete clause. Since the names of the customers seeking data recovery services being well known and in public domain was undisputed, therefore, the defendants cannot be restrained from approaching the customers only on the allegation that the defendants were aware of the names of the plaintiff’s customers. The court said that this contention that defendants could not be permitted to carry on any competing business is also “bereft of any merit as by expanding the width of the expression ‘confidential information’ to include information which is in public domain, the plaintiff was not seeking protection of proprietary or confidential information, but essentially seeking a restraint on trade, which is be void by virtue of Section 27 of the Indian Contract Act, 1872”. As regard the contention regarding the restriction on carrying on competing business, since a covenant in restraint of trade, whether partial or not is void by virtue of Section 27 of the Indian Contract Act, 1872. The court said: “The contention that the restriction to carry on competing business is for a limited time and is therefore, reasonable and consequently, enforceable cannot be accepted. Once it is held that in the guise of a confidentiality clause, the plaintiff is attempting to enforce a covenant in restraint of trade, the same must be held to be void.” On the basis of conclusions drawn, the court dismissed the appeal of the plaintiff company.

Read more at: http://www.livelaw.in/guise-confidentiality-clause-employer-cant-restrain-trade-delhi-hc/

Comments

Post a Comment

Most viewed this month

One Sided Clauses In Builder-Buyer Agreements Is An Unfair Trade Practice

In CIVIL APPEAL NO. 12238 OF 2018, Pioneer Urban Land & Infrastructure Ltd. vs Govindan Raghavan, an appeal was filed before the Supreme Court  by the builder against the order of the National Consumer Forum. The builder had relied upon various clauses of the Apartment Buyer’s Agreement to refute the claim of the respondent but was rejected by the commission which found the said clauses as wholly one-sided, unfair and unreasonable, and could not be relied upon. The Supreme Court on perusal of the Apartment Buyer’s Agreement found stark incongruities between the remedies available to both the parties. For example, Clause 6.4 (ii) of the Agreement entitles the Appellant – Builder to charge Interest @18% p.a. on account of any delay in payment of installments from the Respondent – Flat Purchaser. Clause 6.4 (iii) of the Agreement entitles the Appellant – Builder to cancel the allotment and terminate the Agreement, if any installment remains in arrears for more than 30 da...
Post a Comment
Read more

Inherited property of childless hindu woman devolve onto heirs of her parents

In Tarabai Dagdu Nitanware vs Narayan Keru Nitanware, quashing an order passed by a joint civil judge junior division, Pune, the Bombay High Court has held that under Section 15 of the Hindu Succession Act, any property inherited by a female Hindu from her father or mother, will devolve upon the heirs of her father/mother, if she dies without any children of her own, and not upon her husband. Justice Shalini Phansalkar Joshi was hearing a writ petition filed by relatives of one Sundarabai, who died issueless more than 45 years ago on June 18, 1962. Article referred:http://www.livelaw.in/property-inherited-female-hindu-parents-shall-devolve-upon-heirs-father-not-husband-dies-childless-bombay-hc-read-judgment/
Post a Comment
Read more

Court approached in the early stages of arbitration will prevail in all other subsequent proceedings

In National Highway Authority of India v. Hindustan Steelworks Construction Limited, the Hon'ble Delhi High Court opined that once the parties have approached a certain court for relief under Act at earlier stages of disputes then it is same court that, parties must return to for all other subsequent proceedings. Language of Section 42 of Act is categorical and brooks no exception. In fact, the language used has the effect of jurisdiction of all courts since it states that once an application has been made in Part I of the Act then ―that Court alone shall have jurisdiction over arbitral proceedings and all subsequent applications arising out of that agreement and arbitral proceedings shall be made in that Court and in no other Court. Court holds that NHAI in present case cannot take advantage of Section 14 of the Limitation Act, 1963 for explaining inordinate delay in filing present petition under Section 34 of this Act in this Court.
Post a Comment
Read more