D.P. Mohapatra, J.
1. In this petition filed under Section 115 of the Code of Civil Procedure, the petitioner indo Flogates Limited, a company incorporated under the Companies Act has challenged the order passed by the learned Additional District Judge, Rourkela on 1-12-1993 in Misc. Appeal No. 6/1993 setting aside the order of interim injunction passed by the learned Subordinate Judge, Rourkela in Misc. Case No. 42/93 arising out of T.S. No. 42/93,
2. Facts of the case, shorn of unnecessary details, may be stated thus :
Petitioner-Company filed the afore-mentioned suit citing the opposite party, Hemanta Bhattacharya and his employer Visuvius India Limited, as defendants seeking a declaration that defendant No, 1 is not entitled either alone or jointly with or as employee, manager or agent for any person, firm or company directly or indirectly to carry on or to engage in any business similar to the business of the plaintiff, for perpetual injunction restraining the defendant No. 1 from being employed by the defendant No. 2 or continuing with the services of the defendant No. 2 or either alone or joint with or as employee, manager or agent for any person directly or indirectly to carry on or to engage in any business; similar to the business of the plaintiff and for perpetual injunction restrai- ning the defendant No. 2 from employing and/or in any way utilising the services of the defendant No. 1
3. The case of the plaintiff is that it is one of the well-known and top manufacturers in India of slide gate refractories and slide gate valves which are mostly utilised in steel plants. The Company has entered into a technological collaboration with Flogates Limited of United Kingdom for manufacture of these items in its factory at Kalunga Industrial Estates in the district of Sundargarh. According to the petitioner it meets about 80 per cent of the present market requirement in the country for these goods.
On 15th July, 1992, petitioner made an offer to the opposite party for being engaged as its Deputy General Manager (Research and Development) on diverse terms and condition which, inter alia, included that the opposite party will enter into, a secrecy agreement and/or confidentiality agreement before taking up position offered to him. The opposite party having accepted the said term signed the secretary-cw- confidentiality agreement and joined the service of the company as
Deputy General Manager (Research and Development). In the said agreement it was stipulated, inter alia, that the opposite party cannot within 12 month 3 after ceasing to be employed by the petitioner-company, without its consent in writing, carry on any business similar to the business of the petitioner on his behalf or on behalf of any person, firm or company directly or indirectly or to be employed in States of West Bengal, Orissa and Bihar or for any firm, company directly or indirectly carry on or be engaged in any business similar to the business of the petitioner. He was in charge of research and development laboratory at Kalunga and was responsible for quality control, development in technology and processing improvement and other similar activities relating to products of the petitioner. According to the petitioner in such capacity the opposite party had come to know and had acquired information relating to the technology for manufacture of the products.
4. In June, 1993, the opposite party represented to the petitioner that he had received an offer of appointment in Europe and wanted to tender his resignation from service of the petitioner in order to take up a job in Europe. The petitioner believed and relied on such representation of the opposite party; the resignation tendered by him on 14th June, 1993 was accepted on 15th June, 1993 and the opposite party was relieved from his service with effect from 29th of June, 1993, In Aug. 93 the petitioner came to know that the opposite party has joined another company in India, Visuvius India Limited, (Defendant Mo. 2) as its general manager (Technology). The said company is a new establishment, it has set up a manufacturing unit in India to produce, inter alia, refractories for slide gates system and therefore is a competitor with the petitioner in business. Thereafter the petitioner carried on correspondence with the opposite party bringing to his notice the violation of the terms of the agreement and requested him to desist from service under defendant No. 2. The opposite party paid no heed to the requests and did not reply to the letters sent by the petitioner from time to time In such compelling circumstances the petitioner filed the suit seeking the reliefs noted earlier.
5. in the suit the petitioner filed an application seeking interim injunction against the defendants opposite parties (Misc. Case No 42/93) for restraining the opposite parties from continuing in service of the defendant No. 2 and for restraining the said defendant from employing the opposite party. The learned Subordinate Judge by the order dated 23-8-92 granted ad-interim injunction against the defendants-opposite parties.
On receiving the show cause notice the opposite party submitted his reply stating, inter alia, that the prayer for injunction should not be granted against him since the petitioner has sought for enforcement of the restrictive covenant which is unconscionable, unreasonable, unenforceable and hit by Section 27 of the Contract Act. He also contended that the injunction as prayed for cannot be granted Under Section 42 of Specific Relief Act. He prayed for vacating the ad- interim injunction granted against him.
6. The learned Subordinate Judge in his order dated 22-9-92 allowed the Misc. Case against the opposite party and dismissed it against the defendant No. 2. The trial Court maintained the restraint order against opposite party No. l from being employed by opposite party No. 2 till 12 months from the date of leaving service of the petitioner company and made the order absolute. The order of ad-interim injunction against defendant No. 2 restraining it from employing opposite party No. 1 in its employment was vacated since it was not a party to the contract with the petitioner.
7. On appeal by the opposite party, the learned Additional District Judge in his] order dated 1-12-93 allowed the appeal and set asides the interim injunction. The appellate Court following the decision of the Supreme Court reported in AIR 1980 SC 1717 (Superintendence Company of India (P) Ltd. v. Krishan Murgai) held that the restrictive covenant is to be construed to mean where the employment or service of the employee comes to an end by the act or at the pleasure of the employer only and it would not include a case of the employee voluntarily leaving the service of the employer. Elucidating the point the learned Additional District Judge observed :
'So it clearly appears that the intention of the parties in the instant case was that the appellant would not serve a competitive firm within the stipulated period and area only when his service under the respondent would come to an end by some act of the respondent like dismissal, discharge, termination of service etc. and pot when the appellant voluntarily leaves the service by tendering .resignation, taking premature voluntary retirement, etc.'
The said order is assailed by the petitioner in the present case.
8. On the case of the parties as discussed in the preceding paragraphs, the question that falls for determination is whether the restrictive covenant restricts the rights of the employee after conclusion of the term or service or after termination of the employment for other reasons to engage in any business similar to or compete with the employer is in restraint of trade and is, therefore, void Under Section 29 of the Contract Act,
9. Section 27 of the Contract Act reads as follows :
'27. Agreement in restraint of trade, void-Every agreement by which one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void. 'Exception 1-Savings of agreement not to carry on business of which good-will is sold-One who sells the good-will of a business may agree with the buyer to refrain from carrying on a similar business, within specified local limits, so long as the buyer, or any person deriving title to the good-will from him, carries on a like business therein, provided that such limits appear to the Court reasonable, regard being had to the nature of the business.'
The restrictive covenant in the agreement is in the following terms ;
'3. (ii) Subject to Sub-clause (iv) hereof, Mr. H Bhattacharya hereby covenants with the Company that he will not in India during his employment and in the States of West Bengal, Orissa, and Bihar within 12 months after ceasing to be employed by the company without the consent of the Company in writing, either alone or jointly with or as employee, manager or agent for any person, or company directly or indirectly carry on or be engaged in any business similar to the business of the company.'
The question formulated earlier was considered by the apex Court in the case of Superintendence Company of India (P) Ltd, v. Krishan Murgai, AIR 1980 SC 1717. Indeed the Courts below have referred to this decision and the decision was also relied by the learned counsel for the parties in course of hearing of the case in this Court. In that case of the three learned Judges on the Bench, two Judges, Hon'ble N. L Untwalia and Hon'ble V. D. Tulzapurkar, JJ. did not feel the necessity of adverting to the point of validity or otherwise of such agreement since they felt that the case could be disposed of on another point, that is, whether the restrictive covenant assuming it to be valid as on its terms enforceable at the instance of the appellant- company against the respondent. The third learned Judge Hon'ble A. P. Sen, J. considered the question since the appeal turned on it. Referring to several English decisions and decisions of High Courts and the Supreme Court in the case of Niranjan Shankar Golikari v. Century Spinning and . AIR 1967 SC 1098 the learned Judge recorded the following findings :
''Neither the test of reasonableness nor the principle that the restraint being partial was reasonable is applicable to a case governed by Section 27 of the Contract Act, unless it falls within Exception 1. We, therefore, feel that no useful purpose will be served in discussing the several English Decisions cited at the Bar.'
(See paragraph 52)
'Under Section 27 of the Contract Act, a service covenant extended beyond the termination of the service is void. Not a single Indian Decision has been brought to our notice where an injunction has been granted against an employee after the termination of his employment.'
(See paragraph-63)
Keeking in view the importance of the question and its implication and effect it will be apt and proper to extract some of the observations made in the afore-mentioned decision :
'While the Contract Act, 1872, does not profess to be a complete Code dealing with the law relating to contracts, we emphasize that to the extent the Act deals with a particular subject, it is exhaustive upon the same and it is not permissible to import principles of English law de hors the statutory provision, unless the statute is such that it cannot be understood without the aid of the English Law.'
(See paragraph-25)
'The question whether an agreement is void Under Section 27 must be decided upon the wording of that section. There is nothing in the wording of Sec 27 to suggest that the principle stated therein does not apply when the restraint is for a limited period only or is confined to a particular area. Such matters of partial restriction have effect only when the facts fall within the exception to the section.'
(See paragraph-28)
'A contract, which has for its object a restraint of trade, is prirma faice void. Section 27 of the Contract Act is general in terms and unless a particular contract can be distinctly brought within Exception 1 there is no escape from the prohibition. We have nothing to do with the policy of such a law. All we have to do is to take the words of the Contract Act and put upon them the meaning which they appear plaintly to bear. This view of the section was expressed by Sir Richard Couch in the celebrated judgment in Madhub Chunder v. Rajcoomar Doss (1874 (14 Being LR 76) at pp 85-86) laying down that whether the restraint was general or partial, unqualified or qualified, if it was in the nature of a restraint of trade, it was void'.
(See paragraph-29)
'The decision in Niranjan Shankar Goiikari's case supra is therefore of little assistance to the appellant. It is not seeking to enforce negative covenant during the terms of employment of the respondent but after the termination of his services. The restriction contained in Clause 10 of agreement is obviously in restraint of trade and, therefore, illegal and unenforceable Under Section 27 of the Contract Act. 1 (See paragraph-23) Earlier in the judgment, the learned Judge quoting from Niranjan Shankar Goiikari's case (supra') had sought to draw a distinction between restrictions applicable during the period of service and after the termination of the contract of employment. The observation in the afore-mentioned case was quoted as in paragraph 22 of the judgment which reads as follows ;
'The result of the above discussion is that considerations against restrictive covenants are different in cases where the restriction is to apply during the period after the termination of the contract than those in cases where it is to operate during the period of the contract. Negative covenants operative during the period of the contract of employment when the employee is bound to serve his employer exclusively are generally not regarded as restraint of trade and therefore do not fall Under Section 27 of the Contract Act. A negative covenant that the employee would not engage himself in a trade or business or would not get himself employed by any other master for whom he would perform similar or substantially similar duties is not therefore a restraint or trade unless the contract as aforesaid is unconscionable or excessively harsh or unreasonable or one-sided.'
10. Coming to the case at hand, on the pleadings of the parties. particularly in the injunction matter, it is clear that the case turns on the question of validity or otherwise of the restrictive covenant in the agreement. Therefore the decision of the apex Court in AIR 1980 SC 1717 (supra) on this question squarely applies to the case. With respect am of the view that the present case is covered by the findings and observations of Hon'ble Mr. A. P. Sen, J. on the point.
11. On a fair reading of the restrictive covenants in the agreement which have been- quoted earlier, it is clear to me that the agreement imposes restraint on the employee not to carry on any business similar to the business of the company ; not to work on behalf of any person or firm or company ; not to engage in similar business or procure orders from any person, firm, company, not to engage in similar business and not to approach any client or customer of company with whom in course of his employment with the company he shall have dealing for a period of 12 months after the ceasing to be in employment of the company. The agreement also imposes restriction on the opposite party not to be engaged directly or indirectly in any business similar to the business of the company in the States of West Bengal, Orissa and Bihar without permission of the petitioner being in writing for a period of 12 months after ceasing to be in employment. The restrictions imposed under the. agreement are clearly in restraint of profession, trade or business.
12. On giving my anxious consideration to the facts and circumstances of the case, stipulations in the agreement between the parties particularly, the restrictive covenants therein, it is my considered view that the said covenants are prima facie void and unenforceable being in restraint of trade. Therefore, the agreement is prima facie void and unenforceable being hit by Section 27 of the Contract Act. It is not the case of the petitioner that the present case is covered by the Exception under the said section.
13. Coming to the impugned order of the lower appellate Court passed by the learned Additional District Judge, though he has rightly set aside the order of interim injunction passed by the Subordinate Judge, the finding recorded by him that the agreement stipulates that that restrictive covenants under Clause 3(ii) of the agreement will be applicable only to a case where the petitioner-company removes the opposite party-employee from service or terminates his service and . does not apply to the present case since the opposite party voluntarily left the service of the petitioner is patently incorrect. He has clearly misread and misconstrued the terms of the agreement. Clause 3(ii) does not make any distinction between the employee voluntarily quitting service of the employer and the employer removing the employee from or terminating his service.
14. On the analysis and discussions in the foregoing para- graphs, the revision petition being devoid of merit is dismissed, but in the circumstances of the case without any order for cost.