AL-ABID SILK MILLS LIMITED Versus Syed MUHAMMAD MUDASSAR RIZVI
ORDER
1. Through Civil Miscellaneous Application No.5349 of 2002 the plaintiff seeks ad interim order against the defendant restraining him from serving with any organization manufacturing or selling home textile in Pakistan in any capacity whatsoever until 21‑4‑2003 by invoking negative covenant contained in the letter of appointment.
2. The plaintiff‑company is engaged in manufacturing of home textile. The Quality Control, Research and Development have a major role in achieving high quality of its product. The defendant was employed as Assistant Manager, Quality Control by the plaintiff, during April, 1996 through appointment letter. (Annexure‑A) with negative covenant that during the employment he will not work in any other organization in any capacity be it whole time or part time and upon leaving his employment with the plaintiff, he will not work in any organization engaged in similar trade for a period of 11 months. The appointment letter contains such covenant in clauses 6 and 8, which reads as under:‑‑
3. "6. During the period of your employment in this organization, you will not work in any organization, in any capacity be it whole time or part time.
8. After leaving this organization you will not join any other organization of similar trade for a period of eleven months ".
4. During the course of employment from April, 1996 to 13‑5‑2002 the defendant was trained in all aspects of quality control and in this process he was made privy to a number of original ideas pertaining to quality control, formulated, developed and advanced by the plaintiff. The defendant was promoted as Manager, Quality, Assurance and upon such promotion his access to, and knowledge of the confidential quality control documents and manuals became unrestricted. On 13th May, 2002 the defendant tendered his resignation, which was accepted on 22‑5‑2002. After leaving tire employment with the plaintiff, the defendant was obliged not to accept employment for a period 11 months with any other similar organization. The defendant joined in substantial similar position with Mustaqim Dyeing and Printing Industries (Pvt.) Ltd. Immediately upon coming to know of the same, the plaintiff was quick to make an inventory of all material records pertaining to the areas that fell under the domain and control of the defendant as Manager, Quality Assurance. The plaintiff discovered that a number of manuals, duplicate copies, including quality material stitching procedure and work instructions are missing. A notice dated 13th July, 2002 was served on the defendant to abide by the restrictive covenant prohibiting the employment with an organization engaged in business of similar that of the plaintiff. The defendant was also asked to return all the manuals and material. The notice was responded by the defendant whereby the validity of restrictive covenant was challenged as well as denial regarding the record or material to have taken away by him with assurance that if such restrictive covenant is to be enforced, he be paid salary for that period. In the supporting affidavit the assertions made by the plaintiff are that he is entitled to permanently restrain the defendant from accepting the employment with any organization similar to the plaintiff for a period 11 months from date of cessation of his employment with the plaintiff. The defendant under implied terms of contract is not entitled to use the confidential information gained by him during the plaintiff's employment, to the disadvantage or detriment of the plaintiff's interest.
5. The application has been resisted vehemently by the defendant through counter‑affidavit by raising, inter alia, pleas that such restriction is hit by Article 18 of the Constitution with a plea that it was obtained by mis‑representation and coercion. Such covenant is total blanket banning employment of the defendant in similar organization and amounts to restraint of trade thus void under section 27 of the Contract Act. The ban is even otherwise. unreasonable and illegal.
6. I have heard Mr. Munir A. Malik, learned counsel for the appellant and Mr. S.M. Yaqoob learned counsel for the defendant.
7. Mr. Munir A. Malik in support of the application raised two fold contentions, firstly that the restrictive covenant accepted by the defendant as to time and scope is enforceable. He referred clause 8 of the appointment letter containing negative covenant whereby the defendant agreed that after leaving his organization will not join any other organization of similar trade for a period of 11 months. Mr. Malik contended that such covenant is not void under the provisions of section 27 of the Contract Act and referred the following judgments in support his contention:‑‑
(i) BNS Air Services (Pvt.) Ltd. v. Anwar Ali and another (1987 MLD 3009).
(ii) Sunilchand C. Maumdar v. The Aryodaya Spg. and Wvg. Mills (AIR 1964 Gujrat 115).
(iii) Niranjan Shankar Golikari v. Century Spinning and Manufacturing Co. (AIR 1967 SC 1098).
8. The second limb of his argument was that under the implied term of contract the defendant is under the obligation that he would not use confidential information gained by him to the disadvantage or detriment of the plaintiff by divulging the said information and in support of his submission has referred the decision from English Court viz. Wessex Dairies Limited v. Smith (1935 2 KB 88), wherein it was observed as under:‑‑
9. "I think that it is a necessary implication which must be engrafted on such a contract that the servant undertakes to serve his master with good faith fidelity. That is what was said in Lamb v. Evans (4) and I entirely agree with it".
10. In Saunders v. Parry (1967) All England Law Reports 803 same view was expressed. The plaintiff solicitor entered into an agreement with the defendant to employ the defendant as assistant solicitor. The plaintiff had an important builder client, T. and in correspondence with the defendant before the defendant commenced work with him the plaintiff referred to the fact that the of T.'s conditions for remaining with the plaintiff was that the plaintiff would replace the defendant's predecessor with someone as efficient as he was. It was an implied term of the agreement between the plaintiff and the defendant that the defendant would serve the plaintiff with good faith and fidelity. The defendant handed to the plaintiff a letter from T. in which T. wrote that the defendant had applied for a lease of the upper part of his premises and that T. had accepted the defendant as a tenant. T further said in the letter that instructions to act for him would in future be sent to the defendant, and asked that all the files relating to T.'s business should bye handed over to the defendant. The defendant gave the plaintiff the notice required by the agreement. The defendant left the plaintiff's employment, moved to the premises which T. had acquired and entered into an agreement with T. and his three companies that, for a period of seven years, the defendant should undertake all the legal work of T. and his companies and that during that period. T. would not instruct any other solicitor m connection with any legal work without the defendant's consent. The plaintiff's secretary in his branch office where the defendant worked, left when he did. He had offered her work as his secretary about ten days before he left; she accepted. In an action by the plaintiff for damages for breach by the defendant of the agreement between them, the trial Judge found that it was not established that the defendant's agreement with T. was initiated by the defendant. It was held that the defendant in entering on his agreement with T. was guilty of breach of the duty implied by law in the service agreement, that the defendant would serve the plaintiff with good faith and fidelity.
11. Mr. S.M. Yaqoob in opposition, has canvassed before me the following contentions.
12. That the Court would not grant an injunction if the result of it would be to enforce specific performance of the positive contract a thing which the Court never does in the matter of personal service.
13. That the Court should refuse injunction if the effect of it would be to reduce the employee either to idleness or starvation,
14. That the grant of an injunction being discretionary and. such discretion being one which is to be exercised according to well-settled principles, the Court would refuse to exercise it, if the terms of the agreement are unreasonable or unnecessarily wide.
15. The Court would refuse to exercise its discretion if the result would leave the employee the alternative either to go back to the employer enforcing specific performance of the positive covenant or face idleness and starvation. The exercise of discretion in such cases would be an unreasonable restriction against trade under section 27 of the Contract Act and violative of the provisions of Article 16 of the Constitution. Mr. S.M. Yaqoob also referred the case of Niranjan Shanker Golikari v. Century Spinning and Manufacturing Co. (AIR 1967 SC 1098) by contending that such restrictive covenant is not reasonable and not enforceable.
16. Mr. S.M. Yaqoob, learned counsel for the defendant has also referred the following cases in support of his contentions.
(i) Gopal Paper Mills v. S.K.G. Malhotra (AIR 1962 Cal. 61).
(ii) Ameejee v. American Plins (PLD 1973 Kar. 49).
(iii) Ms. Atiqa Odho v. R. Lintas Ltd. (PLD 1997 Kar. 57).
17. I do not intend to tax the order with reappraisal of the above case‑law except Niranjan Shankar case referred to by both side as the question involved is whether the negative covenant is reasonable as to the time and scope.
18. In Sunilchand C. Mazumdar v. The Aryodaya Spg. and Wyg. Mills Co. Ltd. (AIR 1964 Gujrat.115), an appeal was preferred against the order granting an interim injunction against the appellant‑restraining him from serving or engaging himself directly or indirectly for or under any other person, firm or company in India as a senior assistant in the spinning department or in, any other similar capacity and from divulging any of the secrets, process or information received by him in respect of his employment till the hearing and final disposal of the suit.
19. 'The facts of the case were that the defendant worked in textile Mills of the plaintiff as Senior Assistant in the spinning department until April 17, 1962, on which day he sent a letter to the plaintiff‑company resigning his employment. His resignation was not accepted. The defendant wrote that he was prepared to work for the plaintiff‑company provided assurance of good treatment were given to him and he was asked to resume service. The company again wrote letter offering to make enquiry into any complaint as to improper treatment that the defendant might have had to suffer. The defendant gave no reply. On June 7, 1962 he accepted the employment as Assistant Spinning Master on a salary higher than the one he was getting in the plaintiff‑company. The plaintiff‑company filed a suit and in a notice of motion taken out by the plaintiff‑company the learned trial Judge passed an interim order as referred to above. In appeal almost same contentions raised by Mr. S.M. Yaqoob, Advocate were raised and appeal was dismissed with the observation as under:‑‑
20. "No doubt that the contract in the instant case is the valid and enforceable contract and Court has power to issue an injunction to prevent breach of the negative covenant contained therein. The negative covenant is not void as being in restraint of trade nor unreasonable nor unnecessary wide in the scope. An injunction in the terms in which it had been granted by the learned trial Judge would not, in my view, have the effect of indirectly enforcing specific performance of its affirmative stipulation nor of reducing the appellant into either idleness or starvation as contended by his learned Advocate."
21. It was further observed that‑--
22. "It is also possible to say that the terms of the injunction are in any sense unnecessarily wide or in any way unreasonable."
23. In Niranjan Shankar (surpa) a case involving restrictive covenant it was observed that "in the event of the employee leaving abandoning or resigning the service of the company in breach of the terms of the agreement before the expiry of the said period of five years he shall not directly or indirectly engage in or carry on of his own accord or in partnership with other the business at present being carried on by the company and he shall not serve in any capacity, whatsoever or be associated with any person, firm or company carrying on such business for the remainder of the said period." It was further observed that "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 of trade unless the contract as aforesaid is unconscionable or excessively harsh or unreasonable and it was ruled that obviously he cannot be heard to say that no injunction should be granted against him to enforce the negative covenant which is not opposed to public policy. The injunction issued against him is restricted as to time, the nature and employment and as to area and cannot, therefore, be said to be too wide or unreasonable or unnecessary for the protection of the interests of the respondent‑company.
24. In BNS Air Service (Pvt.) Ltd. v. Anwar Ali and another (1987 MLD 3009) learned Single Judge of this Court granted the injunction in a similar matter involving negative covenant and restriction of one year was not found to be unreasonable.
25. In order to seek injunction the party has to make out a prima facie case and balance of convenience in his favour. The term "prima facie" case has been interpreted by a Division Bench of this Court in case of Muhammad Mateen v. Mrs. Dino Mankji Chinoy (PLD 1983 Kar. 387) by Abdul Hayee Qureshi, Actg. C.J. who authored the judgment on behalf of the Bench and followed the view then in Sui Gas Transmission Company v Sui Gas Employees Union (1977 SCMR 220) that prima facie case could be spelt out if a serious question of law, or fact was raised in the plaint, on which the parties have to go to trial. In such enquiry, the objection by the defendants even as to maintainability of the suit will not be a proper criterion.
26. The second question, which requires consideration is whether a the grant of relief on an interlocutory application would mean granting substantial relief claimed in the suit as such relief should not be granted as contended by Mr. S.M. Yaqoob and in support of his contention has referred the judgment of Iftikhar Siddiqui v Clifton Cantonment Board (PLD 1998 Kar. 378), wherein the learned Single Bench refused to grant mandatory injunction in the term cited in the application with observation that such order would amount to grant of final relief in proceeding without trial of the suit, which requires evidence.
27. Conversely, Mr. Munir A. Malik, learned counsel for the plaintiff has contended that if the Court is called upon to grant any relief on any interlocutory application which, when granted, would mean granting relief claimed in the suit. Therefore, is no absolute bar to the Court granting such a relief and in support of his contention has also referred the view taken in Al‑Jamiaul Arabia Ahasanuloom and Jamia Masjid v. Sibte Hasan (1999 YLR 1634) that "In case where the act complained or is based on illegality the grant of interim, relief cannot be withheld merely on the ground that the final relief would stand granted but cannot be allowed to continue even on the ground of convenience or otherwise".
28. Similar question was considered by a Division Bench of Calcutta High Court in India Cable Company Ltd. v. Smt. Sumitra Chakroborty (AIR 1985 Calcutta 248). The question posed was can mandatory injunction be granted on interlocutory application even if it results in granting relief claimed in the suit. Such contention was addressed by Bench that if the Court is called upon to grant any relief on any interlocutory application which if granted would mean granting substantially relief claimed in the suit, the Court will be very slow and circumspect in the matter of granting any such prayer. It is indeed true that such a relief should be granted only in exceptional cases. Though exercise of such a discretion would be limited to rare and exceptional cases at the same time no Court should think that in law there is any absolute bar to the Court granting such a relief. In deserving cases, the Court should not hesitate to come in aid of a litigant and uphold the cause of justice by granting such a relief.
29. In view of the dictum laid down in above case though the exercise of discretion is limited to rare and exceptional cases but in law there is no absolute bar to the Court in granting such a relief in deserving cases.
30. In the instant case the restrictive covenant is not disputed and only the plea raised is that it was obtained under coercion, on such plea the contract would be voidable and not void. The defendant has not elected to get it declared as voidable during the period of employment. The restriction cannot be termed to be unreasonable as to time and scope i.e. for 11 months in Home Textile Unit. By such covenant the defendant is not restrained from getting employment in an organization other than Home Textile. The remedy in law which is not challenged on any ground of Constitution to prevent such breach or its enforcement by a judicial proceedings cannot, in my view, be considered‑ as contravention of Article 16 or the restriction as contained in section 27 of the Contract Act.
31. During the arguments, the plaintiff's counsel has offered three months' salary on last drawn by the defendant.
32. In the light of the above discussion, the plaintiff has demonstrated prima facie case for the grant of injunction as prayed.
33. The application is granted as prayed, subject to three months salary to the defendant by the plaintiff to be deposited by plaintiff with Nazir of this Court within a week.
34. S.A.K./A‑487/K Application allowed.