Full Text
HIGH COURT OF DELHI
CS(COMM) 526/2024 & I.A. 31760-61/2024
NAYAN INDIA SCIENCE AND TECHNOLOGIES PVT. LTD. ..... Plaintiff
Through : Mr. Tanmaya Mehta, Ms. Swati Mittal, Ms. Manisha Singh, Mr. Abhai Pandey, Ms. Anju Agrawal, Mr. Dhruv Tandan, Mr. Gauram Kumar, Mr. Shivani Singh and Mr. Manish Aryan, Advocates
Through : Mr. Anupam Srivastava and Ms. Sarita Pandey, Advocates for D-
1.
JUDGMENT
I.A. No. 31760/2024
1. The present application has been filed by the plaintiff under Order XXXIX Rules 1 and 2, read with Section 151 of Code of Civil Procedure, 1908 (“CPC”) for granting interim reliefs in favour of the plaintiff.
2. The present application has been filed with the following prayers: “xxx xxx xxx a. Restrain the Defendant No.1 to use/access/share any confidential, sensitive and proprietary information including and not limited to its intellectual property which Defendant No. 1 gained access during the course of his employment for his own benefit or to the benefit of any third parties including and not limited to Defendant No.2 and 3; b. Direct Defendant No. 1 to complete the exit formalities and handover all work product and knowledge to Plaintiff, return Plaintiffs confidential, sensitive and proprietary information including and not limited to its intellectual property and provide immediate access to Plaintiffs confidential information which Defendant No. 1 gained access during the course of his employment; c. Restrain the Defendant No. 1 from further violating any terms of the Agreement; d. Ex-parte interim orders m respect of (a), (b ), and ( c) above; e. An order for handing over of all digital storage mediums including cloud repositories accessible and in possession of Defendant No.1, to validate retention of confidential information beyond the employment period; f. An order of disclosure of all confidential information shared about Plaintiff including work product, intellectual property and documents worked on or having accessed by Defendant No.1 while employed at Plaintiff to any third parties including and not limited to Defendant No.2 and 3; g. An order of disclosure of all information shared including work product, intellectual property and documents from the date of joining with Defendant No.2; h. For costs; and i. For such other and further reliefs as the nature and circumstances of the case may require. xxx xxx xxx”
3. At the outset, Mr. Tanmay Mehta, learned counsel appearing for the plaintiff submits that for the present, he is pressing only prayer b, to the extent of giving direction to the defendant no.1 to transfer the work product knowledge to plaintiff, by visiting the office of the plaintiff in that regard.
4. The facts, as canvassed before this Court, are as follows: 4.[1] The present suit has been filed seeking a perpetual and mandatory injunction to prevent defendant no.1 from using or disclosing the plaintiff‟s confidential and proprietary information for personal gain or for the benefit of third parties, including defendant nos. 2 and 3. The plaintiff also claims damages for violation of the Employment Agreement by defendant no.1 and seeks specific performance of the said agreement by defendant no.1. 4.[2] The defendant no.1, a former employee of the plaintiff, was initially hired as a software engineer-AI in 2021 and signed an Employment Agreement dated 22nd February, 2021. Subsequently, defendant no.1 was promoted to the position of Lead-AI from January, 2022 and was further promoted to the level of Co-founder of the plaintiff vide letter dated 30th September, 2022, effective from 24th October, 2022. 4.[3] The defendant no.1 had been intimately involved in understanding, development and promotion of plaintiff‟s products and services, including the Driver Behaviour Monitoring feature of plaintiff‟s application, which can be integrated through Dashcams as well. Defendant no. 1 has been part of and aware of all the developments in the plaintiff-company in this technology particularly, and was involved in all key strategic decisions. 4.[4] Defendant no.1 also participated and represented plaintiff in the capacity of Lead-AI as well as Co-founder on multiple occasions, before current and prospective clients, investors, government events and vendors, discussing and presenting plaintiff‟s products and services, including the Driver Behaviour Monitoring feature. Additionally, defendant no.1 was also involved in client meetings, particularly, with fleet companies, where, plaintiff showcased its range of products, including Dashcam-based solutions for monitoring road conditions, traffic and driver behaviour. 4.[5] On 19th January, 2024, defendant no.1 notified the plaintiff of his decision to resign via E-mail, by giving a notice period of 90 days. The resignation of defendant no.1 was accepted on 08th February, 2024, and he was informed to fulfil all his obligations as part of exit formalities and separation procedures. 4.[6] After resigning, defendant no.1 has joined defendant no.2, who is the direct competitor of the plaintiff. Defendant no.2 is also involved in developing Artificial Intelligence-based systems for Driver Behaviour, like the technology of the plaintiff. However, the plaintiff has already developed advance Artificial Intelligence systems on Driver Behaviour and defendant no.1 was one of the key personnel in development of those systems. 4.[7] Defendant no.1 was required to keep the plaintiff‟s confidential and proprietary information „confidential‟. Around May, 2024, plaintiff conducted a Forensic Investigation of the laptop that was being used by the defendant no.1, and found that the defendant no.1 shared a very confidential and critical SSH key with himself to his private G-mail. It is apprehended that defendant no.1 shared this key with third parties, and gave access to them to the confidential information of the plaintiff, hence, the present suit has been filed.
5. On behalf of learned counsel for the plaintiff, the following submissions have been made: 5.[1] There is urgency in the matter, as the defendant no.1, who was an employee in the plaintiff-company, was involved in development of an AI work project as the team leader. As per the Employment Agreement, the work project belongs to the plaintiff-company. 5.[2] The defendant no.1 did not transfer the knowledge, which the defendant was bound to do, wherein, the nuances of the project were to be explained. 5.[3] The defendant in his reply, does not deny his responsibility/obligation to transfer the knowledge, as the defendant, by his E-mails, has confirmed that he has already transferred the knowledge twice, though, the said contention of the defendant no.1, is disputed by the plaintiff. 5.[4] Plaintiff relies on the Joint Declaration Document dated 20th June, 2024, signed by the plaintiff‟s employees, wherein, the employees have given three declarations that there are deficiencies in the work product, being stale (not latest), incomplete work product, and some portions have not been handed over, at all. 5.[5] Learned counsel for the plaintiff draws the attention of this Court to the Employment Agreement dated 22nd February, 2021, particularly, Clause 14.6, wherein, it is stated that the employee shall not retain any copy of the product of the company. 5.[6] Attention of this Court is also drawn to the Employment Agreement, particularly to Clauses 14.[3] and 14.[5] signed by defendant no.1. 5.[7] It is further submitted that, the judgments, as relied upon by the defendant with respect to bar under Section 14(c) of the Specific Relief Act, 1963, being Chem Academy Pvt. Ltd. Versus Sumit Mehta, 2021 SCC OnLine Del 4985 and Executive Committee of Vaish Degree College, Shamli & Others Versus Laxmi Narain & Others, (1976) 2 SCC 58, are not applicable to the present case, as in the said judgments, the employees were asked to come and join back their duties. However, in the present case the plaintiff is merely asking for the defendant to transfer the knowledge, which the plaintiff is entitled to. 5.[8] Learned counsel appearing for the plaintiff draws the attention of this Court to the E-mail dated 29th April, 2024, stating that the defendant was willing to help with the transfer of knowledge, after he had left the company. Thus, the defendant should not have any issue regarding transfer of any knowledge, following what he already proposed to do. 5.[9] It is submitted that, the defendant is leveraging his position by asking the plaintiff-company to complete the exit formalities with him, in return for the work product knowledge.
5.10 It is further submitted that, the defendant held the work product as a trustee, being a former employee. Considering the fact that Artificial Intelligence (“AI”) is developing every day at a fast pace, delay in getting relief would render the relief as defeated. As per mandate of Section 8 of the Specific Relief Act, 1963, the Court shall presume that the compensation in money would not afford the plaintiff adequate relief, if directions are not granted to the defendant for transfer of work product knowledge.
5.11 Learned counsel appearing for the plaintiff submits that, a conference is coming up in Vienna on 16th July, 2024, wherein, the work product is to be presented, and, it is imperative that the plaintiff has knowledge of the work product. Thus, the plaintiff is only requesting the defendant to take out time, access the computers and servers, and transfer the knowledge to the plaintiff‟s team.
6. Per contra, on behalf of the defendant no.1, the following submissions have been made: 6.[1] There cannot be an indefinite/unlimited contract with the plaintiff, wherein, the defendant shall be obliged to work for the plaintiff even after his employment is over, and pending formalities have been met. 6.[2] Learned counsel appearing for the defendant draws the attention of this Court to the E-mail conversation dated 20th April, 2024 and 23rd April, 2024 of the defendant no.1 with the plaintiff-company after his resignation, showing that the formalities at his end were satisfied. However, vide E-mail dated 01st May, 2024, the defendant was again asked to work for some time. 6.[3] It is submitted that, Section 14 of the Specific Relief Act, 1963 categorically states that certain contracts cannot be specifically enforced, such as those involving personal services. Therefore, no injunction can be granted against the defendant, which will tantamount to direction to perform a contract, which is not enforceable. 6.[4] Learned counsel appearing for defendant no.1 further submits that, in case the defendant is directed to work for the plaintiff, it will be in breach of his current employment.
7. Having heard learned counsels for the parties and having perused the record, the issue to be adjudicated by this Court is whether the Court can give a positive direction to the defendant no.1 to visit the office of the plaintiff for transfer of knowledge in the work product, which the defendant no.1 is stated to have worked upon, during the subsistence of his employment with the plaintiff-company.
8. It is no longer res integra that no mandatory injunction can be granted, directing specific performance of contracts for personal service that are dependent on personal qualifications. An order passed compelling specific performance of contract of personal service, is barred under Section 14 of the Specific Relief Act.
9. In this regard, it would be relevant to refer to Section 14 of the Specific Relief Act, which reads as under: “14. Contracts not specifically enforceable - The following contracts cannot be specifically enforced, namely - (a) where a party to the contract has obtained substituted performance of contract in accordance with the provisions of Section 20; (b) a contract, the performance of which involves the performance of a continuous duty which the court cannot supervise;
(c) a contract which is so dependent on the personal qualifications of the parties that the court cannot enforce specific performance of its material terms; and
(d) a contract which is in its nature determinable.”
10. Dealing with the effect of Section 14 of the Specific Relief Act, 1963, this Court in the case of Paul Sales Pvt. Ltd. Versus Hari Darshan Sevashram Pvt. Ltd.1, has held as follows:
5. Thus a contract which is dependent on the personal qualification or volition of the parties the material terms whereof cannot be specifically enforced by the Court. The legal position in this regard is well settled.
6. In the decision reported as (1999) 82 DLT 137 Marriott International Inc. v. Ansal Hotels it was held: “106. The main issue which arises for consideration is whether the respondents are guilty of breach of contract and if so, in the facts and circumstances of this case should be respondents be restrained by a court injunction or order of interim relief from carrying on their further arrangement with the ITC? Before deciding this issue, two questions which require urgent reply are: (1) Can the respondents be compelled to take the services from the petitioners particularly when they have lost faith, confidence and trust in each other? (2) The other question which also needs to be answered is can the petitioners be adequately compensated in terms of money when it is ultimately proved that the respondents are guilty of breach of contract?
107. I am of the view that it may not be possible to compel the respondents to discharge their obligation of the remaining contract with the petitioners. Distrust and loss of confidence has developed between the parties. In this view of the matter, it would hardly be proper now to compel them to work together”. 2020 SCC OnLine Del 2480 (Emphasis Supplied)
11. Holding that employees cannot be compelled by the Court against their will to perform a contract which is dependent on the personal qualifications, under any legal principle applicable to employment contracts, a Coordinate Bench of this Court in the case of Chem Academy Pvt. Ltd. Versus Sumit Mehta[2]
6. The Court has considered the contentions of the parties. In the opinion of the Court, the relief as sought for in the present Petitions cannot be granted. Although, Chem Academy has given up prayer „b.‟, noted above [viz. mandatory injunction against the Employees to re-join and continue the coaching classes of the Chem Academy], it is nevertheless imperative to note that, the prayer is even otherwise misconceived. The Agreements stand terminated with Employees' resignation. The Agreements indeed provide for an exit clause whereby the Employees could quit by serving the notice period. This makes the Agreements unambiguously and inherently in its nature determinable - prior to the term of 36 months, thereby attracting the bar contained in Section 14(d) read with Section 41(e) of the Specific Relief Act, 1963 [hereinafter “Specific Relief Act”].[8] Furthermore, the Agreements herein are contracts for personal service dependent on the personal qualifications, and ordinarily, the Court cannot, by way of a mandatory injunction direct specific performance of such a contract under Section 14(c) of the Specific Relief Act.[9] The Employees cannot be compelled by the Court against their will to perform a contract which is dependent on the personal qualifications under any legal principle applicable to employment contracts. No special circumstances exist to make an exception. The remedy, if any, for Chem Academy is to sue for damages. To underscore, the scope of the present Petitions is only limited to securing interim measure(s) under Section 9 of the Act and the reliefs sought are beyond the scope of the Petitions.
7. This brings us to question that if the Employees cannot be compelled to serve Chem Academy, whether prayer „a.‟ - premised on the negative covenant [Clause 6.[2] of the Agreements] - which is all encompassing and widely termed, can be granted or not. The Employees are sought to be injuncted from joining, teaching, or being engaged in any related activities with which Chem Academy is engaged, during the employment 2021 SCC OnLine Del 4985 term of three years. Considering the fact that the Employees are in the profession of teaching - the sweep and span of the injunction prayed for would render them incapable of employment avenues in their field of expertise viz. teaching/in the same business as conducted by their former employer i.e., Chem Academy. This would and practically render them idle and prevent them to earn livelihood, which must not be allowed, being contrary to Section 27 of the Indian Contract Act, 1872 [hereinafter “Contract Act”]. Chem Academy is not insisting for prayer „b.‟, thus granting prayer „a.‟ would, render the Employees without employment, as they would not be able to work with their current Employer and would then be compelled to go back to Chem Academy. Side-lining professional(s) is likely to inflict their future prospects and would have adverse impact on their mental wellbeing.
12. Learned counsel appearing for the plaintiff, has relied upon Clause 14.[3] and Clause 14.[5] of the Employment Agreement dated 22nd February, 2021, which read as under:- 14.[3] Termination of employment shall not release the EMPLOYEE from his/her obligations and liabilities accrued prior to the date of termination. However, if there are obligations of the EMPLOYEE which activate upon termination of his/her employment, such obligations shall be so activated. xxx xxx xxx 14.[5] Return of COMPANY property Irrespective of the absence of such procedures at the relevant time of the termination of the employment, the EMPLOYEE shall return all movable properties such as equipment, documents in paper or electronic form, and any other material and shall transfer all immovable property whatsoever that belongs to the COMPANY, its Affiliates, partners, clients or vendors, and is in the EMPLOYEE‟s possession (“COMPANY Property”). Such COMPANY Property shall be returned in the same condition that it was when handed over to the EMPLOYEE, except for reasonable wear and tear. The obligations contained in this Section also apply to any property that belongs to a third party, including, but not limited to, (i) any entity that is affiliated or related to the COMPANY, or (ii) the COMPANY‟s clients, licensors, or suppliers. The EMPLOYEE shall also refund any amounts borrowed from the COMPANY subject to any terms of borrowing and sign all documents required by the COMPANY in that regard. The COMPANY shall not be bound to pay any dues of the EMPLOYEE until such time that the EMPLOYEE does not discharge these obligations upon termination.
13. Clause 2 of the Affidavit, as submitted by defendant no. 1 to the plaintiff-company, on the last day of his service with it, reads as under:
2. As part of the exit formalities, I consent to cooperate with the Company and its authorized representatives to address all necessary procedures for a seamless departure, including data handover. I will engage in the sign-off process for all relevant documents related to the termination of my employment. Additionally, I affirm that I shall not retain any intellectual property, physical property, or any other proprietary items belonging to the Company upon my exit.
14. Reading of the aforesaid shows that the defendant no. 1 had consented to cooperate with the plaintiff-company to address all necessary procedures for a seamless departure, including data handover. Further, the defendant NO. 1 was enjoined to return the company property, including any equipment documents etc. The defendant no. 1 has taken a clear stand that he has already cooperated and transferred all the knowledge in the work product to the current employees of the plaintiff-company, and that he does not wish to visit the office of the plaintiff-company for such purpose.
15. Having regard to the aforesaid, this Court cannot pass any mandatory injunction against the defendant no.1 compelling him to visit the plaintiff‟s office against his will, and perform any task, which the plaintiff contends to be in the nature of transfer of knowledge of the work product, upon which the defendant no.1 had worked during the course of his employment. Such mandatory injunction, if granted by this Court, would amount to compelling the defendant to specifically perform the contract of personal service.
16. This Court also rejects the submission made by learned counsel appearing for the plaintiff that the plaintiff is not asking the defendant to rejoin the service, but only requesting him to visit the office of the plaintiff for transfer of knowledge, that he gained during the subsistence of his employment. No employee can be compelled to deal with another party against his or her wish and the same is barred in view of Section 14(c) of the Specific Relief Act, 1963.
17. Service of personal nature is dependent on mutual trust, faith and confidence and no person can be compelled to enter into a relationship involving mutual faith and confidence, against his will, when mutual trust has been lost between the parties. Thus, Supreme Court in the case of Percept D’mark (India) (P) Ltd. Versus Zaheer Khan & Another[3], has held as follows:
58. We have perused the relevant portions of Niranjan Shankar Golikari [(1967) 2 SCR 378: AIR 1967 SC 1098], Superintendence Co. of India [(1981) 2 SCC 246] and Gujarat Bottling [(1995) 5 SCC 545] which have been extracted by the learned Judges of the Division Bench and quoted in extenso. In the circumstances, there can be no manner of doubt that the Division Bench was right in coming to the prima facie conclusion drawn by it, and in setting aside the Single Judge's order. No case was made out by the appellant for compelling Respondent 1 to appoint the appellant as his agent in perpetuity. In view of the personal nature of the service and relationship between the contracting parties, a contract of agency/management such as the one entered into between the appellant and Respondent 1 is incapable of specific performance and to enforce the performance thereof would be inequitable. Likewise, grant of injunction restraining the first respondent would have the effect of compelling the first respondent to be managed by the appellant, in substance and effect a decree of specific performance of an agreement of fiduciary or personal character or service, which is dependent on mutual trust, faith and confidence.
59. The appellant can be adequately compensated in terms of money if injunction is refused. In our view, grant of injunction, in the present case, would result in irreparable injury and great injustice to the first respondent which is incapable of being remedied in monetary terms, as he would be compelled to enter into a relationship involving mutual faith, confidence and continued trust against his will.
18. Likewise, holding that a contract of personal service cannot ordinarily be specifically enforced, Supreme Court in the case of, Executive Committee of Vaish Degree College, Shamli & Others Versus Laxmi Narain & Others[4]
18. On a consideration of the authorities mentioned above, it is, therefore, clear that a contract of personal service cannot ordinarily be specifically enforced and a court normally would not give a declaration that the contract subsists and the employee, even after having been removed from service can be deemed to be in service against the will and consent of the employer. This rule, however, is subject to three well recognised exceptions — (i) where a public servant is sought to be removed from service in contravention of the provisions of Article 311 of the Constitution of India; (ii) where a worker is sought to be reinstated on being dismissed under the Industrial Law; and (iii) where a statutory body acts in breach or violation of the mandatory provisions of the statute.
19. It would make no difference to the circumstance that the plaintiff is praying only for limited visit of the defendant no.1 to the office of the plaintiff for performance of task of transfer of knowledge, as no such mandatory injunction can be granted, in view of the law, as discussed herein. The prayer made by the plaintiff, is in the nature of performing contract of personal services/qualification, the specific performance of which, cannot be enforced.
20. This Court notes the clear stand of the defendant no.1 that he has already done the needful and has already transferred the knowledge twice to the employees of the plaintiff-company. The questions raised by the plaintiff, which are in the nature of disputed questions of facts, cannot be gone into by the Court, at this stage.
21. Considering the detailed discussion, as above, this Court is of the view that there is no prima facie case or balance of convenience, in favour of the plaintiff. The loss, as claimed by the plaintiff, can always be compensated in terms of money.
22. In view of the aforesaid findings, the Court is not required to go into other issues raised by the parties, at this stage.
23. Accordingly, the present application is dismissed. MINI PUSHKARNA, J JULY 8, 2024