Paul Deepak Rajaratnam & Ors. v. Surgeport Logistics Private Limited & Anr.

11. Soon after, the respondents filed a petition under Section 9 of the Act in this Court, suppressing the Termination Notice and sought to restrain the appellants from engaging in competing business. On 03.08.2023, this Court issued notice to the appellants only on prayers (a) and (b) and not on prayers (c), (d) and (e) of the petition. The appellants only discovered the contents of the SHA upon receiving the paperback of the petition. The prayers of the said petition are reproduced as under:- “a. Pass an order of ad-interim/interim injunction, restraining the Respondents, and any of its agents / partners / subsidiaries / affiliates / associates from operating or engaging in competing business activities to the prejudice of the Petitioners and in violation of the non-compete provisions of the Shareholders Agreement under Clause 15; b. Pass an order directing the Respondent No.1 and Respondent No.2 to continue to comply with all the obligations under the Shareholders Agreement and not disrupt the business of the Petitioners or take any such step which would jeopardize the smooth functioning of the Petitioners, in accordance with the terms of the Shareholders Agreement during the pendency of the adjudication of disputes between the parties c. Pass an order directing rendition of accounts in respect of businesses, relating to, akin to or similar to, the business of the Petitioner No. 2 whether managed, contributed and/or owned by Respondent No. 1 and Respondent 2, directly or indirectly from 28.04.2018 and the accounts of profits earned by the Respondents till date (including but not limited to their held companies, proprietorships and partnerships); d. Pass an Order appointing and deputing a local commissioner for the purpose of clause (c) above, to assess and examine the loss caused by Respondent No. 1 and 2 by diverting the business and breaching the terms of the Shareholders Agreement; e. Pass an ex-parte/ad-interim/interim order directing the Respondents to deposit an amount of Rs. l,00,00,000/- (Rupees One Crore only) before this Hon'ble Court; and/or; ***”

12. Thereafter, respondents issued a notice invoking arbitration under Section 21 of the Act on 24.08.2023, seeking a three-member tribunal, which was objected to by the appellants on 16.09.2023 due to inconsistencies in the SHA, including irrelevant clauses like “Civil Construction Projects.”

13. On 16.10.2023, this Court directed the appellants to submit an affidavit regarding the SHA, wherein the appellants stated that they had never received a copy of the SHA and questioned its authenticity, though admitted the signatures appeared to be theirs. On 16.05.2024, this Court directed the appellants to disclose sales turnover, balance sheets, complete list of clients and nature of services rendered to such clients, including that of the appellant No. 3. The appellants termed this direction unjustified and harmful to their business, especially after having lost access to servers and emails and highlighted that the noncompete clause was unenforceable post-termination.

14. On 31.05.2024, the respondents challenged the Order dated 16.05.2024 under Section 37 of the Act seeking vacation of the directions contained in paragraph 8 of the said Order. Meanwhile, on 19.07.2024, the Hon’ble Supreme Court appointed the learned arbitrator. The first procedural hearing occurred on 10.08.2024, but the respondents did not file their Statement of Claim. On 23.08.2024, the Division Bench of this Court directed that the petition under Section 9 of the Act be treated as an application under Section 17 of the Act before the learned Arbitral Tribunal and liberty was granted to the learned Arbitral Tribunal to vacate, vary, modify or affirm the Order dated 16.05.2024. The appellants were also granted liberty to move a fresh application under Section 17 of the Act before the learned Arbitral Tribunal.

15. Finally, on 16.12.2024, the learned arbitrator passed an interim award under Section 17 of the Act, as recorded in paragraph 62 of the impugned interim award, which reads as under:-

The above disclosures can be made by the Respondents, if the Respondents are so advised, by filing separate affidavits of both the Respondents. If the affidavits filed by the Respondents, turn out to be false or incorrect, or if any information concerning such business activity is withheld, the Respondents - Mr. Paul Deepak Rajaratnam, and Mr. Mohamed Naushad Basheer, will expose themselves to civil and criminal consequences. With the above observations, the application filed by the Claimants under Section 9 of the Arbitration and Conciliation Act, 1996 (which has been treated as having been filed under Section 17 of the Arbitration and Conciliation Act, 1996, on the basis of the order passed by Hon'ble Delhi High Court, dated 23.08.2024 - extracted in paragraph 18, above), is disposed of.”

SUBMISSIONS ON BEHALF OF THE APPELLANTS

16. Mr. Vivek Kohli, learned senior counsel for the appellants, challenges the impugned interim award contending that it is erroneous in law and warrants being set aside. The core grievance arises from the direction of the learned arbitrator enforcing non-compete and non-solicit clauses i.e. Clause 15 of the SHA, despite the undisputed fact that the SHA was unilaterally terminated by the respondents through Termination Notices dated 25.07.2023, which were further accepted by the appellants via email dated 13.10.2024. It is stated that the said direction of the learned arbitrator imposes a wrongful restraint of trade upon the appellants.

17. The facts clearly demonstrate that the respondents themselves severed the contractual relationship, terminating services of the appellants, denying them access to workplace infrastructure and withholding all forms of remuneration, including salary, commission and dividends. The respondents also communicated this severance to clients, thereby conclusively ending any business associations/engagement with the appellants. Yet, the learned arbitrator erroneously relied on an oral submission made by the respondents claiming no termination had occurred, citing technicalities like the lack of a second termination letter to appellant No. 2, the authority to terminate the SHA vests with respondent No. 2 and the continued appearance of the appellants as Directors on the MCA portal, despite it being the responsibility of the respondents to update those records.

18. The learned arbitrator’s acceptance of these flawed arguments ignores categorical written evidence of termination. It proceeds to grant specific performance of Clause 15 of the terminated SHA, which is impermissible under Sections 14(c) and 14(d) read with Section 41(e) of the Specific Relief Act, 1963 (for brevity “the SRA”) and is contrary to Section 27 of the Indian Contract Act, 1882 (for brevity “the ICA”) which renders agreements in restraint of trade void. The appellants argue that enforcing a negative covenant from a terminated agreement deprives them of their right to earn a livelihood and amounts to compelling performance of a personal service contract and determinable contract, which is legally unenforceable in view of Sections 14(c) and 14(d) read with 41(e) of the SRA.

19. The impugned interim award is also criticized for denying immediate relief to the appellants in the form of salary, commissions or dividends, while requiring them to file a separate application for their rightful dues. This imposes an unjust procedural burden on the appellants, already suffering financial hardship due to unlawful termination.

20. Further, the SHA itself quantifies liquidated damages under Clause 15(3), which under established legal principles, precludes grant of injunctive relief at the interim stage. In support, reliance is placed on Dalpat Kumar v. Prahlad Singh, (1992) 1 SCC 719 and Indian Oil Corporation Limited v. Amritsar Gas Service & Ors., (1991) 1 SCC 533, where it was held that when damages are an adequate remedy, injunctions should not be granted.

21. The impugned clause is also void for being in restraint of trade posttermination. The law is clear that such restrictive covenants are unenforceable beyond the life of the contract. This has been affirmed in Percept D’Mark (India) Private Limited v. Zaheer Khan, (2006) 4 SCC 227, Niranjan Shankar Golikari v. Century Spinning and Manufacturing Company Limited (1967) 2 SCR 378 and Country Development and Management Services Private Limited v. Brookside Resorts Private Limited, 2006 SCC OnLine Del 200, which hold that post-termination restraints, even outside employment contracts, are contrary to public policy.

22. Reliance is further placed on Arvind Medicare Private Limited v. Dr. Neeru Mehra, 2021 SCC OnLine Del 2225, to urge that personal service contracts cannot be specifically enforced.

23. The enforcement of such a restraint not only violates settled law but also results in grave real-life consequences for the appellants. These include forced idleness, loss of livelihood, corporate subjugation and harm to families dependent on their earnings. Such consequences are disproportionate, unjust and contrary to the equitable principles underlying arbitral relief.

24. In conclusion, the appellants pray that the impugned interim award be set aside as it is legally untenable, factually flawed and causes irreparable harm to the rights and livelihood of the appellants.

25. In addition, on 22.05.2025, the appellants have submitted a supplementary written note stating that they ceased to be Directors of respondent No. 1 with effect from 25.07.2023. This fact is relevant for the proper adjudication of the present appeal and to counter any continuing misrepresentation regarding the subsistence of their directorship.

26. The appellants have submitted that appellant No. 2 was in the process of having his name removed from the Ministry of Corporate Affairs (for brevity “the MCA”) Master Data records of respondent No. 1 and the said process is now complete.

27. The updated MCA Master Data as of 19.05.2025 confirms that both appellants are no longer listed as Directors of respondent No. 1 since 25.07.2023. It is clarified that the name of appellant No. 1 name was removed earlier on 24.04.2024 and the name of appellant No. 2 has now also been removed.

28. In light of the above factual developments, the appellants reiterate their prayer that the impugned interim award be set aside, as the contractual relationship between the parties has conclusively ended and the underlying basis for enforcing the impugned interim award no longer exists.

SUBMISSIONS ON BEHALF OF THE RESPONDENTS

29. The respondents oppose the present appeal against the impugned interim award passed by the learned arbitrator under Section 17 of the Act and submit that the appeal is not maintainable and must be outrightly rejected for there are no grounds made out to suggest that the impugned interim award is against the fundamental policy of Indian Law, and/or perverse or manifestly arbitrary, and/or the learned arbitrator exceeded his jurisdiction, for it to be challenged under Section 37(2)(b) of the Act.

30. The respondents contend that the core challenge of the appellants, claiming the impugned interim award is equivalent to a “commercial death sentence” or “corporate slavery”, is fundamentally flawed. The impugned interim award merely enforces the non-compete obligations under Clause 15 of the valid and subsisting SHA. The learned arbitrator had already considered and rejected the argument of the appellants that the SHA had been terminated. Therefore, the present appeal amounts to a re-litigation of issues that were fully argued and addressed in the Section 17 hearing.

31. The second contention raised by the appellants, alleging that the learned arbitrator misinterpreted Clause 15(1) of the SHA by ignoring its conditionality, is also meritless. The learned arbitrator had thoroughly reviewed and upheld the unambiguous language of the clause and the current argument of the appellants seeks nothing but a re-appreciation of evidence and record, which is impermissible under Section 37 of the Act.

32. The third ground, alleging violation of client confidentiality, thereby enforcing an unconscionable and geographically undefined restraint of trade, compelling perpetual service to the respondent No. 1 in respect of the business of the respondent No. 1, was already adequately considered by the learned arbitrator. The respondents maintain that this claim too is outside the permissible scope of review under Section 37 of the Act.

33. Further, the respondents allege that the appellants have made shifting and contradictory claims throughout the dispute to avoid their contractual obligations under the SHA. Initially, the appellants denied the existence of a valid SHA and claimed they were not Directors or shareholders. However, these contentions were later retracted through affidavits acknowledging the validity of the SHA, their directorships and the nature of the business governed by Clause 15.

34. The respondents also highlight that in earlier proceedings under Section 9 of the Act before this Court, the contentions of the appellants were considered and this Court passed an order on 16.05.2024 directing them to disclose specific commercial information. The operative part of the said Order reads as under:

sales turnover and the balance sheets for the partnership firm Respondent No. 3-M/s Accel Transport and Logistics since its incorporation on 18th July, 2018, as well as the complete list of its clients and the nature of services rendered to such clients. It is also directed that Respondent No. 1&2 shall not use the email addresses of SurgePort Logistics Private Limited in any manner whatsoever.”

35. While the appellants challenged that the said Order under Section 37 of the Act, this Court later directed, via its Order dated 23.08.2024, that the petition under Section 9 of the Act be treated as an application under Section 17 of the Act before the learned arbitrator, where all issues were again thoroughly adjudicated. The operative part of the said Appeal Order reads as under:-

passed today before the learned Single Judge, who will pass appropriate orders qua the application preferred by the respondents under Section 9 of the 1996 Act, having regard to the directions contained herein.”

36. The appellants had argued that the SHA stood terminated due to various alleged violations and a termination notice issued on 25.07.2023. They claimed their relationship with respondent No. 1 had ended, as they were no longer receiving salary, profits or dividends and were accused of engaging in competing businesses. They relied on alleged termination letters, including one dated 25.07.2023. The appellants also relied on precedents asserting that non-compete clauses cannot be enforced post-termination of a contract.

37. The respondents state that the termination notice dated 25.07.2023 could not be considered valid under Clause 14 of the SHA, which only empowered respondent No. 2 to terminate the agreement and not respondent No. 1. Since the said notice was issued by respondent NO. 1 and not respondent No. 2, it lacked authority and did not amount to lawful termination. Additionally, this letter mainly pertained to criminal complaints filed before the Economic Offences Wing (for brevity “the EOW”), not for termination of the SHA.

38. There exist contradictions in the stand of the appellants: while they earlier denied being party to the SHA, they later acknowledged its execution. Also, the appellants failed to show that a termination notice was ever issued to appellant No. 2. The appellants were still listed as Directors of respondent No. 1 as per the Order dated 16.05.2024 passed by this Court and continued to receive board meeting invitations, indicating an ongoing associations/engagement.

39. On the issue of financial entitlements, the learned arbitrator held that claims regarding profit share, salaries or dividends could be pursued through separate legal means but had no bearing on the enforceability of the SHA or its non-compete and non-solicit clauses. The learned arbitrator found the SHA to be valid and enforceable and that the relationship of the appellants with the company had not been severed.

40. Regarding the applicability of Section 27 of the ICA, the learned arbitrator accepted the argument of the respondents that the appellants were not mere employees but also shareholders and directors. Therefore, the non-compete and non-solicit clauses remained enforceable even during the subsistence of the SHA. The precedents cited by the appellants were found to be inapplicable to the current facts by the learned arbitrator.

41. In conclusion, the learned arbitrator correctly found the SHA to be intact and enforceable, rejected the claim of termination and upheld the enforceability of the restrictive covenants.

42. The respondents had filed a petition under Section 9 of the Act seeking interim reliefs including restraining the appellants from engaging in competing businesses, compliance with the SHA, rendition of accounts, appointment of a local commissioner and deposit of Rs. 1 crore. The appellants opposed these reliefs by arguing that Clause 15(3) of the SHA already provided a penalty framework for breaches, making interim injunctive relief unnecessary. They further contended that the SHA was not breached as their activities were transparent and approved and any breach could be compensated monetarily as per the penalty clause.

43. However, the respondents contend that Clause 15 alone did not limit their right to injunctive relief, as Clause 25 of the SHA also allowed enforcement through specific performance. The learned arbitrator upheld this view, stating that the respondents would otherwise be unable to identify violations without disclosure from the appellants. Since the appellants had not complied with court directions to disclose their business activities, it became necessary to grant interim protection to preserve the rights of the respondents under the SHA.

44. The learned arbitrator also pointed out that the appellants had earlier questioned the validity of the SHA, calling it unregistered and unstamped, only to later abandon that argument. This inconsistency, along with non-compliance with the Orders of this Court to submit affidavits regarding disclosing their business details, raised questions on the credibility of the appellants.

45. The learned arbitrator held that the interim relief granted was aligned with the terms of the SHA and not excessive. It merely restrained the appellants from engaging in competing business activities in international freight forwarding and logistics. The learned arbitrator noted that while appellant No. 3 was permitted to act as a vendor, it was not authorised to engage in competing businesses. The learned arbitrator found five letters evidencing the intent of the appellants to breach non-compete obligations and cited their continued refusal to disclose business activities as directed by this Court.

46. Additionally, the learned arbitrator found no merit in the argument of the appellants that Clause 15 was ambiguous and rejected the contentions of the appellants. He held that Clause 15 clearly prohibited not only direct competition but also businesses that are “relatively same business”, thereby establishing a broad scope for prohibited activities.

47. In view of the above, the respondents urge that the present appeal be dismissed.

ANALYSIS AND FINDINGS

48. I have heard learned counsel for the parties and also perused the material available on record. Scope of Interference under Section 37(2)(b) of the Act.

49. Before delving into the substantive merits of the impugned interim award, it is important to delineate the permissible scope of judicial interference under Section 37(2)(b) of the Act. The said provision is extracted below:-

50. Under Section 37(2)(b) of the Act, the jurisdiction of an appellate court to interfere with an interim order passed by an arbitral tribunal under Section 17 of the Act is limited and well-settled. This restrained approach is rooted in the legislative policy of the Act, as reflected in Section 5 of the Act, which mandates minimal judicial intervention in arbitral proceedings.

51. Judicial intervention is warranted only when the order is (A) perverse, arbitrary or unreasonable, (B) contrary to the fundamental policy of Indian law, (C) the arbitral tribunal has exceeded or failed to exercise its jurisdiction, and/or (D) it results in a miscarriage of justice.

52. This standard has been laid down and reiterated in multiple decisions of the Hon’ble Supreme Court and this Court including National Highways Authority of India v. HK Toll Road Private Limited, 2025 SCC OnLine Del 2376. The relevant paragraphs read as under:-

reflects the legislative intent to minmize judicial interference in the arbitration process. Unlike the appeals under other statutes, the appeals under the 1996 Act against the orders passed by the Arbitral Tribunal are subject to strict and narrow grounds. The 1996 Act aims at minimal court involvement, thereby to uphold the autonomy and efficiency of the arbitration process. (Reference: paras 64, 66, 68-70 of Dinesh Gupta case13).

57. The appellate court is not required to substitute its views with the view taken by the Arbitral Tribunal which is a reasonable or a plausible view except where the discretion is exercised arbitrarily or where the AT has ignored the settled principles of law. In fact, the whole purpose to bring the 1996 Act is to give supremacy to the discretion exercised by the AT. The appellate court is not required to interfere in the arbitral orders especially a decision taken is at an interlocutory stage. The appellate court is only required to see the whether the AT has adhered to the settled principles of law rather than reassessing the merits of the AT's reasoning.

58. A coordinate Bench of this Court in Tahal Consulting Engineers India (P) Ltd. case22 has observed as under: (SCC OnLine Del paras 36 and 38)

judicial intervention being kept at the minimal. It also correctly finds that the power conferred by Section 37(2)(b) is not to be understood as being at par with the appellate jurisdiction which may otherwise be exercised by courts in exercise of their ordinary civil jurisdiction. This clearly flows from the foundational construct of the Act which proscribes intervention by courts in the arbitral process being kept at bay except in situations clearly contemplated under the Act or where the orders passed by the Arbitral Tribunal may be found to suffer from an evident perversity or patent illegality. ∗∗∗

38. It would thus appear to be well settled that the powers under Section 37(2)(b) is to be exercised and wielded with due circumspection and restraint. An appellate court would clearly be transgressing its jurisdiction if it were to interfere with a discretionary order made by the Arbitral Tribunal merely on the ground of another possible view being tenable or upon a wholesome review of the facts the appellate court substituting its own independent opinion in place of the one expressed by the Arbitral Tribunal. The order ofthe Arbitral Tribunal would thus be liable to be tested on the limited grounds of perversity, arbitrariness and a manifest illegality only.”

59. To sum up, it is clear that in view of the limited judicial interference, the appellate court has to exercise its power only if the arbitral order suffers from perversity, arbitrariness and a manifest illegality.”

53. Hence, it is clear that in view of the limited judicial interference, the Appellate Court must intervene only where the order is vitiated by perversity, arbitrariness, jurisdictional error or contravention of public policy. Ambit of Section 17 of the Act.

54. Section 17 of the Act empowers an arbitral tribunal to grant interim measures during arbitral proceedings or after the arbitral award but prior to its enforcement under Section 36 of the Act. Such measures may include the protection relating to the preservation or sale of goods, securing monies in dispute, inspection or preservation of disputed property, interim injunctions or receivership and any other protective or convenient orders deemed necessary. The arbitral tribunal is vested with powers equivalent to those of a civil court for granting such reliefs and the orders under Section 17 of the Act are treated as court orders and are enforceable under the Code of Civil Procedure, 1908 (for brevity “the CPC”) in the same manner as orders of a civil court.

55. The Coordinate Bench of this Court in Handicraft and Handlooms Exports Company of India v. SMC Comtrade Limited, 2023 SCC OnLine Del 3981, reiterated the judgment of Arcelormittal Nippon Steel (India) Limited (supra). The relevant paragraph reads as under:-

56. To grant interim reliefs under Sections 9 or 17 of the Act, the ingredients as set out in the judgment of Arcelormittal Nippon Steel (India) Limited (supra) are to be satisfied. The relevant paragraph reads as under:-

injury or prejudice may be caused to the party seeking interim relief.”

57. Having discussed the principles with regard to the powers of the Appellate Court and the powers of the arbitral tribunal under Section 17 of the Act, I will now proceed to examine the contentions raised by the parties. Whether the Shareholders’ Agreement was Validly Terminated.

58. A pivotal issue in this case is whether the SHA dated 28.04.2018 was validly terminated by the respondents through the termination notice dated 25.07.2023. The appellants contend that upon termination of the SHA, they ceased to owe any obligations under Clause 15, including the non-compete and non-solicit obligations. The learned arbitrator, however, found that the SHA continued to remain valid and binding upon the parties.

59. The relevant paragraph of the impugned interim award is reproduced as under:-

„international freight forwarding and logistics‟. This action of the Claimants, it was argued, violates the safeguards available to the Respondents, under Section 27 of the Indian Contract Act, 1872. The Arbitral Tribunal has given its thoughtful consideration to the instant submission advanced by the learned Counsel for the Respondents. In support of the instant assertion, reliance was placed by the learned Counsel for the Respondents on the judgments noted in paragraph 37, above. The same have been duly considered by the Arbitral Tribunal. The Arbitral Tribunal has also considered the judgments relied upon by the learned Counsel for the Claimants, as have been referred to in paragraph 50, above. The Arbitral Tribunal is of the considered view, that the relationship of the Respondents with SurgePort Logistics Private Limited - Claimant No. 1, has not been severed. The Respondents - Mr. Paul Deepak Rajarantnam, and Mr. Mohamed Naushad Basheer, still continue to be the Directors of Claimant No.1 - SurgePort Logistics Private limited. This position has been recorded in the order of the Hon'ble Delhi High Court, dated 16.05.2024 (passed in O.M.P. (I) (COMM.) 246/2023). In the instant order passed by the Hon‟ble High Court, it was observed “... On a specific query, Mr. Ritin Rai, ld. Senior Counsel submits that the Respondent Nos. 1&2 are currently directors of SurgePort Logistics Private Limited and are not engaging himself in any of the competitive business against SurgePort logistics Private Limited. Mr. Rai further submits that the only business being carried out by the Respondent Nos. 1&2 is a business which was within the knowledge of the Petitioners …”. The Respondents - Mr. Basheer, continue to possess a right to dividends from SurgePort Logistics Private Company, in consonance with their respective share holdings. The Respondents - Mr. Paul are also entitled to salary under Clause 4 (2) of the „Shareholders Agreement‟, dated 28.08.2018. It is the case of the learned counsel for the Claimants, that the relationship of the Respondents - Mr. Paul Deepak Rajaratnam, and Mr. Mohamed Naushad Basheer, with SurgePort Logistics Private Limited, has not come to an end, and that it still subsists. The Arbitral Tribunal finds itself satisfied, with the above submission of the learned Counsel for the Claimants. In the considered opinion of the Arbitral Tribunal, till the relationship between the Respondents - Mr. Paul Deepak Rajaratnam, and Mr. Mohamed Naushad Basheer, with SurgePort Logistics Private Limited subsists, there can be no question of any breach of Section 27 of the Indian Contract Act. As such, the „non-compete and non-solicit obligations‟ contained in Clause 15 of the „Shareholders Agreement‟, dated 28.04.2018, is liable to be considered as valid, and enforceable against the Respondents - Mr. Paul Deepak Rajaratnam, and Mr. Mohamed Naushad Basheer. For the reasons recorded above, the Arbitral Tribunal finds no merit in the contention advanced on behalf of the Respondents, on the basis of Section 27 of the Indian Contract Act, 1872.”

60. On perusal, the conclusion of the learned arbitrator that the SHA is subsisting was premised on the following grounds:-

61. After examining the matter, I agree with the conclusion of the learned arbitrator and set forth the following detailed reasons:- A.Conduct of the Appellants Inconsistent with Termination.

62. The fact that weighs with me is that the material on record does not support the contention of the appellants that the SHA stood terminated pursuant to the termination notice dated 25.07.2023.

63. At the outset, it is relevant to note that the Order dated 16.05.2024 passed by this Court in O.M.P.(I)(COMM) 246/2023 expressly records that the appellants continued to hold the position of Directors in the respondent No. 1 company as on the said date. This factual finding, recorded by a coordinate Bench of this Court, directly contradicts and undermines the present contention of the appellants that all legal and contractual relationships with the respondent No. 1 were terminated as early as 25.07.2023.

64. The relevant extract from the said Order is reproduced as under:- “7. On a specific query, Mr. Ritin Rai, ld. Senior Counsel submits that the Respondent Nos. 1&2 are currently directors of SurgePort Logistics Private Limited and are not engaging himself in any of the competitive business against SurgePort Logistics Private Limited. Mr. Rai further submits that the only business being carried out by the Respondent Nos. 1&2 is a business which was within the knowledge of the Petitioners.

8. A perusal of Clause 15 of the Shareholders‟ Agreement clearly shows that the Respondent Nos. 1&2 cannot engage in any business competitive to the Petitioner No. 1‟s business, where they are currently directors. The Respondent No. 1&2 shall, accordingly, place on record the sales turnover and the balance sheets for the partnership firm Respondent No. 3-M/s Accel Transport and Logistics since its incorporation on 18th July, 2018, as well as the complete list of its clients and the nature of services rendered to such clients. It is also directed that Respondent No. 1&2 shall not use the email addresses of SurgePort Logistics Private Limited in any manner whatsoever.”

65. This Order leaves little room for doubt. The representation made by learned senior counsel and duly recorded by this Court, confirms the continued role of the appellants as Directors and their ongoing legal obligations under Clause 15 of the SHA. Therefore, the attempt of the appellants to portray a clear severance from the corporate and contractual framework post 25.07.2023 is not only factually incorrect but also legally untenable in light of the express judicial record.

66. Beyond the documentary record, what also warrants an adverse inference is the timing and evolving nature of the stand of the appellants regarding the termination of the SHA. Although the termination notice is dated 25.07.2023, it is noteworthy that the appellants themselves neither acted upon nor relied on this notice until much later. Their formal acceptance of the termination was communicated only on 13.10.2024, well after the commencement of arbitration proceedings on 10.08.2024. This delayed and selective invocation of the termination plea, conveniently raised only in response to the initiation of arbitral proceedings, appears to be a clear afterthought.

67. Further, in their additional reply dated 13.09.2024 to the application of the respondents under Section 17 of the Act, the appellants made no mention whatsoever of the alleged termination of the SHA or of Clause 15 being rendered unenforceable as a consequence thereof. This line of argument was raised for the first time only in their written submissions dated 27.11.2024, over three months after the commencement of arbitration and only after their acceptance of the termination had been formally communicated.

68. It is also relevant to note that the appellants were subsequently compelled to file an application dated 22.10.2024 seeking to bring on record their acceptance of the termination. The said application states as follows:

Respondents at the time of filing theReply or Additional Reply to the Claimants‟ Section 17 Application as it was not in existence at the relevant time.It is a matter of record that this Hon'ble Tribunal, after recording no objection of the Claimants, was pleased to take on record the Claimants‟ Termination Notice dated 25.07.2023 in terms of order dated 30.09.2024. However, during the course of the arguments, the Claimants have conveniently chosen to wriggle out of the said termination by giving a different interpretation totheir Notice of Termination dated 25.07.2023. Therefore, it was deemed necessary and appropriate to issue notices of confirmation of the termination of the Shareholders‟ Agreement.”

69. This extract further demonstrates that the position of the appellants evolved only after the arbitral process had commenced and in response to the legal strategy of the respondents. It reveals that the termination was not treated as operative until it became expedient to do so during the proceedings. Such conduct reinforces the inference that the plea is opportunistic and designed to evade contractual obligations, particularly those imposed under Clause 15 of the SHA.

70. Even more significantly, the appellants have, at different stages, taken inconsistent positions regarding the very existence of the SHA. In earlier pleadings and communications, the appellants outright denied the existence and enforceability of the SHA. However, at a subsequent stage, they chose to rely upon the same agreement to claim that it stood terminated.

71. The Order dated 19.12.2023 passed by this Court records the contradictory stand of the appellants, which is reproduced as under:-

week thereafter.”

72. Lastly, the MCA Master Data records reflecting the cessation of the directorship of the appellants is, in essence, a self-serving document, having been unilaterally filed by the appellants themselves with the MCA. It does not, by itself, establish the termination of the broader legal relationship governed by the SHA. The mere act of updating statutory records cannot override or substitute the mutual obligations contemplated under the SHA, particularly when the underlying termination itself is disputed.

73. Taken cumulatively, the documentary recognition of the appellants positioned as Directors of the respondent No. 1 company well after the purported termination, their delay in asserting the plea of termination and their inconsistent positions regarding the existence of the SHA, all point to a lack of bona fides and undermine the credibility of their claim that the SHA was validly terminated.

74. This Court accordingly finds no infirmity in the finding of the learned arbitrator that the SHA continued to subsist and had not been effectively or lawfully terminated. B.Separation from Management ≠ Termination of Contractual Obligations.

75. The appellants have contended that their removal from email systems, cessation of remuneration and exclusion from day-to-day affairs signify the termination of the SHA and removal from directorship. Even if such an inference is accepted for the sake of argument, it is critical to underscore that these actions may, at best, evidence a change in managerial or operational status. However, they do not, ipso facto, result in the legal termination of the SHA.

76. The SHA is a commercial agreement entered into between equity holders, establishing rights and obligations in the capacity of shareholders, not as employees or executives. Employment or managerial roles may flow from or coincide with shareholding arrangements, but they are not synonymous with them. Consequently, disengagement from management or operational responsibilities does not bring about the cessation of contractual obligations imposed under the SHA, including those that survive its termination, such as noncompete and non-solicit covenants.

77. This distinction has been duly recognized by the learned arbitrator, particularly in relation to the claim of the appellants regarding their financial entitlements. The learned arbitrator granted liberty to the parties to file their financial claims and held that the same have no nexus to the non-compete and non-solicit obligations of the SHA.

78. The relevant paragraph reads as under:

Alternatively, the Respondents may claim the same, by filing 'counter claims' before the Arbitral Tribunal. The instant contention of the learned Counsel for the Respondents, has no nexus to the 'non-compete and non-solicit obligations', contained in the Clause 15 of the 'Shareholders Agreement', dated 28.04.2018. For the above reasons, the Arbitral Tribunal finds no merit in the instant contention of the Respondents.”

79. This reasoning finds support in the decision of the Bombay High Court, in Novartis Vaccines & Diagnostics Inc. v. Aventis Pharma Limited, 2009 SCC OnLine Bom 2067, which emphasized the enduring nature of contractual obligations arising out of joint venture or shareholders’ agreements, irrespective of operational disengagement. The relevant paragraph reads as under:-

and the object behind formation of such partnership/company. No provision is made for a partner to do rival or competing business freely. Both the parties are governed by JVA, shareholders agreement & the Article of Association of CBVPL. Both the partners are aware of their respective, written & unwritten obligations, liabilities, duties.”

80. Accordingly, the mere cessation of managerial roles or nonparticipation in operational affairs does not absolve a party from the continuing legal and contractual obligations flowing from the SHA. Any attempt to circumvent or disclaim such obligations by citing managerial disengagement is legally unsustainable. Non-Applicability of Section 27 of the Indian Contract Act, 1882.

81. The argument of the appellants is that the impugned interim award is contrary to Section 27 of the ICA which renders agreements in restraint of trade void. The appellants argued that enforcing a restrictive covenant from a terminated agreement deprives them of their right to earn a livelihood.

82. Section 27 of the ICA provides that every agreement by which anyone is restrained from exercising a lawful profession, trade or business is to that extent void, unless it falls within the statutory exception. The sole exception to this provision pertains to the sale of goodwill, where the seller may agree to a reasonable restriction on carrying on a similar business within specified limits. The said provision reads as under:

83. It is well settled that restrictive covenants during the term of a valid contract are not considered in restraint of trade under Section 27 of the ICA. Since the learned arbitrator has found that the SHA is still in force, to which I agree, Clause 15 of the SHA is not in restraint of trade and remains enforceable, as detailed hereinunder.

84. In Niranjan Shankar Golikari (supra), the Hon’ble Supreme Court upheld restrictions during the course of employment or contractual engagement, distinguishing them from post-contractual restraints. The relevant paragraph reads as under:-

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 of trade unless the contract as aforesaid is unconscionable or excessively harsh or unreasonable or one sided as in the case of W.H. Milsted and Son Ltd. [W.H. Milsted and Son Ltd. v. Hamp and Ross and Glendinning Ltd., 1927 WN 233].”

85. Recently, the Hon’ble Supreme Court in Vijaya Bank &Anr. v. Prashant B. Narnaware, 2025 INSC 691, again upheld the validity of the restrictive covenant operating during the subsistence of the contract. The relevant paragraphs read as under:-

respondent‟s option to resign and thereby perpetuated the employment contract for a specified term. The object of the restrictive covenant was in furtherance of the employment contract and not to restrain future employment. Hence, it cannot be said to be violative of Section 27 of the Contract Act.”

86. The reliance of the appellants on a decision where restrictive covenants were held unenforceable post-termination, such as Percept D’Mark (India) Pvt. Ltd. (supra) is misconceived in the present case. In this case, the agreement was validly terminated and the clause in question extended far beyond the subsistence of the contract. The relevant paragraph of the judgment reads as under:-

87. I am of the considered view that the contention of the appellants that the enforcement of a restrictive covenant from a terminated agreement infringes upon their right to livelihood and is hit by Section 27 of the ICA is misconceived. The learned arbitrator has expressly clarified that the appellants are not barred from engaging in any lawful trade, business or profession, except from international logistics and freight forwarding, in view of Clause 15 of the SHA.

88. In addition, the learned arbitrator entitled the appellants to seek a recall or modification of the directions in the impugned interim award, consequent upon the appellants’ disclosing their entire business activities, as directed by this Court, vide its order dated 16.05.2024. This narrowly tailored requirement ensures that the interim relief granted remains proportionate and balanced and does not amount to an unreasonable or absolute restraint on their right to earn a livelihood. The Impugned Interim Award Satisfies the Triple Test of Granting an Interim Relief.

89. The Hon’ble Supreme Court in Dalpat Kumar (supra) has discussed the well-settled triple test that governs the grant of interim relief, which reads as under:

injunction. The Court further has to satisfy that noninterference by the Court would result in “irreparable injury” to the party seeking relief and that there is no other remedy available to the party except one to grant injunction and he needs protection from the consequences of apprehended injury or dispossession. Irreparable injury, however, does not mean that there must be no physical possibility of repairing the injury, but means only that the injury must be a material one, namely one that cannot be adequately compensated by way of damages. The third condition also is that “the balance of convenience” must be in favour of granting injunction. The Court while granting or refusing to grant injunction should exercise sound judicial discretion to find the amount of substantial mischief or injury which is likely to be caused to the parties, if the injunction is refused and compare it with that which is likely to be caused to the other side if the injunction is granted. If on weighing competing possibilities or probabilities of likelihood of injury and if the Court considers that pending the suit, the subject matter should be maintained in status quo, an injunction would be issued. Thus the Court has to exercise its sound judicial discretion in granting or refusing the relief of ad interim injunction pending the suit.” (emphasis supplied)

90. The interim relief granted by the learned arbitrator in the impugned interim award reads as under:- “62. Based on the consideration recorded in the foregoing paragraphs, more particularly in paragraphs 60 and 61 above, the Arbitral Tribunal is satisfied, that an interim order needs to be passed, restraining the Respondents - Mr. Basheer, including their agents, partners, subsidiaries, affiliates and associates, from engaging themselves in competing business activities pertaining to 'international freight forwarding and logistics', to the prejudice of SurgePort Logistics Private Limited - Claimant No. 1 and Skyways Air Services Private Limited - Claimant No. 2 (as would infringe the 'non-compete and non-solicit obligations', contained in Clause 15 of the 'Shareholders Agreement', dated 28.04.2018). It is accordingly, so ordered. Needless to mention, that the Respondents would be entitled to seek a recall and/or modification of the above directions, consequent upon the Respondent's disclosing the entire business activities of the Respondents - Mr. Paul including their agents, partners, subsidiaries, affiliates and associates, with effect from the date of incorporation of Accel Transport and Logistics (ie., from 18.07.2018), as directed by the Hon'ble Delhi High Court, vide its order dated 16.05.2024.”

91. In the present case, on a holistic appreciation of the record, I am of the opinion that the learned arbitrator has justifiably concluded that each of the prongs of the triple test stand satisfied.

92. The impugned interim award restrains the appellants from engaging in business activities that are identical or competing with the domain of “international logistics and freight forwarding”, the precise scope covered under Clause 15 of the SHA. Far from being overboard, the impugned interim award is narrowly tailored to protect the contractual interests of the parties and maintain the status quo in a domain contractually agreed to be restricted.

93. Importantly, the learned arbitrator has expressly clarified that the appellants are free to pursue any other lawful trade, business or profession. Additionally, the injunction is also capable of being recalled or modified upon the disclosure of the appellants of the details of their ongoing business activities in compliance with the Order dated 16.05.2024 passed by this Court. This carve-out ensures that the interim relief remains proportionate and does not impose any unreasonable restraint on their right to livelihood.

94. The detailed analysis of the satisfaction of the impugned interim award on the established triple test for granting an interim relief is as under:- A.Prima Facie Case Exists.

95. The prima facie case is established through cogent documentary evidence and conduct of the appellants, detailed in paragraph 60 of the impugned interim award. Despite specific directions issued by this Court vide order dated 16.05.2024, the appellants failed to disclose the nature and extent of their business operations, including that of the appellant No. 3. This deliberate non-compliance warranted an adverse inference by the learned arbitrator that such documents, if produced, would have revealed active engagement in competing business activities. The learned arbitrator further noted that the appellants initially denied the very existence of the SHA, but later reversed their position and admitted their signatures once pressed through judicial proceedings. This shifting and evasive conduct reflected a lack of candour and reinforced the case of the respondents.

96. The learned arbitrator also relied on five letters addressed by the appellants to various international clients between May and August 2019, in which they falsely represented the appellant No. 3 company as a “group company” of the respondent No. 1. These communications, which were never denied by the appellants, established that the appellants misused the name and the goodwill of the respondents to divert business opportunities in violation of Clause 15 of the SHA. Further, two certificates issued by international partners, Jilani Freight International (Pakistan) and NorthPort Logistics (Sri Lanka), confirmed that the appellant No. 3 company was acting as their principal in the same line of business. These certificates remained uncontroverted during the arbitration proceedings and clearly demonstrated engagement in competing activities. Additionally, a “relieving certificate” dated 25.03.2022 issued by the appellant No. 2 falsely claimed that he was no longer associated with the respondent No. 1, although he continued to be its Director. The learned arbitrator rightly inferred that this falsehood was crafted to facilitate the solicitation of the appellants of international business.

97. The learned arbitrator also examined emails dated 06.01.2023, wherein the appellant No. 2 offered to represent Oceanwide Logistics in India through the appellant No. 3 company and promised to expand its operations into the Gulf and Africa. The email was marked to the appellant No. 1, indicating collusion. Yet another email thread from March 2022 and March 2023 revealed the appellants exploring logistics business in Indonesia through the appellant No. 3 company without any role for the respondent No. 1.

98. The above mentioned findings establish a consistent and continuing breach of Clause 15 of the SHA, leaving little room for doubt as to the existence of a strong prima facie case. At this interim stage of the arbitration proceedings, a detailed examination of the above referred material is not required to grant an interim relief, as long as a prima facie case is established by the aggrieved party. B.Irreparable Injury Exists.

99. With respect to the second limb of the triple test, the learned arbitrator found that irreparable injury would result from continued breach of Clause 15 of the SHA.

100. The argument of the appellants is that Clause 15(3) of the SHA provides for liquidated damages in the event of breach of the noncompete and non-solicit obligations under Clause 15 of the SHA and once the parties have contractually agreed upon quantifiable compensation, the grant of injunctive relief is legally impermissible. Clause 15(3) reads as follows:- “3. In the event of non compliance of 1 and 2 above, the party at the Second Part and/or the Party at the Third Part shall be liable to compensate by way of penalty to the party at First Part with minimum amount of Rupee one crore and subject to maximum of loss suffered party at the First Part due to breach of agreement by the party at Second and/or Third Part.”

101. However, I do not find this argument tenable in the present circumstances. In paragraph 60 of the impugned interim award, the learned arbitrator noted that the global nature of international freight forwarding renders it virtually impossible for the respondents to track or unearth the activities of the appellants, particularly given the opaque and cross-border character of such operations. The relevant paragraph of the impugned interim award reads as under:-

try to dig out the same. It is therefore meaningless on the part of the Respondents to contend, that compensation payable to the Claimants under Clause 15, would emerge after the Claimants have completed their pleadings and produced their witnesses. If the Respondents, had placed the details of their business activities (including those of Accel Transport and Logistics, from the date of its incorporation of Accel Transport and Logistics ), on the record of the case, in compliance with the directions issued by the Hon 'ble Delhi High Court, on 16.05.2024 {in O.M.P. (I) (COMM.) 246/2023), it would perhaps have been possible for the Claimants, to point out the business transactions entered into by the Respondents, which transgressed the 'non-compete and non-solicit obligations', contained in Clause 15. The aforesaid direction of the Hon'ble High Court, was contained in paragraph 8 of its order, which is being extracted hereunder:- …”

102. In the present case, the respondents operate in the highly competitive and intangible domain of international freight forwarding and logistics, a sector driven primarily by goodwill, proprietary know-how and confidential client relationships. It is pertinent to note that such relationships, once breached, are not easily quantifiable in monetary terms and cannot be adequately restored through damages alone. The continued violation of non-compete and non-solicit obligations, therefore, threatens to irreparably erode the market position of the respondents, causing loss that is neither measurable nor compensable through a purely financial remedy.

103. In view of the matter, since the appellants failed to disclose their financials and operational data despite clear directions vide the Order dated 16.05.2024 passed by this Court, there was no basis for assessing the adequacy of damages. It is pertinent to note that this disclosure by the appellants was critical to enable the learned arbitrator to examine whether Clause 15 of the SHA had been breached and if so, to determine the appropriate quantum of liquidated damages under Clause 15(3) of the SHA, which quantifies a minimum penalty of Rs. 1 crore and provides a ceiling based on the actual losses suffered. However, the continued failure of the appellants to comply with this judicial direction frustrated any meaningful inquiry into the existence and extent of breach, thereby depriving the learned arbitrator of the evidentiary basis required to award damages at this stage, which could very well be in excess of the minimum penalty of Rs. 1 crore.

104. The only argument of the appellants for the non-compliance of the Order dated 16.05.2024 passed by this Court is that the disclosure mandate is excessive, unjustified and severely detrimental to their business. According to the appellants, compliance with this Order would compromise client confidentiality and threaten their very survival in the logistics sector. Further, they assert that the respondents had already terminated their services and access to company systems on 25.07.2023 and therefore, lacked the standing to seek equitable relief.

105. However, this argument does not impress me, as the proceedings under Sections 9 and 17 of the Act evolve based on the necessity to preserve the subject matter of arbitration or prevent irreparable injury. This Court’s as well as the learned arbitrator’s directive for disclosure likely stemmed from a legitimate need to assess whether there was an ongoing violation of contractual obligations or misuse of confidential material. Interim measures are granted on a prima facie basis and do not require a conclusive adjudication on the merits.

106. In such circumstances, the mere existence of a liquidated damages clause does not preclude injunctive relief where quantification of loss is not possible due to the conduct of the breaching party. I am satisfied that interim protection was essential to preserve the subject matter of the dispute under Section 17 of the Act and to prevent the arbitral proceedings from being rendered otiose. Hence, the finding of the learned arbitrator on this point is both reasonable and supports the triple test. C.Balance of Convenience in Favour of the Respondents.

107. The balance of convenience too lies squarely in favour of the respondents. The interim relief granted is not in the nature of a blanket prohibition but is strictly limited to restraining those activities that the appellants had contractually undertaken to refrain from. The appellants remain free to engage in other lawful business activities not covered by Clause 15 of the SHA. Further, the appellants are granted the liberty to apply for recall or modification upon filing full disclosure affidavits of their business activities, including that of the appellant No. 3.

108. On the contrary, denial of interim relief would enable the appellants to continue eroding the business of the respondents in foreign jurisdictions, thereby frustrating the purpose of the arbitration and rendering any final award meaningless. If the injunction is denied and the appellants are later found to have violated Clause 15 of the SHA, it would be practically impossible to reverse the commercial harm caused.

109. Importantly, the impugned interim award is neither punitive nor final in nature, it merely preserves the contractual status quo under Section 17 of the Act, pending final adjudication.

110. In conclusion, the impugned interim award is a well-reasoned and proportionate exercise of the powers of the learned arbitrator under Section 17 of the Act. It satisfies all three elements of the established triple test for granting an interim relief and is based on detailed analysis of the material available on record. The appellants have not only breached Clause 15 of the SHA but also withheld material documents and facts. The interim injunction granted by the learned arbitrator is not only legally sustainable but essential in this factual backdrop to ensure that the arbitral proceedings remain meaningful, efficacious and equitable.

CONCLUSION

111. It is well settled that under Section 37(2)(b) of the Act, this appellate court is permitted to interfere with the impugned interim award granting interim measures under Section 17 of the Act, only in the case where the impugned interim award suffers from perversity, patent illegality, arbitrariness, jurisdictional error or is contrary to public policy.

112. I am of the view that the impugned interim award does not suffer from any such infirmity. The learned arbitrator has applied his mind to the pleadings, documentary evidence and the surrounding circumstances. He has rendered a reasoned order, giving due consideration to the legal framework governing interim measures and balancing the equities between the parties. The reasoning of the learned arbitrator is not only plausible but firmly rooted in the facts and law.

113. For the said reasons, the impugned interim award dated 16.12.2024 passed by the learned arbitrator under Section 17 of the Act in the arbitration matter titled “Surgeport Logistics Private Limited & Anr. v. Paul Deepak Rajaratnam & Anr.” is upheld.

114. Accordingly, the petition is dismissed.