' KHALID AIL Z. QAZI J.---As common questions of facts and law are involved, the two listed applications are being disposed of through a common order.
2. The brief facts giving rise to the present case are that the plaintiff claims to be the market leader in the manufacture and supply of lead acid and industrial batteries in Pakistan for various applications. Admittedly the defendant joined the plaintiff-Company on 9-3-1971 as a Sales Representative, whereafter he was promoted and posted on various posts and designations in Sindh and Balochistan. On 1-4-1996 the defendant was promoted as General Manager (Marketing)
South.
3. According to the plaintiff in terms of the annual appraisal of the defendant which was made on 12-6-2007, effective from 1-4-2007, it was clearly stipulated that in case the defendant left the plaintiff-company for any reason, he would not work for a period of two years in any other organization which would be in any direct or indirect competition with the plaintiff (see Annex. A-5 to the plaint). Since the entire matter hinges upon the alleged clause prohibiting employment for two years it shall be convenient to reproduce the same, which read as follows:-- "If you have to leave this job due to any reason you will not join, for at least a period of two years, any such Company/Organization either in the private or public sector which directly or indirectly competes with EXIDE Pakistan Ltd in any of its products."
4. It is claimed by the plaintiff that the above restrictive covenant was duly accepted by the defendant, which is evidenced by the endorsement and signatures affixed by the defendant at the bottom of annual appraisal dated 12-6-2007 i,e, Annex. A-5 to the plaint, which reads as follows:-- "I confirm that I fully accept the terms and conditions as set out above.
(Sd.) Signature M.A. Wadood".
5. On 4-12-2007 i,e, after putting in some 36 years of service with the plaintiff; the defendant tendered his resignation, which was accepted by the said plaintiff.
6. It is alleged by the plaintiff that some time in the third week of May, 2008 it discovered that the defendant has taken employment as Deputy General Manager (Marketing) South with M/s. Pakistan Accumulators (Pvt.) Ltd., which are the manufacturers and suppliers of OSAKA and VOLTA brand automotive batteries. In support of this the plaintiff has attached certain flyer/circulars, which confirm that the defendant has obtained the latter employment. Hence the present suit.
7. The main contention of the plaintiff is that since the restrictive covenant (supra) has clearly prohibited the defendant from accepting or conducting any employment or associating himself with any person or entity in direct or indirect competition with the plaintiff, the employment undertaken by the defendant with M/s. Pakistan Accumulators (Pvt) Ltd. Violates the said clear and express restrictive covenant. On the basis of this the plaintiff has moved an application for injunction i,e, C.M.A. No,5097/2008 seeking a temporary injunction restraining the defendant from working or associating in the business of any organization engaged in the manufacture and sale of lead acid electric storage batteries/automotive batteries in Pakistan in any capacity whatsoever until 3-12-2009. It is alleged that M/s. Pakistan Accumulators (Pvt.) Ltd. Is a direct competitor of the plaintiff and hence the defendant is sought to be restrained from carrying his employment in the latter company. It is averted that the M/s. Pakistan Accumulators (Pvt.) Ltd. Has attempted to infringe the trade mark of the plaintiff, which can be seen from the order of this court dated 16-1- 2006 in suit No,33 of 2006. On 28-5-2008 a learned single Judge has issued an ex parte ad interim order till the next date of hearing.
8. Ms. Sana Akram Minhas, the learned counsel for the plaintiff, has submitted that the defendant had acquired important and sensitive know-how and trade secrets and had also taken away with him important record such as various manufacturing information with regards plaintiff's customers. It is alleged that a legal notice dated 24-5-2008 was issued to the defendant whereby he was, inter alia, required to return back the material/documents. In support of her contention Ms. Sana Minhas has relied upon the following:--
(a) BNS Air Services (Pvt.) Ltd. v. Anwar Ali and others 1987 M LD 3009;
(b) Al-Abid Silk Mills Ltd. v. Syed Muhammad Mudassar Rizvi 2003 M LD 1947;
(c) Zafar Iqbal Papu v. District Magistrate Karachi East PLD 1988 Kar. 275;
(d) Syed Shabih Haider Zaidi v. Shaikh Muhammad Zahoor Uddin 2001 CLC 69;
(e) Government of Pakistan v. M.I. Cheema Dy. Registrar, Federal Shariat Court 1992 SCM R 1852;
(f) Shahab Din v. The State 2004 M LD 1411;
(g) Al-Jamiaul Arabia Ahasanul Uloom and Jamia Masjid v. Syed Sibte Hasan 1999 YLR 1634;
(h) Section 57 of the Specific Relief Act;
9. On the other hand the defendant has disputed that he never accepted the restrictive covenant.
According to the defendant the annual appraisal letter dated 12-6-2007 was delivered to him and without accepting any restrictive trade covenant he kept the original and affixed his signatures on the copy, as a mark of receipt, while returning the same. As per the defendant, later on the plaintiff fraudulently and through another typewriter typed out his acceptance on the said memorandum.
Reference is invited by the defendant to Annex D/A to the Counter affidavit which is a copy of the Memorandum/Annual appraisal dated 12-6-2007 without the endorsement or signatures of the defendant accepting the restrictive covenant. It is further stated by the defendant that even upon the tendering of his resignation he had orally informed the plaintiff's management that he would be joining some other company to which no objection was raised by the plaintiff and which according to the defendant goes to show that the restrictive covenant was never agreed by the said defendant. It is further stated by the defendant that upon resignation he returned all the record and documents including the car and cell phone to the plaintiff. As per the defendant this can be proved from the fact that all along no requisition was made in this regard by the plaintiff who had belatedly only issued a legal notice dated 24-5-2008 which was received by the defendant at the time when the suit had already been filed on 28-5-2008. It is alleged by the defendant that even his dues were settled by the plaintiff which again shows that if he had not returned the documents/record his dues would not have been settled and this allegation has only been belatedly made by the plaintiff so as to make out a false case against the defendant.
10. The defendant has filed C.M.A. 7214 of 2008 under Order XXXIX, rule 4, C.P.C. So as to seek vacation of the ex parte ad interim order dated 28-5-2008. Mr. Abdul Qayyum Abbasi, learned counsel for the defendant has vehemently argued that restrictive covenant is based upon forgery as in all other promotion letters or documents no such insertion so as to match with the restrictive covenant in question is available. Mr. Abbassi has further stated that the defendant is not tampering with any of the customers of the plaintiff and is not using any special know-how which may have been acquired by the defendant during the course of his employment with the plaintiff.
11. In order to further substantiate his case Mr.Abbassi has referred to a letter of the defendant dated 14-12-2007 addressed to the plaintiff wherein it has been stated that the defendant shall be joining another firm. The defendant has also invited our attention to a greeting card dated 1-1-2008 sent by a plaintiff's representative to the defendant congratulating him "on the start of the journey for a better tomorrow". Reference is also invited to letters of the plaintiff dated 19-2-2008 and 27-3- 2008, which are bills for subscription/membership fee forwarded by the plaintiff to the defendant at his address with his new employer i,e, M/s. Pakistan Accumulators (Pvt.) Ltd. On the strength of these documents Mr. Abbassi has argued that there was no restrictive covenant and all along the plaintiff was in the knowledge that the defendant has obtained employment with M/s. Pakistan Accumulators (Pvt) Ltd. In support of his arguments Mr. Qayyum Abbasi, advocate has relied upon:--
(a) Shree Gopal Paper Mills Ltd. v. Surendra K. Ganeshdas Maihotra AIR 1962 Cal. 61;
(b) Suprintendence Company of India (P.) Ltd. v. Krishan Murgai AIR 1980 SC 1717;
(c) Sandhya Organic Chemicals (P.) Ltd. And others v. United Phosphorous Ltd. And another AIR 1997 Gujarat 177;
(d) Section 27 of the Contract Act.
12. In rebuttal Ms. Sana Minhas, the learned counsel for the plaintiff has vehemently contended that memorandum/annual appraisal letter dated 12-6-2007 was never disputed or denied by the defendant. In fact he continued to draw the revised salary in terms of the said annual appraisal letter dated 12-6-2007. Thus even if the defendant has not signed the disputed endorsement at the bottom of such memorandum, by drawing the revised salary and by not disputing the restrictive covenant, the said defendant accepted the latter and thus he is now not estopped from raising any dispute in relation thereto. It is averred by Ms. Minhas that the defendant cannot pick and choose the terms and conditions mentioned in the annual appraisal letter dated 12-6-2007. With regards the letter dated 12-6-2007, the plaintiff has admitted such letter, however, according to Ms. Sana Minhas the said letter did not give details of the employment, which was to be undertaken by the defendant. Hence just by stating that the defendant was seeking another employment, it could not be deduced that the plaintiff had waived the application of the restrictive covenant in question.
13. I have heard the rival arguments and perused the record and law on the subject.
14. As the matter involves interpretation of the relevant restrictive covenants in the back drop of section 27 of the Contract Act so also sections 56 and 57 of the Specific Relief Act, it shall be convenient to reproduce the latter provisions of law, which read as follows:--
(a) Section 27 of the Contract Act 1972 which deals with agreements which are in restraint of trade, reads as follows:-- "Section 27. Agreement in restraint of trade void.--Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void.
' Exception 1.--Saving of agreement not carrying on business of which goodwill is sold.--One who sells the goodwill of a business may agree with the buyer to refrain from carrying on a similar business, within specified local limits, so long as the buyer, or any person deriving title to the goodwill from him, carries on a like business therein: Provided that such limits appear to the Court reasonable regard being had to the nature of the business."
(b) Section 56 pf the Specific Relief Act, 1877, which provides eventualities when an injunction cannot be granted, reads as follows:-- ' Section 56. Injunction when refused.--An Injunction cannot be granted,---
(a) to stay a judicial proceedings pending at the institution of the suit in which the injunction is sought, unless such restraint is necessary to prevent a multiplicity of proceedings;
(b) to stay proceedings in a Court not subordinate to that from which the injunction is sought;
(c) to restrain persons from applying to any legislative body;
(d) to interfere with the public duties of any department of [the (Federal Government), or any Provincial Government], or with the sovereign acts of a Foreign Government;
(e) to stay proceedings in any criminal matter;
(f) to prevent the breach of a contract the performance of which would not be specifically enforced;
(g) to prevent, on the ground of nuisance, an act of which it is not reasonably clear that it will be a nuisance;
(h) to prevent a continuing breach in which the applicant has acquiesced;
(i) when equally efficacious relief can certainly be obtained by any other usual mode of proceeding except in case of breach of trust;
(j) when the conduct of the applicant or his agents has been such as to disentitle him to the assistance of the Court;
(k) where the applicant has no personal interest in the matter; Illustrations
(a) A seeks an injunction to restrain his partner, B from receiving the partnership-debts and effects.
It appears that A had improperly possessed himself of the books of the firm and refused B access to them. The court will refuse the injunction.
(b) A manufactures and sells crucibles, designating them as "patent plumbago crucibles". Though, in fact, they have never been patent. B pirates the designation. A cannot obtain an injunction to restrain the piracy.
(c) A sells an article called "Mexican Balm", stating that it is compounded of divers rare essences, and has sovereign medicinal qualities. B commences to sell a similar article to which he gives a name and description such as to lead people into the belief that they are buying A's Mexican Balm.
A sues B for an injunction to restrain the sale. B shows that A's Mexican Balm consists of nothing but scented hog's lard. A's use of his description is not an honest one and he cannot obtain an injunction."
(c) Section 57 of the Specific Relief Act which pertains to grant or refusal of injunction to pet torm a negative covenant reads as follows:-- "Section 57. Injunction to perform negative agreement.--Notwithstanding section 56, clause (f), where a contract comprises an affirmative agreement to do a certain act, coupled with a negative agreement, express or implied, not to do a certain act the circumstance that the court is unable to compel specific performance of the affirmative agreement shall not preclude it from granting an injunction to perform the negative agreement provided that the applicant has not failed to perform the contract so far as it is binding on him. Illustrations
(a) A contracts to sell to B for Rs,1,000 the goodwill of a certain business unconnected with business premises, and further agrees not to carry on that business in (Karachi). B pays A Rs,1,000 but A carries on the business in (Karachi). The Court cannot compel A to send his customers to B, but B may obtain an injunction restraining A from carrying on the business in (Karachi).
(b) A contracts to sell to B the goodwill of a business. A then sets up a similar business close by B's shop and solicits his old customers to deal with him. This is contrary to his implied contract, and B may obtain an injunction to restrain A from soliciting the customers, and from doing any act whereby their goodwill may be withdrawn from B.
(c) A contracts with B to sing for twelve months at B's theatre and not to sing in public elsewhere. B cannot obtain specific performance of the contract to sign, but he is entitled to an injunction restraining A from singing at any other place of public entertainment.
(d) B contracts with A that he will serve him faithfully for twelve months as a clerk. A is not entitled to a decree for specific performance of this contract. But he is entitled to an injunction restraining B from serving a rival house as clerk.
(e) A contracts with B that, in consideration of Rs,1,000 to be paid to him by, B on a day fixed, he will not set up a certain business within a specified distance. B fails to pay the money. A cannot be restrained from carrying on the business within the specified distance."
15. A perusal of section 27 of the Contract Act would reveal that it contains the general rule that any agreement by which any lawful profession, trade or business is restrained shall be void. This, however, is subject to an exception contained in section 57 according to which an agreement restraining the carrying out of a business after the sale of goodwill is exempt from the operation of said section 27. According to Mr. Qayyum Abbasi the restrictive covenant in question does not fall within the exceptional category provided in section 21 (i,e, sale of goodwill) and hence the same is void. I am not impressed with this argument for the simple reasons that illustrations (c) and (d) to section 57 of the Specific Relief Act, reproduced supra, create another statutory exception to section 27 of the Contract Act i,e, that an injunction may well be granted restraining an employee from serving with a rival employer. Reliance in this respect is also invited to a decision of a Division Bench of the High Court of Lower Burma in Indo-Burma Oil Fields Ltd. v, Burma, Oil Company Ltd. AIR 1921 Lower Burma 19 wherein it was held that an injunction can be granted restraining an employee from serving another employer if there was an express agreement prohibiting the employee from engaging in employment with another employer. Again a Division Bench of the Bombay High Court in V.N. Desh Pande v. Arvind Mills Company Ltd. AIR 1946 Bombay 423 has held that in view of illustrations (c) and (d) to section 57 of the Specific Relief Act, any restrictive covenant, provided it is reasonable, restraining an employee from contracting employment with another employer, will not violate section 27 of the Contract Act, and an injunction could be granted despite existence of a negative covenant. Kania, Acting Chief Justice, while writing for the Court has succinctly stated the law on the subject as follows:-- "It is sufficient to note at this stage that agreements of service, containing a negative covenant preventing the employee from working elsewhere during the term covered by the agreement, are known to Indian Courts. They were enforced in 5 Bom.L.R.878, 23 Bom. 103, 15 Mad. 18, which was approved in 26 Mad. 168 and 36 Cal. 354, Illusts, (c) and (d) to S.57, Specific Relief Act, in terms recognized such contracts and the existence of a negative covenant therein. It is therefore futile to contend that the existence of a negative covenant in a service agreement makes the agreement void, on the ground that it is in restraint of trade and against the principles found in S.27, Contract Act. All agreements for personal service for a fixed period would, if the appellant's agreement were accepted, be void. An agreement to serve exclusively for a week, a day or even for an hour necessarily prevents the person so agreeing to serve, from working during that period for anyone other than the person with whom he has so agreed. It can hardly be contended that such an agreement is void. In truth a man who works for a particular wage and for a certain period agrees to work in fact and such an agreement does not restrain him from doing so."
16. Mr. Abbasi, has pressed emphatic reliance on Shree Gopal Paper Mills Ltd. v. Surendra K.
Ganeshdas Malhotra AIR 1962 Calcutta 61 wherein it was observed that in India a restrictive covenant beyond the period of employment cannot be valid. I am unable to subscribe to this view.
No general or sweeping principle can be riterated to the effect that an employee in no circumstance can be bound beyond the period of employment. In my considered opinion the entire matter is dependent upon as to whether the restrictive covenant or the restraint of trade clause is reasonable or not, in the given circumstances of the matter. In fact the Indian Supreme Court in the case of Niranjan Shanker Goli Kari v. Century Spinning and Manufacture Company Ltd.
AIR 1967 SC 1098 distinguished the judgment from the Calcutta High Court discussed supra. In the afore-cited judgment from the Indian Supreme Court a company manufacturing tyre cord yarn entered into a collaboration with a foreign producer on the condition that the company shall maintain top secrecy with regard the technical information and it would correspondingly sign a secrecy agreement with its employees. The defendant was appointed for a period of 5 years on the condition that he shall not serve anywhere else, during such period, even if he leaves the service earlier. The Indian Supreme Court found the agreement to be valid and the defendant was restrained from serving anywhere else during the currency of the period envisaged in the agreement. Shelat J. Distinguished the judgment from the Calcutta High Court (cited supra) on the premise that the period of contract in that case was as long as 20 years which gave the employer an arbitrary power to terminate the services without notice and hence such contract was void, being one-sided. While further observing upon the facts of the case before the Indian Supreme Court, Shelat J. Observed as follows:-- "The evidence is clear that the appellant has torn the agreement to pieces only because he has been offered a high remuneration. Obviously he cannot be heard to say that no injunction should be granted against him to enforce the negative covenant which is not apposed to public policy.
The injunction issued against him is restricted as to time, the nature of employment and as to area and cannot therefore be said to be too wide or unreasonable or unnecessary for the protection of the interest of the respondent company." (see pages 424 and 425).
17. Mr. Qayyum Abbassi's further reliance upon Suprintendence Company of India (P.) Ltd. v. Krishan Murgai AIR 1980 SC 1717 is equally irrelevant. In this case the Supreme Court of India was hearing an appeal arising out of a judgment from the Delhi High Court reported in AIR 1979 Delhi 232. The Indian Supreme Court upheld the judgment of the Delhi High Court while observing that a restrictive covenant restraining an employee from seeking employment with a competitor after he leaves the service of the first employer, will be irrelevant where the employee was terminated by his employer. In other words, the employee would not have "left the employment" but rather be terminated. This judgment is not applicable to the facts and circumstances of the present case since the present case is not in relation to termination but rather the employee has voluntarily left the service.
18. In ,Pakistan also there is legal authority on the subject, though scant. In BNS Air Services (Pvt.)
Ltd. v. Anwar Ali 1987 M LD 3009 an employee entered into a written agreement to the effect that after leaving service for one year he shall not seek employment with another concern engaged in the same/similar business' as the first employer. An argument was raised by the defendant that the respective covenant itself violated the freedom of trade/business contained in Article 18 of the Constitution. The contention was rejected and while relying upon Nooruddin Hussain v. Diamond Vacuum Bottle Manufacturing Co. Ltd. PLD 1981 Kar. 720, it was held that the negative covenant was agreed upon by the employee with open eyes. Hence an interim injunction was issued restraining the employee from conducting employment with another concern engaged in same/similar business as the first employer. Reference can also be invited to Syed Shabih Haider Zaidi v. Shaikh Muhammad Zahoor Uddin 2001 CLC 69. In this case the defendant had sold out his photography business to the plaintiff along with its goodwill, whereafter he had set up a photography business in the vicinity despite a clear agreement that he would not carry on similar business in the entire Province. While the plaintiff sought an injunction that the defendant be restrained from setting up a photography business in the entire Province, the contention of the defendant was that the agreement in question violated section 27 of the Contract Act and hence the same was unenforceable. Rejecting the contention, a learned Single Judge of this Court was pleased to observe that the Courts were empowered to consider the restrictive covenant upon the touchstone of reasonableness. It was further observed that the restriction imposed should be in the interest of parties and should be justified in the public interest. In that case the defendant was restrained for a period of five years from setting up or conducting the photography business only in half of the city of Karachi which was in proximity with the business-place of the plaintiff. In Al-Abid Silk Mills Ltd. v.
Syed Muhammad Mudassar Rizvi 2003 M LD 1947 is another authority on the point. In this case the employee had agreed that after leaving the employer he would not join any other organization of similar trade (i,e, Home Textiles) for a period of eleven months. The contention of the defendant that the clause violated section 27 of the Contract Act and Article 16 (sic. It should be Article 18) of the Constitution was rejected and the Court was pleased to grant the interim injunction as prayed, while restraining the employee in engaging in employment violative of the restrictive covenant. In Pak China Chemicals v. Department of Plant Protection 2006 CLD 210 a learned Single Judge of the Lahore High Court while commenting upon a Sale Distribution Agreement was pleased to hold that such an agreement imposing conditions on the principal not to sell goods through other agents and also on the agent not to deal with competing goods were valid. It was observed that such conditions were not wholly one-sided, if they operated during the currency of the contract, and the same cannot be considered as violative of the restrictive trade prohibition contained in section 27 of the Contract Act. In this judgment it was further observed that global trades were mostly based on such agreements and the restrictive trade clauses would not be void if the same were reasonable, on equal bargaining strength, not unilaterally and operated during the currency of the agreement.
19. The English jurisprudence on the subject is very rich, while the case-law revolves round two areas i,e, firstly agreements selling the goodwill of a business or otherwise containing a clause that a person would not compete with the business of another; and secondly agreements between the employer and the employee by which the employee promises that upon leaving the employment he would not work for a rival employer or would not himself start a business in competition with the employer. The, basic principle is that any restraint of trade clause would be prima facie void unless the same is justified to be reasonable between the parties and not inimical to the public interest.
Reference may be invited to the following:--
(a) Nordenfelt v. Maxim Nordenfelt Guns and Ammunition Co. Ltd. (1894) AC 535.
' In this case while selling out the goodwill of the business it was agreed that the seller for 25 years shall not engage worldwide in any trade or business in the manufacture of guns/ammunition and would also not compete in any other business which would be carried out by the buyer-company.
The House of Lords held that while the first part of the clause was reasonable but the second part was not i,e, the part restraining the competition for 25 years worldwide in the trade or business of manufacture of guns/ammunition was upheld but the second part whereby the seller was restrained from entering into any trade activity which could be adopted by the buyer in the future was held to be unreasonable and void;
(b) British Reinforced Concrete Engineering Co. Ltd. v. Scheiff (1921) 2 Ch. 563.
' In this case it was held that the restraint of trade clause will not be valid if it purports to confirm protection on the purchaser that goes beyond the actual business sold by the vendor. In this case the seller of the business was only involved in selling and not manufacturing of road reinforcements. The buyer, who was already engaged in the business of manufacture and sale of road reinforcements, while acquiring the seller's business covenanted that the seller would not enter into competition or be employed in any rival concern engaged in the manufacture or sale of road reinforcements. The Court held the restraint of trade clause to be void and unenforceable and it was held that the restraint could only be employed to the actual business of the seller i,e, selling and not manufacturing of road reinforcements;
(c) Goldsoll v. Goldman (1915) 1 Ch. 292.
' In this case both the parties were dealers in imitation jewellery in London. To avoid competition the defendant sold out his business to the plaintiff on the condition that for 2 years he would not compete with the plaintiff in real or imitation jewellery in the United Kingdom, Isle of Man, Ireland, France, USA, Russia and Spain. It was held that it was only reasonable to restrain the defendant in the United Kingdom and the Isle of the Man and also the restraint on the competition should only be limited to imitation and not real jewellery. In other words, the Court supplied construction to the clause agreed between the parties;
(d) Herbert Morris Ltd. v. Saxelby (1916) 1 AC 688: ' In this case the plaintiff was a leading manufacturer of hoisting machinery in the UK and the defendant was employed as a draughtsman, while under a contract he was a prohibited from working in the same field for a period of 7 years after leaving the employment. The House of Lords held that the covenant was void as being very wide, for too longer of a period and unreasonable. In this judgment Lord Atkison distinguished between two situations i,e, where any employee had access to highly confidential information and a situation where the employee simply acquired expertise or skill during the normal course of his employment. It was observed that the employer was entitled to protection only in the former situation and not in the latter;
(e) Forster and sons Ltd. v. Suggett (1918) 35 TLR 87: ' The defendant here was employed as a works engineer and under contract he was prohibited from divulging any trade secret acquired by him during the course of his employment and he was also prevented from either acquiring an employment with a competitor or himself conducting similar business of the employer (i,e, bottle manufacturing) for a period of 5 years. In the course of his employment the defendant was instructed with certain confidential matters which were of economic value. The Court restrained the defendant from divulging any trade secret or manufacturing process to potential rivals of the plaintiff and it was held that the time restraint of 5 years and the geographilal restraint for the entire UK was reasonable;
(f) Commercial Plastics Ltd. v. Vincent (1965) 1 QB 623: ' In this case the plaintiff company had expertise in the field of P.V.C. Calendered sheeting. The defendant, a plastic technologist, was employed in the research and development section and he acquired access to the plaintiff's company's mixing specification record. However, it was not possible for the defendant to remember these details without the help of documents. As per a condition in the contract, defendant was not to seek employment with any of the plaintiff's rivals worldwide in the P.V.C. Calendered sheeting field for a period of one year after leaving the employment of the plaintiff. The Court held that restraint of trade clause was too void, vague and unreasonable. It was held that the worldwide protection was not really required by the plaintiff and also the defendant had been exposed to the plastic/adhesive tape techniques and not the entire P.V.C. Calendered sheeting. The Court held that since the restrictive covenant was inappropriately drafted to be very wide the Court would not enforce the same;
(g) Little Woods Organization Ltd. v. Harris (1978) 1 All. ER 1026: ' In this case Little Woods had a mail order business in the UK and Great Universal Stores Limited
(GUS) was its competitor. One Paul Harris was an employee of Little Woods who acquired secret information with regards certain catalogues of Little Woods. But Harris was himself given many promotions and later on he became an Executive Director in Little Woods whereafter he himself became responsible for planning and compiling various catalogues of Little Woods. The contract of employment contained a restrictive covenant that for a period of one year Paul Harris would not take up any employment with GUS. Later on Paul Harris left Little Woods and accepted employment with GUS. Paul Harris was restrained from taking up the employment with GUS. Lord Denning observed that since Paul Harris had acquired secret information of the catalogues of Little Woods the only way to prevent him from divulging such secret was to restrain him from undertaking employment with GUS. The restraint of trade clause was held to be reasonable and injunction was issued;
(h) Fitch v. Dewes (1921) 2 AC 158: ' In this case a solicitors' firm employed a clerk, who under the contract was prohibited from practising within 7 miles of the area in which the solicitor's firm was situated, after leaving the employment. The clerk upon leaving the solicitors' firm was restrained by the House of Lords from operating within the 7 miles radius since the defendant-clerk was considered to have acquired an influence over the clientele of the solicitors' firm. It is important to observe that the restraint of trade clause was operative forever and was held to be reasonable. It may be observed here that the unlimited duration in this case was in view of the subjective influence that the clerk could exert on the solicitors' clientele, however, there may be situations/businesses where the influence of the ex- employee over the clients or the customers may diminish as the time would pass [see M&S Drapers v. Reynolds (1957) 1 WLR 9];
(i) Marion White Ltd. v. Francis (1972) 1 WLR 1423: ' In this case one Ann Francis worked in a hair dressing saloon of the plaintiff where she covenanted that after leaving the job she would not work as a hair dresser for 12 months within half a mile radius of the plaintiff's premises. After dismissal from service she found a job to work in a saloon only 150 yards away from the plaintiff's premises. A declaration was issued that the covenant in question was not too wide and was enforceable. An injunction was not issued since by the time the matter was decided the one year time had already lapsed.
(j) Mason v. Provident Clothing and Supply Co. Ltd. (1913) AC 724: ' In this case one Mason was employed by Provident Clothing Limited so as to solicit orders in a particular locality of London. As per the restrictive covenant in the contract of employment Mason was prohibited to seek similar employment within 25 miles of London for a period of three years after leaving Provident Clothing Limited. It was held by the House of Lords that the restraint of trade clause was too wide, covering much wider localities and duration. It was held that to apply doctrine of severance the Court was empowered to rewrite and amend the restraint of trade clause but that was only possible where the excessive part of the clause was merely technical or of trivial importance and not part of the main substantive clause. The Court in this case decided another very important principle, which is that the restraint of trade clause must be intended to protect the employer's business and not simply to inconvenience the employee i,e,, the restrictive covenant should not be penal in nature vis-a-vis the employee. The Court in this case held that Mason was drawing customers through his own skill of persuasion and was not given any secret or confidential information by the employer. The House of Lords refused to grant injunction.
(k) Attwood v. Lamont (1920) 3 KB 571: ' In this case the plaintiff was a well-known tailoring business. The defendant was employed by the plaintiff with a condition that after the termination of the contract he would not involve in similar business within a radius of 10 miles of the employer's place of business. The Court held that the restraint of trade clause was too void and vague to be enforced.
(1) Alec Lobb Grages Ltd. v. Total Oil (GB) Ltd. (1985) 1 WLR 173.
' In this case it was observed that the restraint should not be longer than what was reasonably necessary to protect the legitimate interest of the company.
20. From the above discussion the following principles of law are deducible:--
(a) a restraint of trade clause is void if unreasonable, however, if the same is reasonable the said clause is valid;
(b) a reasonable restraint of trade clause whereby an employee is prevented from entering into competition with his former employer or entering into an employment in same/similar business with a competitor of former employer, can be enforced by Court. The said enforcement can include a declaration or injunction or both, as the case may be;
(c) reasonableness of the clause will vary from case to case and inter alia, depends upon the following:--
(i) the extent of duration;
(ii) the extent Of the geographical territory;
(d) the employer will only be able to obtain an injunction for information, know-how and details of customers/orders acquired by employee through some classified or secret information. However, no injunction would be obtained if the know-how is not acquired by employee through access of classified or secret information but rather during the normal course of employment;
(e) the restraint of trade clause should only be aimed at protecting interest of the employer and not aimed at penalizing the employee or causing him inconvenience;
(f) the restraint of trade clause .Should not be vague and generalized but should be rather specific.
In case the general a vague part of the restrictive covenant is separable from substantive part, the Court while exercising doctrine of severance and by supplying construction will be empowered to uphold the substantive part of restrictive covenant. However, where the restraint of trade is not separable in the manner stated above, the Court will reject the entire clause without applying the doctrine of severance;
(g) the restraint of trade clause shall only be applicable to particular type of business in which the employer is actually engaged in and not to any business activity in which the employer would possibly engage in the future.
21. Applying the above principles to the facts of the present case it is rather abundantly clear that the restrictive covenant in question is. Too vague, generalized and hence void. It does not specify as to what particular specialized information has been divulged to the defendant, which he would be prevented to use directly or in employment with another employer. Apart from this although it has been stated that the defendant has acquired confidential information, it has not been particularized as to what particular confidential information was acquired by the defendant.
Reliance can be invited to paras. 6 and 7 of the plaint which, inter alia, stated that the defendant had acquired knowledge of confidential manufacturing process and quality control documents/ manual, which are the products of the plaintiff-company. It has been alleged by the plaintiff that a huge number of man-hours have been spent on the preparation of these documents/manuals.
These documents, records and entire system of quality control at all steps of production process, can be described as a "trade secret". In para. 7 of the plaint the plaintiff has admitted that the defendant's basic responsibility was limited to sales and marketing in the southern region, but the office of the defendant was situated at the plaintiff's corporate marketing office at the factory premises, which gave the defendant an opportunity to get possession of the plaintiff's confidential records including but not limited to International sales budgets, national sales plans, marketing policy and strategies, advertisement budget and plans, trade receivable reports on international as well as regional basis, names and addresses and details of dealers of automotive batteries in Pakistan and statutory record. It is further stated that some of the plaintiff's methodology in relation to its products and quality control is reflected in various written documents and from the manuals which are the property of the plaintiff. Further it is stated that the defendant was given training at the expense of the plaintiff through a number of seminars, lectures and demonstrations.
22. The averments as above, I am afraid, apart from being too general, are also self-contradictory.
On the one hand it has been stated that the defendant's responsibility was only limited to sales and marketing in the southern region, while on the other hand it is stated that it was only due to the fact that defendant's office was situated in the factory that he acquired sensitive information. If this so, then it is the plaintiff alone who has to only blame itself for physically placing the defendant in an office where he was able to acquire sensitive information. This again sufficiently implies that the alleged sensitive information was not specifically divulged to the defendant by the plaintiff. It is also not the plaintiff's case that the defendant had acquired information/know-how by stealing or without the knowledge of the plaintiff. The stance of the plaintiff that the defendant has taken away important documents and is not willing to return the same, does not inspire-confidence. If this were the case then why the plaintiff settled all the post employment dues of the defendant, is again not explained. Merely issuing a belated legal notice on 24-5-2008 would not be sufficient. As soon as the defendant had left the job, he could have been, given a legal notice or civil/criminal proceedings could have been filed against him for his failure to return confidential documents. No such steps were admittedly taken by the plaintiff immediately upon the resignation of the defendant. The fact that the plaintiff was in the knowledge of the defendant contracting another employment with Messrs Pakistan Accumulators (Pvt.) Ltd. Cannot be ruled out since the plaintiff themselves had forwarded letters, dated 19-2-2008 and 27-3-2008 to the defendant at the address of his new employer. The injunction application would thus also be clearly hit by lathes and acquiescence.
23. Mr. Qayyum Abbasi has placed reliance on Sandhya Organic Chemicals (P.) Ltd. And others v.
United Phosphorous Ltd. And another AIR 1997 Gujarat 177 for the point that an injunction cannot be granted to restrain an employee from divulging confidential information acquired during the employment, after cessation of the employment. The head note of this law report is misleading.
After going through the complete judgment it may be said that the same advances the case of the defendant but the above point envisaged by Mr. Abbassi is not substantiated by the judgment itself. Perhaps this demonstrates the danger of the counsel only confining themselves to head notes in isolation. In this case from the Gujarat High Court it was alleged by the plaintiff that the defendant who acquired special information about the chemical composition as a plant manager should be restrained from divulging the secret formula to his new employer, since in terms of the restrictive covenant he was prohibited from divulging such information. The Court was of the view that there was nothing on record to show that the employee had divulged any secret information.
The formula in question was already known to the new employer and hence the defendant could not be restrained as the matter was in want of proper evidence. It was on this basis that the injunction was declined.
24. In light of the above, I am of the considered view that the plaintiff has failed to disclose as to what particular trade secret or secret formula or information was specially acquired by the defendant other than in his normal course of employment. The plaintiff having failed to make out a prima facie case, the injunction is refused and the ad interim order, dated 28-5-2008 is hereby recalled. Consequently, C.M.A. No,5097 of 2008 is dismissed, while C.M.A. 7214 of 2008 is allowed.
25. It is needless to stress that the above observations are only tentative in nature and shall have no bearing at the final trial.
26. In the above circumstances there shall be no order as to costs.