S. S. Nijjar, J.
1. This order will dispose of Notices of Motion 632 of 2000 in Suit No. 711 of 2000, 633 of 2000 in Suit No. 712 of 2000, 634 of 2000 in Suit No. 713 of 2000 and 676 of 2000 in Suit No. 766 of 2000. Since the facts are substantially the same in all the four suits, for facility of reference, the facts are being reported from Suit No. 711 of 2000.
2. The plaintiff seeks an order of permanent injunction restraining the defendant from taking; up or continuing any employment until 11th October, 2005. with any other Airline, including Sahara Airlines for the purpose of operating aircraft on the basis of the endorsement of the licence obtained as a result of the training provided by the plaintiff, that is to say, for operating B 737 Series 300/400/500. The plaintiff also seeks an order directing the defendant to return forthwith to the plaintiff the documents and articles set out in Exhibit-1. The plaintiff also seeks a money, decree against the defendants in the sum of Rs. 6,94,000/- together with interest at the rate of 24 per cent per annum from the date of the filing of the suit until payment or realisation.
3. Notice of Motion No. 632 of 2000 has been taken out seeking an order of temporary injunction in the same terms as stated above.
4. The plaintiff carries on the business of Air transport carrier within India and operates a fleet of modern Aircraft. The plaintiff commenced operation in May, 1993. It; decided to operate and expand its fleet based on the latest series of Boeing 737 aircraft in India only the Aircraft 737-200 was operated. The plaintiff, however, introduced the series B 737-300/400. The plaintiff was the first Airline to induct these two series of aircrafts in India. When the plaintiff commenced operations, there were no pilots in India who were rated for this type of aircraft i.e. who were valid licences endorsed by the Director General of Civil Aviation (DGCA) to fly this type of aircraft. The plaintiff, therefore, embarked on a manpower plan of recruiting Indian pilots and training in the First Officers and Commanders. In the initial year of the Airlines operation, the Aircraft were commanded by foreign instructors who were training the plaintiff Indian Pilots. The defendant was employed by the Plaintiff after an interview on 30th April, 1998. Prior to joining the plaintiff, the defendant was employed by the Indian Navy and thereafter by Span Air. When the defendant joined the plaintiff, he had been flying Super King Air 8 200",. In order to equip the pilots for operating B-737/300/400 series an intensive training has to be undertaken. The plaintiff organised the necessary training for the defendant and the other pilots. In the letter of appointment dated 30th April, 1998 the defendant was offered the post of Trainee First Officer on certain terms and conditions. In consideration of the plaintiff making the arrangement for the training of the defendant, the defendant agreed and undertook that during a period of 7 years from the date of completion of training in India and abroad and on resuming actual services with the plaintiff as First Officer, he would not accept employment, similar in nature, either in full time or part time with any other employer. In the event of the defendant resigning from the services, he would make good to the plaintiff entire cost in respect of training and/or damage, if any. The defendant joined the services of the plaintiff w.e.f. 4th May, 1998. The total cost of training is approximately Rs. 15 lakhs. Therefore, the defendant had agreed to provide a bank Guarantee/deposit for a sum of Rs. 7.5 lakhs for a period of 7 years. The balance Rs. 7.5 lakhs was to be recovered in instalments from the salary of the defendant after successful completion of training over a period of 3 years. In addition to this, the defendant was required to execute the indemnity bond with two sureties for an amount of Rs. 7.5 lakhs and agreeing to serve the company for a period of 7 years. In the indemnity bond, the defendant also agreed to serve the company for the agreed period of 7 years and not to leave or terminate the services with the company till the expiration of the period of 7 years. It was further agreed that during the period of 7 years, the defendant shall not accept employment similar in nature either full time or part time with any other employer. The period of seven years is to be computed from the time of the completion of the training in India and abroad and on the defendant resuming actual service with the plaintiff as a First Officer. The defendant failed to fulfil his obligations under the letter of appointment and did not provide the Bank Guarantee for Rs. 7.5 lakhs or execute the indemnity bond. On a request made by the first officer of the plaintiffs and the difficulty expressed by them the plaintiff amended the terms of the letter of appointment by letter dated 16th July, 1998. Ultimately all the conditions were satisfied by the defendant and he was sent for training to Malaysia between 11th May, 1998 and 11th June, 1998 and between 15th August, 1998 and 5th September, 1998. The plaintiff incurred an amount of Rs. 11,31,400 on the training of the defendant. On the basis of the training, the defendant obtained B-737-300/400/500, P2 endorsement with effect from 12th October, 1998. The defendant was confirmed in service of the plaintiff on 6th February, 1999. By letter dated 4th December, 1999, the defendant resigned from the services of the plaintiff with immediate effect. The reason stated for resignation was the adverse changes to the rule of seniority. On 27th December, 1999 the defendant was informed that he had wrongfully abandoned the services of the plaintiff in breach of the terms of employment and, therefore, necessary legal steps will be instituted against him.
5. The relevant terms and conditions of the appointment as given in the letter dated 30th April, 1998 are as under.
"1, you shall be in possession of valid Indian
3. You will be initially on training for which the company will make necessary arrangements. You will have to pass the company's technical/performance examination and the DGCA Technical Examination for B-737-300/400 endorsement within two attempts, failing which your training will stand automatically terminated.
You will have to complete successfully simulator and flying training and obtain B- 737-300/400 endorsement, should you fail to obtain the same within company's stipulated time, your training shall stand terminated.
Details of the training will be intimated to-you separately. Oh successful completion of your training including Simulator and Flying training and on obtaining B-737-300/400 endorsement you shall be on probation.
6. The total cost of your training is estimated at approximately at Rs. 15.0 lakhs (Rupees Fifteen Lakhs only) which you are required to pay back to the company. You will be required to provide a Bank Guarantee/Deposit for a sum of Rs. 7.50 lakhs for a period of 7 years. The balance of Rs. 7.50 lakhs (Rupees Seven lakhs and fifty thousand) will be recovered in instalments from your salary that you will be entitled after successful completion of training and being cleared for flying duties, over a period of 3 years at such rates as may be fixed by the company. In addition to the above you will be required to execute an indemnity bond with two sureties for an amount of Rs. 7.5 lakh (Rupees Seven Lakhs Fifty Thousand only) and agreeing to serve the company for the agreed period of seven years and shall not leave or terminate your services with the company till the expiration of the said period of 7 years. During this period of 7 years, you shall not accept employment, similar in nature, either full time or part time with any other employer. This period of 7 years shall be computed from the period of the completion of the above said training in India and abroad and on resuming actual services with the employer company as a First Officer.
21. You will be required to serve the company for a minimum period of 7 years from the date of your obtaining B-737-300/400 endorsement on your flying licence. In the event of your resigning/leaving the service before the completion of the period aforesaid for any reason whatsoever, you shall make good and pay to the company the entire cost in respect of training and/or damages, if any.
22. During this period of seven years, you shall be exclusively employed by Jet Airways and perform your duties towards Jet Airways. You shall agree that during the said period of seven years you shall not take up employment with any other
persons/organisations/companies requiring you to perform similar duties as required to be performed by Jet Airways and shall not engage in any similar business or vocation requiring you to fly any other Aircraft.
23. After confirmation, the company would be entitled to terminate your services without assigning any reason, by giving you three months notice in writing or by payment of three months salary in lieu of such notice. In the event of your desiring to leave the services of the company at any time after confirmation, you shall give to the company three months notice in writing provided that the company may, at its sole discretion, waive such notice. This is subject to provisions of para No. 20."
The amended Clause 6 as incorporated in the letter dated 16th July, 1998 is as under :
The total cost of your training is estimated at approximately Rs. 15.0 lakhs (Rupees Fifteen Lakhs only) which you are required to pay back to the company.
You will be required to deposit a sum of 2.50 lakhs by Demand Draft which will be retained by the company for a period of 7 years. The same will be refunded without interest on completion of confirmed service in the company for 7 years.
A sum of Rs. 33,000/- p.m. which represents F.D.A. payable @ Rs. 1,500/- per day to a First Officer will be recovered from your salary over a period of 24 months to recover total sum of Rs. 7.92 lakhs. You may agree for a reduction for a higher amount in case you desire to do so.
This amount of Rs. 33,000/- is based on 22 days of minimum flying and on and additional flying done by you we will adjust a further sum @ Rs. 1,500/- per flight day, additionally towards training costs. This amount will not be refunded in the event of your failure to complete simulator/ground classes and the company finds your performance during your training to be below acceptable standards.
In addition to the above you will be required to execute an Indemnity Bond with two sureties for an amount of Rs. 7.50 lakhs (Rupees Seven Lakhs Fifty Thousand only) and agreeing to serve the company for a period of seven years and shall not leave or terminate your services with the company till the expiration of the said period of 7 years.
During this period of 7 years you shall not accept employment, similar in nature, either full time or part time with any other employer. This period of 7 years shall be computed from the period of the completion of the above said training in India and abroad and on resuming actual services with the employer company as a First Officer."
6. Mr. Vahanavati, learned Counsel, submits that on reading of Clause 6 it clearly show that the defendant had agreed to serve the company for a period of 7 years and not to leave or terminate his services till the expiration of the period of 7 years. The defendant had also agreed not to accept employment similar in nature either full time or part time with any other employer during the period of 7 years. This negative covenant is reiterated by the defendant on 23rd September, 1998 whilst executing the bond. Apart from this, there is a complete negative covenant contained in Clause 22. There is no option given to the defendant to cut short the period of 7 years. It is submitted that the plaintiff has spent large amounts of money on training the defendant. He cannot now be permitted to facilitate the competiter in getting unfair and dishonest advantage against the plaintiff. It is, therefore, absolutely necessary that the injunction be granted. Learned Counsel submitted that grave and irreparable loss and damage will be caused to the plaintiff and the breach cannot be compensated in terms of money. He submitted since 8 pilots have left the services of the plaintiff one after the other and joined Sahara Airlines, it has led to disruption of the plaintiffs schedule. The difficulties experienced by the plaintiff cannot be compensated in terms of money. Learned Counsel has relied on two judgments of the Supreme Court to submit that in the case of a clear negative covenant the relief of injunction can be granted, restricted of course to the period of contract. Indeed all the learned Counsel on both the sides have relied on the same judgments. These are (i) M/s. Gujarat Bottling Co. Ltd. v. Coca Cola Company and others, , hereinafter referred to as "the Coca Cola case" and (II) Niranjan Shankar Golikari v. Century Spinning and Mfq. Com. Ltd., , hereinafter referred to as "the Golikari" case.
7. Mr. Chagla, learned Counsel appearing in Notice of Motion No. 676 of 2000 has recapitulated the facts in that particular case. The learned Counsel has submitted that the negative covenant contained in Clauses 6 and 22 are not in restraint of trade. The breach of the contract is clear. In terms of Clause 6, an enormous amount of money has been spent on the training of the defendant. The covenant contained in Clauses 6, 21 and 22 are affirmative as well as negative in nature. He submits that the excuse given for leaving the company is an afterthought. This is a clear case of illegal inducement being offered by Sahara Airlines. The plaintiffs are perfectly within their right in accordance with the contract to rationalise the criteria for fixation of seniority. The excuse put forward by the defendant is baseless and misconceived and has been made only as a prelude to justify the breach of the contract. The seniority list was in fact duly published in July, 1999. The objections were invited and they have been dealt with. He submitted that if in a matter of this nature, the defendants are successful in resisting an injunction, it would mean that there is no sanctity of contract. Learned Counsel submits that the sanctity of contract must be enforced by the courts on the principles of equity and good conscience. Otherwise it would lead to inducements being offered by the competitors. This has happened quite blatantly in the present case. Eight pilots of the plaintiff have left and joined the competitor giving only lame excuses for the breach of the contract. Learned Counsel submits that it will be in the public interest to enforce the contract by way of injunction. If this is not done, it would send a totally wrong signal in the Airline industry. The Airlines will cut corners in training the pilots. This may lead the Airlines to curtailing the extent of training as the Airlines would not know as to how long the pilot that has been trained by them is likely to serve them. Learned Counsel readily agrees that so far as law in India is concerned, there can be no injunction on the basis of a negative covenant in the post contract period. This would be void under section 27 of the Contract Act. However, during the period of contract injunction can and should be granted. He submits that balance of convenience is clearly in favour of the plaintiff. If these pilots are permitted to join Sahara Airlines it would cause irreparable loss. On the other hand, if the injunction is issued, the defendant would not remain idle. He would still be entitled to fly other kinds of planes. It may be that he would get a lesser salary but this would not be sufficient to prevent the Court from granting the injunction sought. The learned Counsel had very fairly stated that there is a judgment of this Court given by Lodha, J., in the case of Harjit Singh Kang v. Jet Airways (India) Put. Ltd., in Appeal from Order No. 837 of 1996 decided on 24th July, 1996 which would need to be distinguished. In that case the plaintiffs had filed a suit in the City Civil Court seeking an injunction on the basis of an implied negative covenant. There was no express negative covenant like in the present case. The City Civil Court had granted an omnibus injunction. According to the learned Counsel, in the present case the injunction is restricted only to B-737-300/400 series. Therefore, the observation made by Lodha, J., would not be applicable to the facts and circumstances of this case. Furthermore, Lodha, J., has refused to grant the injunction on the basis of the finding that there is no implied negative covenant. The negative covenant has been specifically provided in all the letters of appointment and in the indemnity bonds in view of the judgment of Lodha, J. The defendant in this case has agreed to exclusively work for the plaintiff for a period of 7 years. Thus he cannot now be permitted to work with any other Airline in India on B-737-300/400 series Aeroplanes.
8. Mr. Dwarkadas, learned Counsel appearing in Notice of Motion Nos. 633 and 634 of 2000 has made some additional submissions. In Suit No. 712 of 2000 the defendant had been appointed on 9th May, 1996; According to the learned Counsel, after the judgment of Lodha, J., the defendant executed a bond sometime in the year 1997 which contain an express negative covenant. This, according to the learned Counsel, was a complete negative covenant and there is no option left with the employee. Although the bond is executed on a stamp paper of 1996 it was executed within the stipulated period of six months. The resignation of the defendant was given on 6th December, 1999, only one day before joining the Sahara Airlines. Distinguishing the judgment of Lodha, J., the learned Counsel submitted that a perusal of para 17 of the judgment would show that if the Court had come to the conclusion that there was an implied negative covenant then the injunction would have followed. It is only because the Court came to the conclusion that no negative covenant can be implied that the injunction was refused. The learned Counsel has also reiterated the submission made by Mr. Chagla to the effect that the City Civil Court had granted an omnibus injunction and thus the appeal was allowed by Lodha, J. Furthermore, the learned Counsel submitted that injunction in similar circumstances had been given by the Supreme Court in Golikari's case (supra). In that case there was a similar affirmative convenant as well as the negative covenant. In that case negative covenant had provided for an obligation to' serve the company. Liquidated damages were provided in case of breach of contract and the negative covenant not to engage or carry on the business being carried on by the company. He was also not to serve in any capacity for any other company carrying on similar business. Learned Counsel has reiterated that the plaintiffs are not seeking any restraint against the defendant in the post contract period. The plaintiff is only seeking an injunction during the period of the contract. Learned Counsel has also relied on the observations of the Supreme Court in para 34 of the Coca Cola case. In this it is reiterated that except in cases where the contract is wholly one sided, normally the doctrine of restraint of trade is not attracted in cases where the restriction is to operate during the period the contract is subsisting and it applies in respect of a restriction which operates after the termination of the contract.
9. Mr. Tulzapurkar, learned Counsel appearing for the defendant in Notice of Motion No. 633 of 2000 in Suit No: 712 of 2000 has argued that the question of grant of injunction has to be considered on the basis that there is an express negative covenant in the appointment letter dated 9th May, 1996. In this appointment order, on the contrary certain clauses show that the parties bargained that the contract period can be cut short by either party. The clauses also provide the consequences if the defendant cut short the period. According to the learned Counsel, Clause 20 provides for pro rata payment. Clause 21 provides for service for a minimum period of 36 months. In case of resignation, liquidated damages are provided for. Clause 23 permits the company to terminate the services of the defendant without assigning any reason after giving 3 months notice or by payment of three months' salary in lieu of such notice. Same right is given to the defendant. This clause applies after confirmation of the defendant in the service of the company. The negative covenant only comes when a bond is executed on 5th November, 1996. According to-the learned Counsel, the bond shows that it is prepared in 1997. It is, however, clarified in the affidavit in rejoinder that date 5-11-1996 is given because stamp was bought on that date. In that case, according to the learned Counsel, in view of section 52(b) of the Bombay Stamp Act, this bond is not stamped at all. If the bond has not been executed within a period of six months of the date which is on the stamp paper then it is deemed to have lapsed, Therefore, since the bond is not stamped at all it cannot be received in evidence. It is this document which contains the negative covenant. Therefore, it cannot be relied upon. He submits that in any event the negative covenant is too wide. It is not restricted in any manner. This point is also covered by the judgment of Lodha, J. Learned Counsel has referred to para 21 of the judgment of Lodha, J., and submitted that Lodha, J., has allowed the appeal even on the assumption that there was an implied negative covenant. Even the Supreme Court in Golikari's case has clearly held that merely because there is a negative covenant does not necessarily mean that the Court has to grant the injunction. Independently of this, Mr. Tulzapurkar submits that in view of the parties having themselves contemplated either the plaintiff dismissing the defendant or the defendant leaving the services of the plaintiff, under section 41(h) of the Specific Relief Act, no injunction should be granted. The plaintiffs have themselves provided an equally efficacious remedy by way of liquidated damages. Learned Counsel submits that even this point is decided by Lodha, J., in paragraph 25 of the judgment. He further submits that the negative covenant cannot be enforced after the contract has been terminated. He further submits that no public interest whatsoever is involved for granting the injunction to the plaintiff. In fact, it would be positively against the public interest to compel a disgruntled pilot to work for an employer for whom he does not wish to work. The defendant has left the plaintiff because of the change in the conditions of service of the defendant. Promotions have been denied to the defendant. His seniority has been adversely affected. He submitted that in para 12 of the affidavit in reply, detailed reasons as to why the defendant was compelled to leave the services of the plaintiff has been' set out. One of the reasons was that the defendant was entitled to Rs. 1,500/- per day as flight duty allowance. This was unceremoniously reduced by the plaintiff to Rs. 500/- per day. Thus the defendant was caused a loss of Rs. 2,20,000/-. On the representation of the defendant, the V.P. operations has ruled for the payment of the allowance to the defendant and had directed the personal section to pay the arrears at the rate of Rs. 1,500/- per day. According to the learned Counsel, in the affidavit in rejoinder this point is deliberately not dealt with by the plaintiff. This itself is sufficient to reject the claim of the plaintiff for any discretionary relief. The plaintiffs themselves having committed wrongs cannot rely on the same to seek an injunction. In support of this proposition, learned Counsel relies on the judgment of the Supreme Court in the Coca Cola case and makes a pointed reference to the observations made in para 50 of the judgment. Learned Counsel further submitted that granting of injunction in these circumstances would render the defendant wholly idle. He is specially trained to fly the B-737/300/400 series Aeroplane. There is only one other scheduled Airline in India viz. Sahara Airlines in which these planes are available. Thus if the defendant is not permitted to work with Sahara Airlines, the injunction would amount to forcing the defendant to work again with the plaintiff. This would be specific performance of a contract of personal service which relief cannot be granted by virtue of section 14 of the Specific Relief Act.
10. In rejoinder Mr. Dwarkadas submits that the argument about the stamp is not raised in the affidavit in reply and, therefore, cannot be taken into consideration.
11. Mr. Naphade, learned Counsel appearing in Notice of Motion No. 632 of 2000 in Suit No. 711 of 2000 has adopted the argument of Mr. Tulzapurkar. He has, however, made certain additional points which may be noticed. Learned Counsel submits that a perusal of Clause 6 of the letter of appointment shows that the training is only financed by the defendant as a loan transaction. Therefore, the training has been received by the defendant at his own expense. Thus the plaintiff has no proprietary rights in the intellectual property rights which flow from the training. These intellectual property rights are vested in the defendant. Therefore no injunction can be granted which would prevent the defendant from exercising his proprietary rights. The plaintiff has only advanced a loan. To secure the repayment of the loan the plaintiff has taken a guarantee in the amount of Rs. 7.5 lakhs for 7 years. Rest of the amount was being deducted from the salary of the defendant as provided in Clause 7. Learned Counsel further submits that Clause 6 if read in conjunction with Clauses 21 and 22 would show that there is no negative covenant. Clause 21 is equivalent to Clauses 1 and 13 which had been construed by Lodha, J. Therefore, the plaintiff has now added Clause 22. Clause 22 is clearly in conflict with Clauses 6 and 21. The whole document has to be construed harmoniously. Clause 22 cannot be construed in isolation to cull out a negative covenant. Learned Counsel further submits that 7 years mentioned in Clauses 6, 21 and 22 would mean 7 years during the employment of the defendant with the plaintiff. This Clause cannot mean that even if there is a breach of contract by the plaintiff which compels the defendant to leave the services of the plaintiff, the defendant would be bound not to accept any other assignment till the expiry of 7 years. The plaintiffs cannot be permitted to take advantage of their own wrong. Once the employment is terminated either by the plaintiff or by the defendant, then any further restriction would be violative of section 27 of the Contract Act. Learned Counsel submits that Clause 22 has to be read down to mean that there would be no restriction of 7 years if the contract comes to an end before the period of 7 years. Learned Counsel also relies on sections 73 and 74 of the Contract Act to submit that liquidated damages having been stipulated in Clause 6 would disentitle the plaintiff from the relief of injunction. Learned Counsel further submits that there is no public interest involved. In fact pleadings categorically show that the suit is filed merely for recovery of damages. Learned Counsel has referred to page 26 of the plaint wherein it is categorically stated as follows:
"..... The whole purpose of the said negative covenant is to ensure that such pilots in whom the plaintiff made such tremendous investment are not lured away by a competitor in breach of their contracts. The plaintiff was the first airline in the country to conceive and implement the policy of modernising its fleet inducted the latest version of the 737 Boeing aircraft in the country. Sahara Airlines followed suit much later and is now trying to take dishonest advantage with the plaintiffs trained pilots. The effect of the pilots leaving the plaintiff not only disrupts the plaintiffs programming but also represents a considerable set back to the plaintiff in its operation."
A perusal of the above, according to the learned Counsel shows that the plaintiff is only interested in protecting the tremendous investment made by the plaintiff in the training of the defendant. This, according to the learned Counsel, can be sufficiently compensated by damages. Thus, there is no public interest but only commercial interest. Learned Counsel further submits that injunction cannot be granted in view of section 41(e) and section 42 of the Specific Relief Act. Section 41(e) provides that there can be no injunction in cases where specific performance of the contract cannot be ordered- Section 42 provides that in order to get the relief of injunction the plaintiff must perform the obligations under the contract. In the present case, if the injunction is granted it would be in violation of section 41(e) of the Specific Relief Act. Learned Counsel submits that if an injunction is granted not only the defendant will be left idle but his career would be ruined. After six months of no flying the licence of the defendant is liable to be cancelled. Thereafter the fresh training would have to be undergone. Therefore, this is a pressure tactic to compel the defendant to specifically perform the contract of personal service. He submits that there is a distinction between English Law and Indian Law and it has been noticed by the Supreme Court in paragraph 45 of the Coca Cola judgment. Learned Counsel submits that the plaintiffs have to be non suited in view of the observations of the Supreme Court contained in para 46 of the judgment. So far as balance of convenience is concerned, learned Counsel submits that the defendant will lose his job in Sahara. He will sit idle and he will lose his licence. The object of the injunction is to protect the plaintiff against any possible injury which cannot be compensated by way of damages. Thus the balance of convenience clearly lies in favour of the defendant. The question as to how the discretion is to be used has been clearly laid down by Lodha, J. If the injunction is granted it would amount to granting an order of mandatory injunction. This kind of an order can only be made after the trial of the suit. In Golikari's case (supra) the injunction was granted after the trial. Learned Counsel further submits that the plaintiff has not come to Court with clean hands. There is a unilateral change in the service conditions of the defendant. Furthermore, the conditions of repayment of the loan amount given by the plaintiff to the defendant for the training have been altered without the consent of the defendant. All the defendants have in fact are incurring a loss every month. There was a change in the seniority rules. The defendants increments were not paid. Promotion has not been given. Thus the plaintiffs literally compelled the defendants to leave the services. These are circumstances of their own making. Therefore, it cannot be said that defendant has acted in breach of contract. Even otherwise, the negative covenant conditions are onerous, unreasonable and unconscionable. The contracts has been signed under coercion and undue influence of the plaintiff as the plaintiff had a dominant bargaining power. A perusal of Clause 23 shows that it gives the power to the plaintiff to change all conditions of service without consent of the defendant or other employees. It is submitted that the restraint of 7 years in any event is far too long. Last but not the last, it is submitted that pilots are "workman" under Clause 9-A of the Industrial Disputes Act. Therefore, the changes in seniority could only be made after giving a notice of change as required under the Industrial Disputes Act.
12. Mr. Mehta, learned Counsel appearing in Notice of Motion No. 634 of 2000 in Suit No. 713 of 2000 has adopted the arguments of Mr. Tulzapurkar and Mr. Naphade.
13. Mr. Chinoy, learned Counsel appearing in Notice in Motion No. 676 of 2000 in Suit No. 766 of 2000 has submitted that the negative covenant in this suit is contained only in the agreement dated 30th April, 1998. The bond which has been signed by the defendants in the said suits has not been signed by the defendant in this suit. The fact that the defendant has not signed the bond has been treated as a default by the plaintiffs. Therefore, the bond signed in other case on 16th July, 1998 cannot be taken into account. This suit has to be decided on the basis of Clauses 21 and 22 of the order of appointment dated 30th April, 1998. He further submits that the negative covenant is enforceable only if the plaintiffs themselves is not in breach. The plaintiffs also have to show that the covenant itself is not oppressive and unconscionable. Reasonableness or otherwise of the covenant has to be seen from the covenant itself. The Court would not enforce an unreasonable covenant merely because the relief has been toned down. In any event the agreement dated 16th July, 1998 seeks to change the terms and conditions of the service of the defendant contained in the appointment letter dated 30th April, 1998 unilaterally. This cannot be permitted. The plaintiffs are in fact seeking enforcement of the negative covenant contained in the bond dated 16th July, 1998. The plaintiffs are not seeking performance of the terms of the agreement dated 30th April, 1998.
14. I have considered the arguments put forward by the learned Counsel. A perusal of the submissions noted above would show that the learned Counsel have reiterated the arguments one after the other, on both the sides. A perusal of Clauses 6 and 22 would clearly show that there is an affirmative covenant followed by the negative covenant. On the basis of these covenants, the defendants have agreed to serve the plaintiffs for a period of 7 years exclusively. They have agreed that during the period of 7 years they will not take up employment with any other person, organisation, company requiring them to perform similar duties as required to be performed by the plaintiffs. They have also agreed not to engage in any similar business or vocation requiring them to fly any other Airlines. In Golikari's case (supra) the Supreme Court was considering a similar negative covenant. Therein the Clauses were as follows :
" Clause 6 of the agreement provided :-
"The employee shall, during the period of his employment and any renewal thereof, honestly, faithfully, diligently and efficiently to the utmost of his power and skillp
(a) xxx xxx xxx
(b) devote the whole of his time and energy exclusively to the business and affairs of the company and shall not engage directly or indirectly in any business or serve whether as principal, agent, partner or employee or in any other capacity either full time or part time in any business whatsoever other than that of the company."
Clause 9 provided that during the continuance of his employment as well as thereafter the employee shall keep confidential and prevent divulgence of any and all information, instruments, documents, etc. of the company that might come to his knowledge. Clause 14 provided that if the company were to close its business or curtail its activities due to circumstances beyond its control and if it found that it was no longer possible to employ the employee any further it should have option to terminate his services by giving him three months notice or three months salary in lieu thereof. Clause 17 provided as follows :-
"In the event of the employee leaving, abandoning or resigning the service of the company in breach of the terms of the agreement before the expiry of the said period of five years he shall not directly or indirectly engage in or carry on of his own accord or in partnership with others the business at present being carried on by the company and he shall not serve in any capacity, whatsoever or be associated with any person, firm or company carrying on such business for the remainder of the said period and in addition pay to the company as liquidated damages an amount equal to the salaries the employee would have received during the period of six months thereafter and shall further reimburse to the company any amount that the company may have spent on the employees training."
Interpreting the aforesaid Clause, the Supreme Court has held that negative covenants during the period of contract of employment when the employee is bound to serve his employer exclusively are generally not regarded as in restraint of trade and, therefore, do not fall under section 27 of the Contract Act. In that case the defendant had been trained by the plaintiffs on the post of Shift Supervisor. In this training the defendant acquired knowledge of the technique, process and the machinery involved and certain other confidential documents. This confidentiality was sought to, be breached by the defendant by seeking employment with the rivals of the plaintiffs. Thus, the injunction is granted to protect the interest of the plaintiff. It was held that the negative covenant was not unconscionable, oppressive or unreasonable. It was also held to be not against the public policy.
15. The main question to be decided in these cases is whether the negative covenant is in restraint of trade. Under section 27 of the Indian Contract Act, every agreement by which anyone is restrained from exercising a lawful profession or trade or business of any kind is to that extent void. Section 27 reads as under :
"27. Agreement in restraint of trade void : Every agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void."
Whether or not the contract is in restraint of trade would depend upon whether the contract was unreasonable, unfair or unconscionable. A contract imposing a general restraint would, in all probability, be void. Partial restraint would prima facie be valid and, therefore, enforceable. In order for the negative covenant to be valid, even the partial restraint would have to be reasonable in the interest of the parties and of the public. In the case of covenants of restraint between master and servant two question necessarily arise. First what are the interests of the employer that are to be protected. Second what is the remedy available to the employer to protect the interest. In Golikari's case the Supreme Court was dealing with the weaving process which the plaintiff was obliged under an agreement with the foreign collaborator to keep secret. The German Company had agreed to transfer the technical know how to the plaintiff company to be used exclusively, for the plaintiff company's Tyre Cord Yarn Plant at Kalyan. Therefore, the plaintiff was obliged to enter into secrecy agreements with its employees. It was in these circumstances that the defendant in that case was required to give a negative covenant of secrecy. Clause 9 of the agreement specifically provided that the defendant shall keep confidential and prevent divulgence of any of the information and documents etc. Which may have come to his knowledge. In such circumstances, the Supreme Court held that the plaintiff was entitled to be protected in regard to their interest in the trade secret and secret process of manufacturing. This protection was secured by restraining the defendant from divulging those trade secrets or by putting into the use of the competitor.
16. In my view, the ratio of the judgment in Golikari's case is not applicable to the facts and circumstances of the present case. It has been noticed above that all the defendants have been sent on an advanced training course to enable them to fly new generation aeroplanes. It is nobody's case that this training is a well guarded secret of the plaintiffs. In fact the training can be obtained by any pilot by paying the requisite training charges. Even the pilots in Sahara Airlines have to undergo the same training. The plaintiffs also cannot claim to have any interest in the training acquired by the defendants as this is a skill which belongs exclusively to the defendants. The defendants had received no special knowledge of any trade secret which belonged exclusively to the plaintiffs. Thus the ratio in Golikari's case would not be applicable in this case.
17. Mr. Chagla had submitted that breach of contract is clear. An enormous amount of money has been spent on the training of the defendants. The Court would be failing in its duty if the injunction is not granted as it would lead to inducements being offered by competitors to lure away the employees of the plaintiffs. There would be no sanctity of contract. In fact, learned Counsel submitted that this was a blatant case of poaching by the competitors. The same arguments have been reiterated by Mr. Vahanvati and Mr. Dwarkadas. These arguments, in my view, rather than helping the plaintiffs, are the very reasons for which the relief of injunction ought not to be granted. In my view, the covenant is designed merely to prevent the defendants from taking up employment with the competitors. This kind of a restraint, in my opinion, which is in gross is not entitled to any protection. All the learned Counsel from the plaintiffs have submitted that 8 pilots have left and joined Sahara Airlines. They have been offered higher salary. Sahara Airlines would now reap the rewards of the training which has been made possible by the plaintiffs. What has been submitted by the learned Counsel has in fact also been pleaded in the plaint in paragraph 26, which has been reproduced in para 11 hereinabove. A perusal of the same clearly shows that the plaintiff is only interested that the defendants should not accept employment with Sahara Airlines. This becomes evident from the fact that there are only two scheduled Airlines viz. Jet Airways and Sahara Airlines in which the Aircraft B-737-300/400/500 are being operated. It is also a matter of fact that there are large number of pilots who are unemployed and would be ready and willing to take up employment with the plaintiffs in place of the defendants. Since the plaintiffs has no property/proprietary right in the skill acquired by the defendants, no protection can be granted on the basis of the negative covenant. The apprehension expressed by the learned Counsel for the plaintiffs that if an injunction is not granted, then the pilots are likely to leave and join the competitor is no ground for granting the drastic relief of injunction against the defendants. It is common ground between the parties that earlier sixteen pilots had left Sahara Airlines and joined Jet Airways. The plaintiffs did not see anything wrong in poaching the pilots from Sahara Airlines. It is settled law that the relief of injunction can only be granted to protect the proprietary interest of the plaintiffs. To prevent the pilots from leaving the plaintiffs and joining the competitor would not be protection of any proprietary interest of the plaintiffs. Such a protection could have been provided by the plaintiffs themselves by offering better condition of service than the competitor. It would clearly be against public policy to compel the defendants to be forced to work with the plaintiffs merely because of the covenant. It would amount to compelling disgruntled employees to work for an equally disgruntled employer. This would not be in the interest of anyone. I am unable to agree with the submissions of Mr. Chagla to the effect that if injunction is not granted, then there would be no sanctity of contract. I am also unable to agree that public interest would be adversely affected as the Airlines might cut corners in the training of the pilots if the negative covenant is not enforced by way of injunction. Sanctity of contract has to be maintained by all parties to the contract. It cannot be that the contract is sacrosanct for the defendants and not so for the plaintiffs. Thus the conduct of the plaintiffs is also relevant. The conduct of the plaintiffs makes it abundantly clear that it is following purely laissez-faire policy of business. Its primary aim is to capture the maximum amount of domestic Air Traffic. It is not in business for any altruistic or philanthropic reasons. It is, therefore, a little difficult to accept the submission of the learned Counsel that the Airline would cut corners in the training which would directly affect its share of traffic which in turn would affect its economic viability. I, therefore, hold that no public interest will be sub-served by the grant of injunction. Further, this would be clearly against section 41(e) of the Specific Relief Act which provides that no injunction ought to be granted to prevent the breach of a contract the performance of which would not be specifically enforced. In my opinion, Mr. Naphade is correct in his submission that the only anxiety of the plaintiffs is to protect themselves from competition of Sahara Airlines. The negative covenant is not to protect any proprietary interest of the plaintiffs, for they have none. It has already been narrated in the facts above that the defendants have in fact financed their own training. The plaintiffs have merely advanced a loan which was being recovered from the defendants in instalments. Therefore, even factually the position would not be the same as in Golikari's case. In that case the defendant had been trained at the expense of the plaintiffs therein. I am of the considered opinion that the negative covenant is unconscionable, one sided, unreasonable and not for the protection of any proprietary interest of the plaintiff. Thus the negative covenant cannot be enforced by way of injunction.
18. I am unable to agree with the submission of Mr. Dwarkadas that Lodha, J., would have granted the injunction if the Court had come to the conclusion that there was an implied negative covenant. There is no indication to this effect in the judgment of Lodha, J. On the contrary Lodha, J., has come to the conclusion that even if it is assumed that there is an implied negative covenant, still the relief of injunction cannot be granted to the plaintiffs. Even in the Coca Cola case, the Supreme Court has categorically held that the Court is not bound to grant an injunction in every case and an injunction to enforce a negative covenant would be refused if it would indirectly compel the employees either to idleness or to serve the employer. Lodha, J., has followed the law laid down by the Supreme Court and has also come to the conclusion that grant of injunction would render the defendant, in that case, either idle or compel him to serve the plaintiff. It is a settled principle of law that the relief of injunction should not be granted if it would compel the employee to serve the employer or when the grant of injunction will lead to the employee remaining idle. Grant of an injunction which would lead to either of these two results would not be in public interest. The plaintiffs had relied on the observations of the Supreme Court in Golikari's case that merely because the employees may be compelled to work on a lessor remunerations no consideration against enforcing the covenant. These observations are of no avail to the plaintiffs in the present case. The defendants have at their own expense acquired the training for flying new generation Aeroplanes. There are only two scheduled Airlines, plaintiff and Sahara Airlines in which these Aeroplanes are operational. An injunction restraining the defendants from flying B-737-300/400/500 is bound to render them idle. It would clearly also amount to specific performance of the contract in that the defendants would either have to remain idle or will be compelled to serve the plaintiff alone. Lodha, J., has refused to grant the injunction even after assuming that a negative covenant can be implied from the agreement. In paragraph 21 of the judgment, Lodha, J., has observed as follows;
"21. In view of the aforesaid ratio of the Supreme Court in M/s. Gujarat Bottling Co. Ltd. (supra) it is clear that Court is not bound to grant an injunction in every case and an injunction to enforce a negative covenant would be refused if it would indirectly compel the employee to idleness or to serve the employer. In the present case, in my considered opinion, the negative covenant cannot be implied and, therefore, question of grant of injunction to enforce the negative covenant would not arise. Even if for the arguments sake it is assumed that the parties had presumed intention that the defendant shall serve the plaintiff alone an exclusively and shall not serve anybody else during the period of the contract, grant of the injunction in the facts and circumstances of the case would definitely lead either the defendant to remain idle or he shall be compelled to serve the plaintiff and if that be the reason, in my view the plaintiff was not entitled to injunction and the temporary injunction granted by the trial Court cannot be sustained. The defendant is admittedly a Pilot having experience in flying aircrafts. There is no dispute that the defendant has acquired the training for flying the sophisticated Boeings i.e. 737-400 and such other aircrafts. The job of a pilot and that too of pilot in command for which the defendant has been engaged by the plaintiff is not an ordinary job nor having acquired such training and spent so many years in flying, he can be expected to serve as member of the ground staff in any other airline as suggested by the learned Counsel for the plaintiff-respondent, a qualified and trained pilot having acquired that skill can either do that job or no job at all and, therefore, if injunction granted by the trial Court is allowed to sustain or the plaintiff is granted such injunction against the defendant either the defendant would remain idle because he cannot work on any other job or that he will be compelled to serve the plaintiff alone. It is not the matter of remuneration but it is the matter of job for which man is equipped, trained and skilled and a person having acquired training and still as pilot of flying sophisticated Boeings, he cannot be expected to do a job of ground staff. Obviously therefore, injunction granted by the trial Court would either compel the defendant to remain idle or would force him by circumstances to serve the plaintiff and I am afraid if injunction granted to the plaintiff would result in such consequence, the injunction cannot be justified. Therefore, in my view, the trial Court cannot be said to have exercised its discretion while granting injunction in accordance with law and well settled principles."
I am in respectful agreement with the observations made by Lodha, J., and would decline the claim for injunction. Another reason for refusing the relief of injunction is that prima facie I am of the view that the plaintiffs have failed to perform the contract so far as it was binding on them and cannot be permitted to take advantage of its own wrong. Proviso to section 42 of the Specific Relief Act clearly requires the plaintiffs to perform its part of the obligations in order to seek the relief of injunction which is otherwise prohibited by virtue of section 41(e) of the Specific Relief Act.
19. Looking at the facts and circumstances of these cases it cannot be held that the restriction is reasonable and fair and not one sided. Inspite of the fact that the defendants have not divulged any trade secret or information which is not available to the general public, they are sought to be restrained from exercising their profession. The defendants have undergone extensive specialised training and spent huge sums of money. Now they are sought to be prevented from making any use of this training merely because the training would be used whilst they are in the employment of the competitor of the plaintiffs. A negative covenant, the sole purpose of which is to avoid competition, cannot be treated to be a covenant by which the covenantee seeks to protect its proprietary interest. Whether or not a contract is reasonable has to be seen by examining as to what is the purpose of the restraint and as to whether it is justified. These principles have been clearly stated in the case of (Shree Gopal Paper Mills Ltd. v. Surendra K. Ganeshdas Malhotro Y, , Justice A.N. Ray has observed as
"21. In contracts of service it is the proprietary interest owned by the master that requires protection. As Lord Parkar said in 1961-1 AC 688.
"The reason, and the only reason for upholding such a restraint on the part of an employee is that the employer has some proprietary right whether in the nature of trade connection or in the nature of trade secrets, for the protection of which such a restraint is - having regard to the duties of the employee - reasonably necessary. Such a restraint has, so far as I know, never been upheld if directed only to the prevention of competition or against the use of a personal skill and knowledge acquired by the employee in his employer's business."
In master and servant contracts restraint can be imposed upon a servant in respect of trade secrets and business connection of the master. In the case of Forster and Sons Ltd. v. Suggett, 1918 35 T.L.R. 87 the works manager of the plaintiff who were chiefly engaged in making glass and glass bottles was instructed in certain confidential methods concerning inter alia the correct mixture of gas and air in the furnaces. He agreed that during the five years following the determination of his employment he would not carry on in the United Kingdom or be interested in glass bottle manufacture or in any other business connected with glass making as conducted by the plaintiffs. The restraint for protection of trade secrets was held to be reasonable. It is indispensable that the employer must prove definitely that the servant has acquired substantial knowledge of some secret process or mode of manufacture used in the course of his business. In our country the restriction beyond the period of employment would not however be valid. Similarly, an employer is entitled to protect his trade connection. The nature of the business and the nature of the employment are important considerations justifying a restraint. It may appear that the servant had no access to the trade secrets of his master or to his customers. If that is so, the covenant is in gross and unenforceable. As Farwell, J., said in Town End v. Jaran, 1900 2Ch 698 at P. 703:
"Now, if one man apart from any business takes a covenant in gross from another man, that he will not trade at all, that is simply oppressive. He does not require it to protect his own interest, because he has no interest to protect."
In the Herbert Morris case, 1916-1-688 Lord Atkinson said that an oppressive agreement meant that it would, if enforced, deprive a person for lengthened period of the power of employing that mechanical and technical skill and knowledge which his own industry, observation and intelligence have enabled him to acquire in the very specialised manufacturing business, thus forcing him to begin life afresh as it were, depriving him of the means of supporting himself and his family. Lord Atkinson further said that the general public suffer with him for it is in the public interest that a man should be free to exercise his skill and experience to the best advantage for the benefit of himself and of all those who desire to employ him. See 1961-1 688 at pp. 698 per Lord Atkinson.
21. In all cases of covenants of restraint between master and servant the two questions are first what are the interest of the employer that are to be protected and secondly, against what is he entitled to have them protected. The master is entitled to be protected in regard to his interests in trade secrets and secret process of manufacture. That protection is secured by restraining the employee from divulging those trade secrets or putting them to the use of the servant, the master is also entitled to be protected against invasion of his customers or clientele but the master is not entitled to be protected against competition..."
The aforesaid observations in my view are sufficient to negative the submissions of the learned Counsel for the plaintiffs to the effect that Jet Airways are entitled to be protected on the basis of the negative covenant.
20. All the learned Counsel for the defendants had submitted that in view of Clauses 20, 21 and 23, there is no negative covenant. I am unable to agree with the submission made by the learned Counsel. Firstly merely providing for liquidated damages will not cut into the scope of the negative covenant. In Golikari's case there was a provision for liquidated damages. Even then the injunction was granted. Similarly the provision for probation or for termination of service prior to the period of 7 years would not mean that there is no negative covenant. A bare perusal of these provisions would show that Clause 21 is similar to Clause 17 in Golikari's case. In that clause it is provided that in the event of the employee resigning or abandoning the services, the employee would pay to the Company liquidated damages as stipulated therein In Clause 21 it is stipulated that in case of resignation or leaving the services, the employee shall make good and pay to the company the pro rata cost in respect of training. This kind of a provision has been held by the Supreme Court in Golikari's case not to be any hindrance for the grant of the relief of injunction. In the present case Clause 21 provides for liquidated damages. Clause 23 gives an option to the plaintiffs to terminate the services of the employee even after confirmation by giving three months notice in writing or payment of three months salary in lieu of the notice. The employee also has the option to leave the services of the plaintiffs by giving 3 months notice in writing. The company can even waive the notice. All these clauses read together leave no manner of doubt that the period of employment can be cut short either by the employer or by the employee. This has no effect on the 7 year period for which the restrictive covenant is to run. Even if the employee leaves the employer on the basis of exercise of his option under Clause 23 he would still be bound to perform the negative covenant provided the covenant is not in restraint of trade, being unreasonable and unconscionable. I am unable to agree with the submission of Mr. Tulzapurkar that merely because liquidated damages have been provided no order of injunction can be issued in view of section 42(h) of the Specific Relief Act. This point has been specifically negatived by the Supreme Court in Golikari's case. Therefore, it is not necessary to give any further reasons for rejecting the submission. To avoid any confusion it is, however made clear that the negative covenant in the present case does not satisfy the test to qualify for any protection by way of injunction.
21. Mr. Tulzapurkar had rightly relied on the observations of the Supreme Court in paragraph 50 of the Coca Cola case which are as under :
"50. In this context, it would be relevant to mention that in the instant case GBC had approached the High Court for the injunction order, granted earlier, to be vacated. Under Order 39 of the Code of Civil Procedure, jurisdiction of the Court to interfere with an order of interlocutory or temporary injunction is purely equitable and, therefore, the Court, on being approached, will apart from other considerations, also look to the conduct of the party invoking the jurisdiction of the Court, and may refuse to interfere unless his conduct was free from blame. Since the relief is wholly equitable in nature, the party invoking the jurisdiction of the Court has to show that he himself was not at fault and that he himself was not responsible for bringing about the state of things complained of and that he was not unfair or inequitable in his dealings with the party against whom he was seeking relief. His conduct should be fair and honest. These considerations will arise not only in respect of the person who seeks an order of injunction under Order 39, Rule 1 or Rule 2 of the Code of Civil Procedure but also in respect of the party approaching the Court for vacating the ad interim or temporary injunction order already granted in the pending suit or proceedings."
In view of the above, it is not only the conduct of the defendants but also the conduct of the plaintiffs which has to be scrutinised. It is an accepted fact that the terms and conditions of service of the defendants have been unilaterally altered by the plaintiffs. It has been emphatically argued by all the learned Counsel for the plaintiffs that the plaintiffs were entitled to do so. It has been submitted that the grievances put forward by the plaintiffs were imaginary. I am unable to accept the submissions. Firstly the defendants were made to pay for the training. Large sums of money were being deduced from the salary of the defendants in order to repay the loan amount. Seniority of the defendants have been affected in such a manner that their chances of promotion have been adversely affected. The terms and conditions of the service as contained in the appointment orders have been altered to the detriment of the defendants with retrospective effect. The instalments for repayment of the loan have been enhanced contrary to the provisions contained in the initial letter of appointment dated 30th April, 1998. From this it becomes obvious that the accured rights of the defendants are sought to be taken away by amendments in the policy decisions retrospectively. Prima facie, I am of the view that this is sufficient breach of contract to disentitle the plaintiffs from the relief of injunction which is to be granted on the basis of equity and good conscience. I am also of the considered opinion that irreparable loss would be caused to the defendants, if they are compelled to remain idle. All these defendants are experienced pilots having served in the Navy and other organisations. They are all persons having family responsibilities. Thus compelling them to remain idle would certainly tantamount to ruining their career as well as family life. The Court cannot be oblivious to the human consequences which an order of injunction would cause. On the other hand non-grant of injunction would not cause any irreparable loss to the plaintiffs. Earlier the plaintiffs had quite merrily and successfully poached 16 pilots from Sahara Airlines. Now 8 pilots left Jet Airways and joined Sahara Airlines. Prima facie, it appears that the conduct of the plaintiffs was such that the defendants had little choice but to seek employment elsewhere. It is a hallowed principle of law, that those who seek equity must do equity. Conduct of the plaintiffs can hardly be described as clean or commendable. I am also of the considered opinion that any inconvenience which had been caused by the resignation of the defendants was merely temporary. Thus the balance of convenience also lies in favour of the defendants. Furthermore, the plaintiffs can be suitably compensated by award of damages in the event the suit is finally decreed against the defendants and in favour of the plaintiffs. In my view, the plaintiffs have failed to show prima facie any legal or equitable right for the grant of injunction.
22. In view of the above all the Notices of Motion are dismissed with costs. Parties to act on an ordinary copy of this order duly authenticated by the Associate of this Court.
Certified copy expedited.
Notice of Motion dismissed.