Delhi High Court
Navigators Logistics Ltd vs Kashif Qureshi & Ors on 20 November, 2024
Author: Vibhu Bakhru
Bench: Vibhu Bakhru
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment Pronounced on: 20.11.2024
+ RFA(OS)(COMM) 3/2019
NAVIGATORS LOGISTICS LTD ..... Appellant
versus
KASHIF QURESHI & ORS. ..... Respondents
Advocates who appeared in this case:
For the Appellant : Mr. Anubhav Kumar, Mr. Rishab
Kaushik, Ms. Gauri Swarup Bansal,
Advocates.
For the Respondents : Mr. Abhijit Mittal, Ms. Shaivya Singh,
Mr. Pulkit Khanduja, Advocates for R1
to R9.
Mr. Mayank Goel and Mr. Diganata
Das, Advocates for R11.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
HON'BLE MS. JUSTICE TARA VITASTA GANJU
JUDGMENT
TARA VITASTA GANJU, J.:
TABLE OF CONTENTS
Preface…………………………………………………………………….2
Brief Facts………………………………………………………………. 2
Impugned Judgment…………………………………………………….. 5
Contentions of the Appellant……………………………………………………8
Contentions of the Respondents………………………………………………..9
Analysis …………………………………………………………………………….. 10
Conclusion………………………………………………………………31Signature Not Verified
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Preface
1. The present appeal impugns the judgment dated 17.09.2018, passed
in CS (COMM) 735/2016 [hereinafter referred to as “Impugned
Judgement”], wherein the learned Single Judge, allowed the
Application filed by Respondents No. 3 and 5 being IA No.
13684/2016 under Order VII Rule 11 of the Code of Civil Procedure,
1908 [hereinafter referred to as “CPC”], and rejected the plaint filed
by the Appellant/Plaintiff [hereinafter referred to as “Appellant”].
Brief facts
2. Briefly, the facts are that Appellant, is engaged in logistics and
freight forwarding services, and claims to possess distinctive and
confidential data, customer databases, and other business
information, which it asserts are trade secrets and are protected under
the Copyright Act, 1957 [hereinafter referred to as “Copyright Act”].
3. The Appellant is a logistics and freight forwarding service provider
and filed a suit against 12 Defendants alleging that they
misappropriated its proprietary data and trade secrets. The
Respondent No.1 to 8 are the former employees of the
Appellant/Company [hereinafter referred to as “Former
Employees”]. Respondent Nos.1 to 8 leaked confidential data of the
Appellant to Respondent Nos.9 to 11 and Respondent No.12, a
Competing Company, Respondent No.9 is also the wife of
Respondent No.2.
4. The Former Employees, were working in various capacities such as
Customer Service Executive, Deputy Manager (Commercial), andSignature Not Verified
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Assistant Manager (Pricing). It is the case of the Appellant that the
employment contracts of the Former Employees contained clauses
regarding confidentiality, non-competition, and protection of the
Appellant’s intellectual property and that they provided these
employees with electronic devices including laptops containing
confidential information for work purposes.
5. Between 09.05.2016 to 25.05.2016, the Former Employees resigned
from their positions with the Appellant. The Appellant contends that
upon return of electronic devices from the Former Employees, a
forensic examination of the laptop/computers of the Former
Employees was conducted. Based on this examination, it was
discovered that confidential data had been deleted. The Appellant
further alleged, that subsequent data recovery revealed Skype chats
suggesting a conspiracy among the Former Employees to use the
Appellant’s confidential information for their benefit and to divert
business to the Competing Company.
6. It was contended by the Appellant that it had meticulously developed
and maintains comprehensive business data including customer
information agreement and financial records, digitally stored and
despite stringent confidentiality agreements, the Respondents
retained sensitive information. It was contended that the retained
information and data was exploited for personal gain by these
Respondents and business was diverted to competitor(s). The
Appellant explained that upon resignation of the Former Employees
from their services with the Appellant, they retained crucial data with
the wrongful intent to exploit it for financial gain.
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6.1 The Appellant in the plaint alleged that the Respondents are
infringing its copyright, misusing confidential information, and
violating the terms of their employment agreements. Based on these
allegations, the Appellant sought mandatory and permanent
injunctions, rendition of accounts, delivery up and recovery of Rs.
1,50,00,000/- from the Respondents as damages.
7. The learned Single Judge on 03.06.2016, passed an ex parte ad
interim order restraining the Respondents from utilizing, exploiting,
copying, transmitting, publishing, or releasing any confidential
information and trade secrets of the Appellant. Directions were also
issued appointing Local Commissioners to examine the Respondents’
computer systems and emails in respect of documents originating
from the Appellant.
8. The Former Employees filed written statements contesting the
Appellant’s claims, wherein it was argued that the Appellant had
failed to disclose specific details of the alleged copyrighted works or
trade secrets. The Former Employees contended that the information
claimed as confidential was merely client data, which is not eligible
for copyright protection. They further asserted that the suit was
barred by Section 27 of the Contract Act, 1872 [hereinafter referred
to as “Contract Act”] and violated the Former Employees’
fundamental rights under Articles 19(1)(g) and 21 of the Indian
Constitution, 1950 [hereinafter referred to as “Constitution”]. The
Former Employees accused the Appellant of attempting to create a
monopoly and prevent its former employees from seeking better
prospects. They also claimed that the non-compete clauses in the
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employment contracts were onerous and unenforceable.
9. In response, the Appellant relied on recovered Skype chats and
emails between the Former Employees and, Respondent Nos. 9 to 11
and Competing Company, and the reports of the Court appointed
Commissioner, which allegedly found customer lists and emails of
the Appellant on the Respondents’ computer systems. The Appellant
argued that it owned the copyright to the business data as per Section
17 of the Copyright Act. Reliance was placed on (i) Burlington
Home Shopping Pvt. Ltd. v. Rajnish Chibber & Anr1; (ii) Diljeet
Titus, Advocate v. Alfred A. Adebare & Ors2; and, (iii) Mayar (H.K.)
Ltd. & Ors. v. Owners & Parties, Vessel M.V. Fortune Express &
Ors.3.
10. An Application under Order VII Rule 11 of the CPC for rejection of
the plaint was filed by Respondents No.3 and 5, therein contending
that the Appellant had not disclosed any specific copyrighted work
or confidential information, and that the non-compete clause was
violative of Section 27 of the Contract Act.
Impugned Judgment
11. The learned Single Judge examined the Appellant’s claims under
three main heads: copyright infringement, breach of confidentiality
clauses and enforcement of non-compete clause.
12. The learned Single Judge found that the Appellant’s pleadings
1
1995 (35) DRJ 335
2
(2006) 130 DLT 330
3
(2006) 3 SCC 100
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regarding copyright infringement were vague and lacked specific
details about the works in which copyright was claimed. The learned
Single Judge analysed whether a list of customers/clients with their
contact information could be considered a copyrightable work and
concluded that such a list does not meet the criteria for copyright
protection. It was held that, the Appellant failed to demonstrate the
required level of skill, judgment, and creativity in compiling the list.
Moreover, the Appellant did not disclose the identity of the author,
which is essential for claiming copyright ownership.
13. On the issue of confidentiality, the learned Single Judge found the
Appellant’s pleadings vague. The learned Single Judge noted that the
Appellant failed to specify what information was confidential, how
it differed from general industry knowledge, and what steps were
taken to maintain its secrecy beyond including confidentiality clauses
in employment contracts. The learned Single Judge emphasized that
without specific details, any injunction granted would be
unenforceable.
14. The learned Single Judge delved into the legal protection of
confidential information, noting that while India has obligations
under the Trade-Related Aspects of Intellectual Property Rights
(TRIPS) Agreement to protect trade secrets, it has not enacted
specific legislation for this purpose. Although, Indian courts have
followed the English approach of protecting confidential information
under both common law and equity, even in the absence of a contract.
15. The learned Single Judge observed that customer lists in the logistics
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and freight forwarding business cannot be automatically deemed
confidential. The learned Single Judge reasoned that such
information is often readily available in the public domain, and
competitors would naturally be aware of businesses requiring freight
forwarding services. It was held that for a customer list to qualify as
confidential information or a trade secret, it must possess significant
economic, business, or commercial value.
16. While relying on Star India Pvt. Ltd. v. Laxmiraj Seetharam Nayak
& Anr.4 and Ambiance India (Private) Ltd. v. Naveen Jain5, the
learned Single Judge marked the parameters of what constitutes a
trade secret. The learned Single Judge held that general knowledge
or skills acquired during the course of employment cannot be
classified as trade secrets. Instead, only formulae, technical know-
how, or unique business methods unknown to others can fall under
this category.
17. Thereafter, the learned Judge while relying on Supreme Court
judgments, Niranjan Shankar Golikari v. Century Spinning &
Manufacturing Co. Ltd.6 and Percept D’Mark (India) (P) Ltd. v.
Zaheer Khan & Anr.7, concluded that post-employment restrictions,
as claimed by the Appellant, are void under Section 27 of the
Contract Act. The learned Single Judge found that the plaint failed to
disclose a cause of action that would justify the grant of injunction or
4
2003 SCC OnLine Bom 27
5
2005 SCC OnLine Del 367
6
1967 SCC OnLine SC 72
7
(2006) 4 SCC 227
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damages.
Contentions of the Appellant
18. The Appellant submits that the Former Employees resigned within a
short span of about one month, and it claims that forensic
examination of their laptop computers which were returned to
Appellant revealed transfer of confidential information and trade
secrets to third parties, including the Competing Company. The
Appellant further alleges that the Respondents began soliciting the
Appellant’s business and diverting it.
19. The Appellant contended that the learned Single Judge should have
confined itself to the averments made in the plaint alone while
considering the Application under Order VII Rule 11 of CPC. The
allegations in the plaint should have been presumed to be true, and
the case should have proceeded on a demurrer.
20. The Appellant submits that learned Single Judge erred by
considering the Respondents’ defences and weighing the strengths
and weaknesses of the case, which is contrary to settled law, at the
stage of Order VII Rule 11 of CPC. Reliance is placed on D.
Ramachandran v. R.V Janakiraman and Ors.8 and Kuldeep Singh
Pathania v. Bikram Singh Jaryal9.
Contention of the Respondents
21. The Respondents contend that the learned Single Judge’s order
rejecting the plaint under Order VII Rule 11 of CPC is well-reasoned
8
(1999) 3 SCC 267
9
(2017) 5 SCC 345
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and legally sound. The Respondents emphasize that the plaint’s
rejection was based on a thorough analysis of the pleadings and
documents filed by the Appellant.
22. The Respondents submit that even if all averments in the plaint were
assumed to be true, no cause of action would arise in favor of the
Appellant/plaintiff. Reliance is placed on Dahiben v. Arvindbhai
Kalyanji Bhanushali (GAJRA) Dead Through LRs & Ors.10,
Dr.Zubair UI Abidin & Ors v. Sameena Adidin @ Sameena Khan11
and I.T.C Ltd. v. Debt Recovery Appellate Tribunal & Ors.12.
23. The Respondents further submits regarding the confidentiality of
customer lists, that such information in the logistics and freight
forwarding business is generally available in the public domain.
Reliance is placed on American Express Bank Ltd. v. Ms. Priya
Puri13 to support the contention that customer details are not trade
secrets or property.
24. The Respondents on the issue of non-compete clauses, highlighted
judgement of Percept D’Mark Case, which held that post-
employment termination restrictions are barred by Section 27 of the
Contract Act. It is contended that this interpretation correctly
balances the rights of employees with the interests of employers.
25. The Respondents further contend that the learned Single Judge’s
consideration of their written statements was not improper, as it was
10
2020 SCC OnLine SC 562
11
2014 SCC OnLine 3575
12
1998 2 SCC 170
13
2006 SCC OnLine Del 638
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limited to addressing legal issues and did not delve into disputed
facts. Reliance is placed on T. Arivandandam v. T.V. Satyapal &
Anrs.14 to support the view that the Court can look beyond the plaint
to determine if it is vexatious or meritless.
26. On behalf of Respondent No.11, it was contended that it was an
independent commission agent who had previously undertaken
printing projects for the Appellant and that the inter-se
communication between them and Respondent No.1 was only with
respect to design of logo, visiting cards and letter heads for the new
company floated by Respondent No.1. In addition, it was contended
that the reports of the local commissioner for investigation that was
appointed by the learned Single Judge, did not yield any evidence of
Appellant’s confidential information or trade secrets being available
with Respondent No.11.
27. Arguments were heard on behalf of Respondent No.1 to 9 and
Respondent No.11, however, written submissions were only filed by
the Appellant and Respondent Nos.1 to 9 in the present Appeal.
Analysis
28. From an examination of the record, the following is evident:
(i) On 03.11.2016, an Application was filed by Respondent Nos.3 and 5
being IA No.13684/2016 before the learned Single Judge under
Order VII Rule 11 of CPC.
(ii) Pleadings in this Application were completed and the Application
was heard by the learned Single Judge including on 18.12.2017 and14
(1977) 4 SCC 467
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24.01.2018.
(iii) The Impugned Judgment rejects the plaint in its entirety and orders
for a decree sheet to be drawn up, holding that the plaint does not
disclose a cause of action on the basis of which the Plaintiff would
be entitled to an injunction or damages.
29. Based on this Application under Order VII Rule 11 of CPC, the
learned Single Judge proceeded to examine whether the Plaintiff can
succeed in the case by proving the averments in the plaint and
documents, without noticing the defences of the Respondents. The
learned Single Judge examined the plaint/suit filed by the Appellant
on the basis of: (i) various provision of the Copyright Act, 1957; (ii)
confidentiality of list/compilation of customers/client details of
contact persons and numbers; (iii) for permanent injunction/damages
for breach of the employment contract of Former Employees.
30. It is settled law that post-termination restrictive covenants in an
employment contract are void under Section 27 of the Indian
Contract Act. The learned Single Judge, relying on the judgments of
the Supreme Court in Niranjan Shankar Golikari case and Percept
D’Mark Case held that since the Former Employees were no longer
in the employment of the Appellant, the non-compete clause of their
employment contract was void under Section 27 of the Contract Act
and thus, there can be no injunction or damages in lieu of injunction
or damages for breach of contract by the Former Employees.
Paragraphs 54, 55, 56 and 57 of the Impugned Judgement in this
regard are reproduced below:
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“54. A three Judge Bench of the Supreme Court in
Superintendence Company of India (P) Ltd. Vs. Krishan
Murgai 1981 2 SCC 246 was concerned with a claim for
injunction post cessation of employment. It was held by two of the
Judges on an interpretation of the restrictive clause in the
Employment Contract, that the same was to apply only when the
employee on his / her volition left the employment and not when
the employer terminated the employment. The third Hon’ble
Judge held that even if the restrictive covenant was to include
cessation of employment at the volition of the employee, there
could be no post-employment restriction under Section 27 of the
Act.
55. A subsequent two Judge Bench of the Supreme Court in
Percept D’Mark (India) (P) Ltd Vs. Zaheer Khan (2006) 4 SCC
227 refused enforcement of a post-employment restriction on the
ground of same being barred by Section 27 of the Act.
56. Applying the aforesaid law to the facts of the present case, it
is found that as per the plaintiff also, there was no fixed term for
which either of the defendants no.1 to 8 had agreed to serve the
plaintiff. The clause in the Employment Contract claimed by the
plaintiff also is to the effect that defendants no.1 to 8, for a
period of one year after ceasing to be the employee of the
plaintiff, to not compete with the plaintiff. Such a clause in the
Employment Contract, as per the judgments aforesaid of the
Supreme Court, is void under Section 27 of the Contract Act.
Once the clause is void, there can be no injunction or damages
in lieu of injunction on the basis thereof.
57. The permanent injunction and in the alternative damages
claimed on the premise of non-compete clause thus discloses no
cause of action and is not required to be put to trial.”
[Emphasis is ours]
31. The non-compete clause as existed in the letter of
appointment/employment contract [hereinafter referred to as
“Contract”] of the Former Employees (which are pari materia with
each other) and which have been signed by all the Former Employees
state that they would not be allowed to go in direct competition of
any business of the kind as is being undertaken by the Appellant or
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its group companies. Clause 13 of the Contract in this regard is
reproduced below:
“13. You will not be allowed to go to direct competition of any
kind of business etc. with Navigators Logistics Pvt Ltd. or any of
its group of Companies. If found in such a situation you will be
liable for legal action in the court & law.
31.1 As can be seen from the aforegoing, Clause 13 of the Contract,
although not very well worded, sets out that the employee (Former
Employees) cannot work with any business which is in direct
competition with the Appellant or its group companies. The Clause
does not provide for any time period but is open-ended as to the
duration of the non-compete.
31.2 Section 27 of the Contract Act holds that any agreement by which
one is constrained from exercising a profession, trade or business is
void to the extent of such constraint. The only exception to this
Section is where the goodwill of the business is sold. Section 27 of
the Contract Act is reproduced below:
“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 to carry on business of
which good-will is sold.–One who sells the good-will 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 good-will 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.”
31.3 Clause 13 of the Contract does not permit Former Employees to carry
on their trade or vocation in a similar/competing business and thus,
is barred by the provisions of Section 27 of the Contract Act. The
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Impugned Judgement in this regard, does not suffer from any
infirmity.
32. The Supreme Court in Kuldeep Singh Pathania case has while
dealing with the scope of inquiry under Order VII Rule 11 of CPC,
held that the scope of inquiry has to be limited to the pleadings of the
Plaintiff and neither the written statement nor the averments in the
Application under Order VII Rule 11(a) of CPC filed by Defendant
can be considered in the following manner:
“10. In the present case, the issue relates to an enquiry under
Order 7 Rule 11 (a) of the Code, and hence, there is no question
of a preliminary issue being tried under Order 14 Rule 2(2) of the
Code. The Court exercised its jurisdiction only under Section
83(1)(a) of the Act read with Order 7 Rule 11(a) of the Code.
Since the scope of the enquiry at that stage has to be limited only
to the pleadings of the plaintiff, neither the written statement
nor the averments, if any, filed by the opposite party for
rejection under Order 7 Rule 11(a) of the Code or any other
pleadings of the respondents can be considered for that purpose.
11. In Mayar (H.K.) Ltd. v. Vessel M.V. Fortune Express [2006
(3) SCC 100], this Court has dealt with a similar issue. To the
extent relevant, para 12 reads as follows: (SCC p. 115)“12. From the aforesaid, it is apparent that the plaint
cannot be rejected on the basis of the allegations made by
the defendant in his written statement or in an application
for rejection of the plaint. The court has to read the entire
plaint as a whole to find out whether it discloses a cause
of action and if it does, then the plaint cannot be rejected
by the court exercising the powers under Order 7 Rule 11
of the Code. Essentially, whether the plaint discloses a
cause of action, is a question of fact which has to be
gathered on the basis of the averments made in the plaint
in its entirety taking those averments to be correct. A cause
of action is a bundle of facts which are required to be
proved for obtaining relief and for the said purpose, the
material facts are required to be stated but not the evidence
except in certain cases where the pleadings relied on are in
regard to misrepresentation, fraud, wilful default, undue
influence or of the same nature. So long as the plaint
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discloses some cause of action which requires
determination by the court, the mere fact that in the opinion
of the Judge the plaintiff may not succeed cannot be a
ground for rejection of the plaint.”
12. It is not necessary to load this judgment with other judgments
dealing with this first principle of Order 7 Rule 11(a) of the Code.
As held by this Court in Virender Nath Gautam v. Satpal Singh,
2007 (3) SCC 617 at para 52: (SCC p. 632)
“52. The High Court, in our considered opinion, stepped
into prohibited area of considering correctness of
allegations and evidence in support of averments by
entering into the merits of the case which would be
permissible only at the stage of trial of the election petition
and not at the stage of consideration whether the election
petition was maintainable and dismissed the petition. The
said action, therefore, cannot be upheld and the order
deserves to be set aside.”
[Emphasis is ours]
33. The Respondents have relied on the judgement of the Supreme Court
in Dahiben case to submit that if on a meaningful reading of the
plaint, no cause of action is disclosed, the plaint is required to be
dismissed under the provisions of Order VII Rule 11 of CPC. The
Supreme Court in Dahiben case while discussing this provision has
held that the power conferred on a Court to terminate a civil action is
a drastic one and the conditions enumerated under Order VII Rule 11
of CPC are required to be strictly adhered to. It was further held that
in examining the assertions made in the plaint, the Court is required
to determine whether these are contrary to statutory law or judicial
dicta and that the pleas taken by the Respondents in their written
statement or the Application under Order VII Rule 11 of CPC is
irrelevant. The relevant extract is below:
“23.2. The remedy under Order 7 Rule 11 is an independent
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and special remedy, wherein the court is empowered to
summarily dismiss a suit at the threshold, without proceeding
to record evidence, and conducting a trial, on the basis of the
evidence adduced, if it is satisfied that the action should be
terminated on any of the grounds contained in this provision.
23.3. The underlying object of Order 7 Rule 11(a) is that if in
a suit, no cause of action is disclosed, or the suit is barred by
limitation under Rule 11(d), the court would not permit the
plaintiff to unnecessarily protract the proceedings in the suit.
In such a case, it would be necessary to put an end to the sham
litigation, so that further judicial time is not wasted.
xx xx xx
23.5. The power conferred on the court to terminate a civil
action is, however, a drastic one, and the conditions
enumerated in Order 7 Rule 11 are required to be strictly
adhered to.
23.6. Under Order 7 Rule 11, a duty is cast on the court to
determine whether the plaint discloses a cause of action by
scrutinising the averments in the plaint [Liverpool & London
S.P. & I Assn. Ltd. v. M.V. Sea Success I, (2004) 9 SCC 512] ,
read in conjunction with the documents relied upon, or
whether the suit is barred by any law.”
[Emphasis is ours]
33.1 The Supreme Court in Dahiben case while examining an Application
under Order VII Rule 11 CPC, found that there was a delay of 5½
years in filing the plaint, and held that the suit was barred by
limitation and rejected under Order VII Rule 11(d) of CPC. However,
the only provision that the plaint in the present case is stated to be
barred by, is Section 27 of the Contract Act. This provision is not of
such a nature as would constitute a bar so as to reject the entire plain
as a whole.
34. We are unable to agree with the contention raised by the Respondents
that on a meaningful reading of the plaint, no cause of action is
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disclosed.
35. The Appellant has pleaded in the plaint, more specifically in
Paragraphs 63 to 75, that the Respondents had in their possession
confidential information and trade secrets and that the Former
Employees were trying to divert business and customers to the
competitor Company/Respondent No.12 and that agents, business
associates and clients of the Appellant abroad have been contacted
by persons claiming to be employed by Respondent No.12. In fact,
the Paragraphs 69 to 71 refers to Skype Chat of particular dates in
relation to diversion of business by the Respondents. The relevant
paragraphs of the plaint are extracted below:
“63. That a perusal of various Skype chats shows that the
defendants no 1 to 8 have been working against the legal and
business interest of the company in violation of the provisions
stipulated in their appointment letters. A perusal of Skype chat
between Kashif Qureshi being defendant no. 1 and Bhawna
Kanojia being defendant no 10 dated 12/05/16 shows the
detailed planning and conspiracy of the defendants to cause
detriment to the legal interests of the plaintiff company and work
in violation of the appointment/employment terms.
xxx xxx xxx
65 That it is pertinent to note that the defendant no. 1,4,5, 6
belonged to the Sales department of the plaintiff company therein
while defendant no. 2,3 worked in the pricing and commercial
department of the plaintiff company whereas defendants no. 7,8
worked in the accounts department of the plaintiff company. All
the defendants, in pursuance of common intention, decided to
divert the existing business that they were handling for and on
behalf of the plaintiff company to another legal entity being
Carex Cargo Express Pvt Ltd. This is evident from the Skype
chat dated 21/4/16 and 22/4/16 between Kashif Qureshi, being
defendant no 1 and Sudhir Kadam, being defendant no 11,
wherein the said defendant no 1 while working in the employment
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interests of the plaintiff company and was also working for
diverting the business of the plaintiff company to Carex Cargo
Express Pvt Ltd/Carex Cargo India Pvt: Ltd/ Carex Cargo Pvt
Ltd.
xxx xxx xxx
69. That further the fact that the defendants have been diverting
the business of the plaintiff company to defendant no. 12, gets
even more crystal clear from the perusal of the Skype chat dated
4/05/16 between defendant no. 3 Kamal Biswaland Arun
Leoproex dated 04/05/2016. The said Skype chat categorically
shows that while being in the employment of the plaintiff
company, the defendant no. 3 was actually working against the
legal interests of the plaintiff company and diverting the
business of the plaintiff company to other legal entities.
70. That further a perusal of the internal discussions available on
various Skype chats which have been recovered from the said
laptops from 4/3/2015 to 22/5/2016 demonstrate the various
illegal acts of the defendants.
71. That further a perusal of the Skype chat recovered from the
said laptops between defendant no. 2 and defendant no. 9 show
that the said defendants were working to divert the shipments of
the plaintiff company from its legitimate customers to Carex
Cargo India Pvt Ltd. The detailed planning in this regard can
be seen from the perusal of the said chat dated 20/04/16 between
defendant no. 2 and defendant no. 9. Further, as per
investigations made by the plaintiff, there is no legally
incorporated entity as Carex Cargo India Pvt Ltd and hence, the
defendants no 2 and 9, alongwith other defendants, have engaged
in electronic forgery.
72. That the illegal acts of the defendants are clearly
demonstrated by emails and various other electronic records.
Consequently, on coming to know about illegal and criminal
activities done by the defendant no. 1 to 8 along with other
defendants, the plaintiff company sent an intimating asking ,its
business partners to refrain from working with defendant no. 1 to
6.
73.That various agents/business associates/clients of the plaintiff
company outside India have already been contacted by one
Bharat Sharma from Carex Cargo India Pvt Ltd in pursuance of
the illegal acts done by defendant no. 1. to 8. This was evident
from the emails dated 26/05/2016 from Robert Skulsky andSignature Not Verified
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Naglaa Azmi.
74.That it is pertinent to point out that the defendant no. 1 to 8
have not personally handed over all the data, information,
equipment, mobile phone, data card, files or documents of the
company as also original RC of Santro Car DL4C AV 2659 used
by the defendant no. 1, to the plaintiff, which was allocated to the
defendants no 1 to 8 by the plaintiff. The aforesaid contain
confidential data and information, customers’ database,
account handling information drawings, Plans, test reports, and
also tax related information etc pertaining to the Plaintiff
Company.
75. That the plaintiff company has learnt that the defendants
have forwarded various confidential data, information and
trade secrets from the computer resources of the plaintiff
company to their personal computer resources and email
accounts.”
[Emphasis is ours]
36. The Appellant has made specific allegations in relation to inter se
communications between Respondent No.1 and Respondent No.10
dated 12.05.2016 in respect of the violation of the employment terms
of the Former Employees. Paragraph 65 of the plaint refers to
communications between 21.04.2016 and 22.04.2016 between
Respondent No.1 and Respondent No.11 in relation to diversion of
business of the Appellant/Company to Respondent No.12. While
paragraph 69 of the plaint similarly refers to other communications
between the Former Employees and the Respondents.
37. As stated above, the Appellant has set up a case that the Former
Employees obtained and shared confidential data and also diverted
the existing business of the Appellant, which they were handling to
Respondent No.12. The claim of confidentiality and secrecy, was
made by the Appellant on the basis of information, data and trade
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secrets residing in the electronic devices (laptop, computers) which
was recovered from forensic analysis conducted on the Former
Employees computers.
38. The Appellant had placed on record extracts of these skype chats
between the Respondents in support of its averments. In addition,
documents were filed showing inter se communications between the
Respondents during the period from 04.03.2015 to 19.05.2016 in
support of the plaint. No discussions with respect to the examination
of these skype chats or that these chats/documents do not show a
cause of action in favour of the Appellant can be seen in the
Impugned Judgment.
39. The Appellant has filed various documents, including emails, skype
chat in support of his contentions and reliefs sought which have not
been examined in the impugned order. Other than a finding on the
examination of the skype chat as submitted by the Local
Commissioner appointed by the Learned Single Judge, there is no
averment in the Impugned Judgement with respect to the
examination of documents attached with the plaint.
40. We are thus unable to agree with the findings of the learned Single
Judge that the plaint does not disclose a cause of action. Although,
some contentions in the plaint are generalised, it cannot be said on a
demurrer that these do not reflect a cause of action so as to merit
dismissal under Order VII Rule 11 of CPC.
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41. As stated above, the Application under Order VII Rule 11 of CPC
was only filed by two of the employees being Respondent Nos.3 and
5. It is apposite at this juncture to set out the prayers in the plaint of
the Appellant which seek reliefs against all the Respondents as
follows:
“a) A decree for permanent injunction may kindly be passed in
favour of the plaintiff and against the defendants whereby
restraining the defendants, their agents, franchises, partners,
servants, employees, representatives, successors, family members
and assigns from infringing/ offending or violating the plaintiff’s
copyright in its original literary and artistic works, as detailed in
the plaint and the plaintiff’s confidential data, information and
trade secrets resident and from printing, publishing, reproducing,
copying and plagiarizing or otherwise dealing in any manner
whatsoever, with the said literary and artistic works of the
plaintiff or any other work which is identical and/or deceptively
similar to the plaintiff’s said literary and artistic works.
b) A decree for permanent injunction may kindly be passed in
favour of the plaintiff and against the defendants whereby
restraining the defendants no.1 to 11, their agents, franchises,
partners, servants, employees, representatives, successors, family
members and assigns from carrying out any business containing
the copyright materials belonging to the plaintiff, being the said
literary and artistic works.
c) A decree for permanent injunction may kindly be passed in
favour of the plaintiff and against the defendants whereby
restraining the defendant, his agents, franchises, partners,
servants, employees, representatives, successors, family members
and assigns from creating any third party rights through sale and
transfer on the copyright materials belonging to the plaintiff
being the said original literary and artistic works.
d) Further a decree of permanent injunction may also be granted
in favour of the plaintiff and against the defendants no 1 to 11
restraining the defendants no 1 to 11, their agents, franchises,
partners, servants, employees, representatives, successors, family
members and assigns from copying, downloading, extracting,
distributing, transmitting, publishing, releasing or disclosing in
any manner whatsoever, the confidential data information and
trade secrets of the plaintiff, whether in the form of text, image,
audio or video, to any other person whether in the actual world
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or in electronic media by any means whatsoever.
e) A decree for perpetual injunction may kindly be awarded in
favour of the plaintiff and against the defendants no 1 to 8
whereby restraining the defendants no 1 to 8 from doing any
business, directly or indirectly, which is in direct competition with
the business of the plaintiff for a period of one year.
f) A decree of mandatory injunction may also be granted in favour
of the plaintiff and against the defendant no. 1 to 8 whereby the
defendants jointly as well severally, their agents, partners,
associates, servants, employees, representatives, successors,
attorneys and assigns be directed to disclose to the court the
computer logs of their computers, computer systems, servers and
computer networks which have relation to or impact or
connection or association with the electronic records infringing
the copyright of the plaintiff in its original literary and artistic
works aforementioned in the plaint as also any other information
logs which has connection or relevance with the aforesaid acts.
g) Further a decree of mandatory injunction may also be passed
in favour of the plaintiff and against the defendant no 1 to 8,
whereby directing the defendant no 1 to 8, his agents, franchises,
partners, servants, employees, representatives, successors, family
members and assigns to handover to the plaintiff company the
original computer resources, containing all data, customers
databases, information, drawings, plans, test reports, tax and
financial information and confidential information of the plaintiff
as also the data card, as detailed in the plaint as also Original
RC copy of the Santro Car bearing No DL4C AV 2659, belonging
to the plaintiff.
h) A decree of mandatory injunction may also be granted in
favour of the plaintiff and against the defendant no.1 to 8 whereby
the defendants jointly as well as severally, their agents, partners,
associates, servants, employees, representatives, successors,
attorneys and assigns to return the SIM cards allocated by the
plaintiff company to them for numbers 8800500237, 8826001663,
9650082059, 8826995811, 8447071435, 9650082075,
9555128289, 7042634414 as also Samsung mobile phones given
by the plaintiff company to the defendant no. 1 for the purposes
of carrying on the duties of the employees of the plaintiff as also
data cards.
i) An order for delivery up of all impugned materials, including
all CDs, inlay cards, hard disks of computer containing the
infringing, pirated materials to an authorized representative of
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the plaintiff, for the purposes of destruction and/or eraser.
j) An order for rendition of accounts of profits illegally earned by
the defendants on account of the sale/unauthorized use of the
original literary and artistic works of the plaintiff and a decree
for the amount ascertained to be awarded in favour of the plaintiff
and against the defendant.
k) A decree for a sum of Rs 1,50,00,000/- (Rupees One Crore and
Fifty Lakhs only) as damages may kindly be awarded in favour of
the plaintiff and against the defendant.
l) Interest at the rate of 18% per annum may also kindly be
awarded in favour of the plaintiff and against the defendant till
the date of realization of the decrial amount.
m) An order for costs in the present proceedings; and
n) Any further orders as this Hon’ble Court deems fit and proper
in the facts and circumstances of the instant case.”
41.1 Prayers (a) to (d) above are in relation to all the Respondents while
prayers (e) to (h) are qua Former Employees alone. Prayers (i) to (n)
are for rendition of accounts, delivery up, damages, interest and
costs, which are the consequential reliefs sought by the Appellant.
41.2 The Appellant has also sought in Prayer (g) of the plaint, handover
of original computer resources and information as well as original
RC of a Santro Car which belongs to the Appellant. This prayer is
not barred by law The same is the case of prayers (h) and (i) of the
plaint. Infact, the Application as filed by Respondent Nos.3 and 5
does not aver to these prayers in the plaint at all.
42. The Supreme Court in Sejal Glass Limited v. Navilan Merchants
Private Limited15 has held that Order VII Rule 11 of CPC refers to
15
(2018) 11 SCC 780
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“a plaint” and that necessarily means the plaint as a whole. It has been
held that it is only where a plaint as a whole does not disclose a cause
of action, the provisions of Order VII Rule 11 of CPC can be made
applicable. It was further held that there is no provision in the CPC
for rejection of a plaint in part. The relevant paragraphs of the said
judgment are as follows:
“3. In our view, the impugned judgment [Navilan Merchants (P)
Ltd. v. Sejal Glass Ltd., 2016 SCC OnLine Del 6580] is wrong
on principle. Order 7 Rule 11 of the Code of Civil Procedure,
1908 which reads as follows:
“11. Rejection of plaint. – The plaint shall be rejected
in the following cases-
(a) where it does not disclose a cause of action;
(b) where the relief claimed is undervalued, and the
plaintiff, on being required by the court to correct the
valuation within a time to be fixed by the Court, fails
to do so;
(c) where the relief claimed is properly valued but the
plaint is written upon paper insufficiently stamped,
and the plaintiff, on being required by the Court to
supply requisite stamp paper within a time to be fixed
by the Court, fails to do so;
(d) where the suit appears from the statement in the
plaint to be barred by any law;
(e) where it is not filed in duplicate;
(f) where the plaintiff fails to comply with the
provisions of Rule 9:
Provided that the time fixed by the court for the
correction of the valuation or supplying of the
requisite stamp papers shall not be extended unless
the Court, for reasons to be recorded, is satisfied that
the plaintiff was prevented by any cause of an
exceptional nature for correcting the valuation or
supplying the requisite stamp papers, as the case may
be, within the time fixed by the Court and that refusal
to extend such time would cause grave injustice to the
plaintiff.”
What is important to remember is that the provision
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refers to the “plaint” which necessarily means the
plaint as a whole. It is only where the plaint as a
whole does not disclose a cause of action that Order
7 Rule 11 springs into being and interdicts a suit
from proceeding.
4. It is settled law that the plaint as a whole alone can be rejected
under Order 7 Rule 11. In Maqsud Ahmad v. Mathra Datt &
Co.;[Maqsud Ahmad v. Mathra Datt & Co., 1936 SCC OnLine
Lah 337 : AIR 1936 Lah 1021], the High Court held that a note
recorded by the trial court did not amount to a rejection of the
plaint as a whole, as contemplated by the CPC, and, therefore,
rejected a revision petition in the following terms: (AIR p. 1022
para 4 : SCC OnLine Lah para 4)“4. … There is no provision in the Civil Procedure
Code for the rejection of a plaint in part, and the
note recorded by the trial court does not, therefore,
amount to the rejection of the plaint as contemplated
in the Civil Procedure Code.”
[Emphasis is ours]
42.1 In the Sejal Glass Limited case the Supreme Court also held that
where only a part or portion of the plaint is to be rejected, an
Application under Order VI Rule 16 of CPC would apply and that
part of the pleadings would be struck out which are unnecessary,
frivolous, vexatious or otherwise abuse of the process of the Court.
The relevant extract is set out below:
“8. We are afraid that this is a misreading of the Madras High
Court judgment. It was only on the peculiar facts of that case that
want of Section 80 CPC against one defendant led to the rejection
of the plaint as a whole, as no cause of action would remain
against the other defendants. This cannot elevate itself into a
rule of law, that once a part of a plaint cannot proceed, the other
part also cannot proceed, and the plaint as a whole must be
rejected under Order 7 Rule 11. In all such cases, if the plaint
survives against certain defendants and/or properties, Order 7
Rule 11 will have no application at all, and the suit as a whole
must then proceed to trial.
9. If only a portion of the plaint, as opposed to the plaint as a
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whole is to be struck out, Order 6 Rule 16 CPC would apply.
Order 6 Rule 16 states as follows:
“16. Striking out pleadings. – The Court may at any stage
of the proceedings order to be struck out or amended any
matter in any pleading –
(a) which may be unnecessary, scandalous, frivolous or
vexatious, or
(b) which may tend to prejudice, embarrass or delay the fair
trial of the suit, or
(c) which is otherwise an abuse of the process of the Court.”
It is clear that Order 6 Rule 16 would not apply in the facts
of the present case. There is no plea or averment to the
effect that, as against the Directors, pleadings should be
struck out on the ground that they are unnecessary,
scandalous, frivolous, vexatious or that they may
otherwise tend to prejudice, embarrass or delay the fair
trial of the suit or that it is otherwise an abuse of the process
of the court.”
[Emphasis is ours]
43. An examination of the plaint reveals that the Former Employees all
resigned from the services of the Appellant during the period from
09.05.2016 to 25.05.2016 and they stopped attending office.
Respondent Nos.1, 4, 5 and 6 belonged to the Sales Department of
the Appellant while Respondent Nos.2 and 3 worked in the Pricing
and Commercial Department and Respondent Nos.7 and 8 worked in
the Accounts Department. It is the allegation of the Appellant in the
plaint that they decided to divert the existing business which they
were handling to another entity (Respondent No.12). Various details
which have been revealed during the forensic analysis of the Skype
chats and e-mails inter se between the Former Employees have been
set out between Paragraphs 63 and 75 of the plaint (reproduced
above).
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43.1 It was further stated therein that the electronic equipment available
shows that customer database, account handling information plans,
test reports and also tax related information belonging to the
Appellant, has been forwarded to Respondent Nos. 9 to 12. The
Appellant in the plaint had averred that the Former Employees are
persons from the sales, commercial and finance/accounts
Departments had all resigned within the span of three weeks and
joined a competitor/Respondent No.12. To the extent as to whether
there was a breach of data/confidential information would be
required to be examined in a trial and could not be decided at the
preliminary stage without leading to evidence by both sides.
44. As stated above, the Application under Order VII Rule 11 of CPC
was filed only by two of the Former Employees. The Supreme Court
in Sejal Glass Limited case has clarified that even though a plaint
may contain averments and contentions against different Defendants,
it was not as if separate suits have been filed. If the Plaintiff chooses
to file one plaint, merely because several causes of action against
several Defendants were brought together in one plaint, the plaint
would still remain as one plaint and the rejection of the plaint would
be as a whole. The relevant paragraphs of the said judgment is
extracted below:
“5.Similarly, in Bansi Lal v. Som Parkash [AIR 1952 Punj 38],
the High Court held: (AIR p.39, para 7)“7. But the real question which arises in this appeal is
whether there can be a partial rejection of the plaint. Mr.
Chiranjiva Lal Aggarwala submits that a plaint can either
be rejected as a whole or not at all, and he has relied on
the statement of the law given in Mulla’s Civil Procedure
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11) does not justify the rejection of any particular portion
of a plaint.” In support of this statement the learned author
has relied on Raghubans Puri v. Jyotis Swarupa [ILR
(1906-07) 29 All 325], Venkata Rangiah Appa Rao v. Secy.
of State [1930 SCC OnLine Mad 123] and Maqsud Ahmad
v. Mathra Datt & Co.[1936 SCC OnLine Lah 337] In reply
to this argument Mr. Puri has submitted that it is really five
suits which had all been combined in one and therefore in
this particular case the rejection of a part was nothing
more than rejection of three plaints. But the suit was
brought on one plaint and not five suits were brought. The
law does not change merely because the plaintiff chooses
in one suit to combine several causes of action against
several defendants which the law allows him. It still
remains one plaint and therefore rejection of the plaint
must be as a whole and not as to a part. I am therefore of
the opinion that the learned Senior Subordinate Judge was
in error in upholding the rejection as to a part and setting
aside the rejection in regard to the other part. This appeal
which I am treating as a petition for revision must therefore
be allowed and the rule made absolute, and I order
accordingly.”
[Emphasis is ours]
44.1 Undisputably, the prayers as have been set out by the Appellant are
against all the Respondents. Since it is settled law that the plaint has
to be rejected as a whole, the examination of the plaint has to be made
with great care by the Court, and it has to be examined as to whether
on a meaningful reading of the entire plaint, it can be said that no
cause of action has arisen or that the plaint is barred by law.
45. The learned Single Judge held that the Respondents in their
Application under Order VII Rule 11 of CPC have in addition to
contending that prayer (e) is barred under Section 27 of the Contract
Act, have also averred that no copyright can be claimed by the
Plaintiff in its capacity as a juristic person. It has thus been held that
prayers (a) to (d) cannot be granted and since, the primary reliefs are
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liable to be rejected, the consequential reliefs cannot be granted
either.
46. The Supreme Court in Madhav Prasad Aggarwal and Another v.
Axis Bank Limited and Another16 while relying on Sejal Glass
Limited case has held that if one or more relief(s) claimed against a
Respondent in a suit is barred including by law, such an objection
can be raised by invoking other remedies including under Order VI
Rule 16 of CPC at the appropriate stage. However, it was held that
since the plaint cannot be rejected in part, the suit must proceed as a
whole to trial. Paragraph 12 of the said judgment is reproduced
below:
“12. Indubitably, the plaint can and must be rejected in exercise
of powers under Order 7 Rule 11(d) CPC on account of non-
compliance with mandatory requirements or being replete with
any institutional deficiency at the time of presentation of the
plaint, ascribable to clauses (a) to (f) of Rule 11 of Order 7 CPC.
In other words, the plaint as presented must proceed as a whole
or can be rejected as a whole but not in part. In that sense, the
relief claimed by Respondent 1 in the notice of motion(s) which
commended to the High Court, is clearly a jurisdictional error.
The fact that one or some of the reliefs claimed against
Respondent 1 in the suit concerned is barred by Section 34 of the
2002 Act or otherwise, such objection can be raised by invoking
other remedies including under Order 6 Rule 16 CPC at the
appropriate stage. That can be considered by the Court on its own
merits and in accordance with law. Although, the High Court
has examined those matters in the impugned judgment the
same, in our opinion, should stand effaced and we order
accordingly.
[Emphasis is ours]
16
(2019) 7 SCC 158
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47. The plaint as filed by the Appellant, when read as a whole comprises
of various different prayers sought against the different Respondents.
The majority of reliefs have been sought against the Former
Employees. However, not all prayers seek relief against them alone.
Applying the ratio of the Madhav Prasad Aggarwal case and Sejal
Glass Limited case, if one or more reliefs are barred by any provision
of law, appropriate remedies could be raised under Order VI Rule 16
of CPC by the Respondents at an appropriate stage, the suit must
however proceed to trial.
48. There is one more aspect which clinches the issue. The Impugned
Judgment relies upon the reports of the Local Commissioner
appointed by the learned Single Judge and gives a finding that the
Commissioners have found e-mails, Skype chats inter se the
Respondents while working with the Appellant and holds that there
is no copyright therein. Thus, the learned Single Judge while
examining the plaint sought to rely upon the evidence/Local
Commissioner’s Report to reach a finding to reject the plaint. The
relevant extract is below:
“21. The plaintiff, save for the aforesaid description, has not given
any other description of the works in which it claims copyright
and no document also has been filed in this regard. As per the
reports of the commissions issued at the instance of the plaintiff
also, what has been found in possession of the defendants is the
list of customers and clients serviced by the plaintiff and their
contact persons. Though the Commissioners have reported also
finding e-mails/skype chats inter se the defendants while
working with the plaintiff and/or e-mails between the
defendants and present employee of the plaintiff, but there can
possibly be no copyright therein.”
[Emphasis is ours]
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49. Clearly an examination under Order VII Rule 11 of CPC has gone
beyond the examination of the plaint and documents and has sought
to rely upon reports of the Local Commissioner which would have
otherwise been relied upon only during trial in the matter. The
Impugned Judgment thus cannot be sustained.
Conclusion
50. In view of the aforegoing discussions, this Court is unable to agree
with the finding of the learned Single Judge that the Plaint as filed by
the Appellant is barred by the provisions of Order VII Rule 11 of
CPC.
51. The Appeal is accordingly allowed. The Impugned Judgement is set
aside. The parties shall appear before the learned Single Judge on
03.12.2024 for further proceedings.
TARA VITASTA GANJU, J
VIBHU BAKHRU, J
NOVEMBER 20, 2024/pa
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