Homag India Private Ltd vs Mr Ulfath Ali Khan

(By Sri Prabhugouda B.Tumbgi, Advocate for Sri M.T.Nanaiah, Advocate for R1; Sri T.S.Amar Kumar, Advocate for M/s. Lawyers Inc., Advocates for C/R2)

These appeals are filed under section 104 r/w order 43 Rule 1(r) CPC, against the order dated 09.12.2009, passed on IA.No.1 & 2 in O.S.No.4418/2009, on the file of XVIII Additional City Civil Judge (CCH-10), Bangalore and etc.

These appeals having been heard and reserved for judgment on 03.10.2012, coming on for pronouncement this day, the court delivered the following:-

JUDGMENT

The appellant in these two appeals is common. The

appellant is plaintiff in O.S.No.4418/2009 (hereinafter

referred to as 'plaintiff'). The respondents herein are

defendants 1 & 2 in O.S.No.4418/2009 (hereinafter referred

to as 'defendants 1 & 2'). The plaintiff had sought for an

order of temporary injunction against defendants 1 & 2. The

learned trial Judge dismissed the application for grant of an

order of temporary injunction against II-defendant and

granted an order of temporary injunction against I-defendant 3

to obey the terms of contract had with plaintiff till disposal of

suit or for one year i.e., till April 2010, whichever is earlier.

2. The plaintiff has filed these two appeals, inter alia

contending that learned trial Judge should have granted an

order of temporary injunction against defendants 1 & 2 till

disposal of suit.

3. I have heard Sri V.Srinivas Raghavan, learned counsel

for plaintiff, Sri Prabhugowda B.Tumbgi, learned counsel for

I-defendant and Sri T.S.Amar Kumar, learned counsel for

II-defendant.

4. In brief, averments of plaint and application necessary

for disposal of these two appeals are stated thus:-

The plaintiff is a private limited company registered

under the Companies Act, 1956. It was incorporated in the

year 2004. The plaintiff's company is an Indian subsidiary

belonging to Homag Group, which originated in Germany

and now has several subsidiaries across the world, including 4

in India, Singapore, Australia, Japan, Brazil, etc. The Homag

Group and plaintiff company are the world's leading

suppliers of machines, cells and factory installations for the

panel processing furniture, structural element and timber

frame house construction industries. The plaintiff has

entered into trading and service activities. The product range

of the group focuses on machines, cells and factory

installations designed for efficient, versatile processing of

wood based panel materials. The plaintiff's company has a

separate department set up for research and development,

where huge amounts of funds are spent for the purpose of

discovering and inventing new processes for manufacture of

light weight panels, like honey comb structures, high speed

machines for manufacture of flooring, for special

technologies in transport chains using magnetic levitation

and so on.

5. The I-defendant joined services of plaintiff as a Senior

Service Engineer on 16.10.2006 with a compensation

package of Rs.3,60,000/- per annum and incentives under 5

appointment letter dated 12.10.2006. In the course of

employment, I-defendant had access to confidential

information of plaintiff's business.

6. After joining services of plaintiff's company, I-

defendant was given two promotions. On 25.03.2009, I-

defendant submitted his resignation. At that time, I-

defendant was holding the post of "Product Manager-Sawing"

with an annual remuneration of Rs.5,50,000/-.

7. The I-defendant was in a highly responsible post and

he had access to highly confidential and commercially

sensitive information pertaining to plaintiff's business,

products and operations. The I-defendant had access to

plaintiff's entire customer data base in India, details of

contracts entered into with customers, details of

methodologies and processes in relation to the products

supplied to various customers. The I-defendant was also

aware that aforestated confidential information is not

available in public domain. The I-defendant was fully aware

that if this data was made publicly available, it would act as 6

a springboard for any other company to launch itself in

Indian market. The I-defendant had submitted his

resignation on 25.03.2009 and requested plaintiff to relieve

him from employment and that he had received a better

employment. On 24.04.2009, I-defendant was relieved from

service of plaintiff. However, on 22.04.2009, officials of

plaintiff's company discovered that I-defendant had sent

several e-mails from official e-mail address containing

confidential information to II-defendant. These e-mails

contained customer details including added updated

commissioned reports, status of pending offers and other

technical details of plaintiff's products. Upon enquiry with I-

defendant, he confessed to have taken aforstated data. The I-

defendant showed to plaintiff his appointment letter with II-

defendant. On perusal of appointment letter, plaintiff was

shocked to realize that I-defendant had been hired by II-

defendant for the purpose of working in its behalf in Indian

market. The agreement clearly stated that I-defendant

approached II-defendant and offered to provide services in 7

the field of market entry as well as services in India. As per

the terms of contract between I-defendant and II-defendant,

former to assist latter in sales in direct competition with

plaintiff's business and I-defendant would be appointed as

Director of Indian subsidiary. The plaintiff also realized that

I-defendant had taken employment with II-defendant even

prior to submission of resignation to plaintiff's company. The

I-defendant had signed contract of employment with

II-defendant on 18.03.2009. The I-defendant submitted

resignation on 25.03.2009 and got relieved on 24.04.2009.

The I-defendant committed breach of terms of employment

by working for II-defendant, who was a competitor of

plaintiff's business. This was done when services of I-

defendant with plaintiff was still subsisting.

8. The II-defendant having enticed I-defendant with a

lucrative offer to appoint I-defendant as the Director of

Indian subsidiary had got confidential information relating to

plaintiff's business. The I-defendant was in contract with II-

defendant from August 2008. The II-defendant wants to use 8

confidential information so far furnished by I-defendant as a

springboard to set up its operations in India.

9. The plaintiff has sought for following reliefs:-

I. A judgment and decree of permanent injunction restraining the defendants, their agents, servants, contractors or anybody claiming under them from carrying on business in India or carrying on business with, dealing or in any manner transacting with any of the customers of the plaintiff by utilizing confidential information whether in the form of technical data, correspondence and information pertaining to, manufacturing process, marketing plans, offers, pricing, customer list, software, specifications, engineering methods and know-how, consumer grievances, customer solutions, service logs, service history and service feedback pertaining to clients or method of resolving area specific problems.

II. A judgment and decree of permanent injunction restraining the Defendants from utilizing or disclosing confidential information whether in the form of technical data, correspondence and information pertaining to, manufacturing process, marketing plans, offers, pricing, customer list, software, specifications, engineering methods and know-how, consumer grievances, customer solutions, 9

service logs, service history and service feedback pertaining to clients or method of resolving area specific problems.

III. A judgment and decree of permanent injunction

restraining the 1st defendant from working, dealing with or functioning in any manner or capacity, or carry on business,

either with the 2nd defendant or anybody else or independently, in any area or field competing with the

Plaintiff's business and restraining the 2nd defendant or its subsidiaries or associated companies from employing or in

any manner dealing with or being associated with the 1st defendant and

IV. Grant costs."

10. The plaintiff had filed an application under Order 39

Rules 1 & 2 r/w 151 CPC, reading as hereunder:

"For the reasons stated in the accompanying affidavit, it is humbly prayed that this Hon'ble court be pleased to grant an order of temporary injunction restraining the defendants, their agents, servants, contractors or anybody claiming under them from carrying on business in India or carrying on business with, dealing or in any 10

manner transacting with any of the customers of the plaintiff by utilising confidential information whether in the form of technical data, correspondence and information pertaining to manufacturing process, marketing plans, offers, pricing, customer list, software, specifications, engineering methods and know-how, consumer grievances, customer solutions, service logs, service history and service feedback pertaining to clients or method of resolving area specific problems in addition to, pending disposal of the suit on merits, in the interest of justice and equity.

It is further prayed that an exparte ad- interim order of temporary injunction in the above terms may kindly be granted, as the delay involved if notices are issued would render the suit nugatory."

11. In brief, averments of written statement and statement

of objections filed by first defendant are as follows:-

The first defendant has admitted that he joined the

services of plaintiff as a Senior Service Engineer on 11

16.10.2006 with a compensation package of Rs.3,60,000/-

per annum and incentives. The first defendant has admitted

letter of appointment dated 12.10.2006 and terms of

appointment contained therein.

As per terms 12 and 13 of letter of appointment, first

defendant was expected to maintain confidentiality of the

information of plaintiff's business, both during the course of

employment and also thereafter and he was not expected to

take up employment with any competitor of plaintiff or to

start on his own accord, anything in competition with the

plaintiff's business for a period of one year after termination

of his employment that he had to maintain confidentiality

about the information pertaining to plaintiffs business.

12. The first defendant has admitted that he had tendered

resignation on 25.03.2009, at the time of tendering his

resignation, he was holding the post of "Product Manager-

Sawing" with annual remuneration of Rs.5,50,000/-. The

first defendant has denied that he had transferred from 12

companies Email ID to his personal Email ID, confidential

information of the business of plaintiff, customers list etc.

The first defendant has contended that in the normal course

of employment such Emails were being transferred from the

company Email ID to his personal Email ID. The first

defendant, from the beginning for business purpose was

using these Emails at customer places for trouble shooting

whenever needed. The first defendant resigned from his

employment on 25.03.2009 and he was relieved on

24.04.2009. The first defendant has denied that he had

transferred the confidential information of plaintiff's

business from companies Email ID to his personal Email ID

with an intention to help the second defendant for the

purpose of working with the second defendant and enable

the second defendant to establish it's subsidiary in India as

competitor to plaintiff.

13. The first defendant has denied that he had entered

into contract of employment with the second defendant. The

first defendant has contended that letter dated 24.04.2009 13

said to have been executed by him was under threat and

coercion. The first defendant has contended that there is no

cause of action against first defendant and the plaintiff has

not made out prima-facie case to grant an order of temporary

injunction against first defendant.

14. In brief, averments of written statement and objection

filed by second defendant are as follows:-

The second defendant has denied that it had contacted

first defendant and first defendant had worked for second

defendant. The second defendant has denied averments of

plaint relating to nature of business activities of plaintiff and

the technologies evolved by plaintiff.

15. The second defendant has contended that companies

like BIESSE (Italy) HOLZHER (Germany), SCM (Italy) and

even the second defendant for many years have produced,

sold and serviced the machines through feed corner

rounding. The second defendant has denied the

correspondence of defendants No.1 and 2 interse and Emails 14

exchanged defendants 1 and 2 interse. The second

defendant has denied that first defendant for and on behalf

of second defendant had tried to establish contacts with

several customers of plaintiff.

16. The second defendant has denied that first defendant

has breached confidentiality by revealing confidential

information of plaintiff's business to second defendant. The

second defendant has denied that it was fully aware about

first defendant being in possession of highly sensitive

confidential information pertaining to plaintiffs business and

second defendant had induced first defendant to leave

services with plaintiff, employed first defendant and obtained

confidential information relating to plaintiff's business from

first defendant. The second defendant has contended that

plaintiff has no right to sue against second defendant. The

plaintiff is not entitled to an order of temporary injunction

against second defendant.

15

17. The learned trial judge on hearing learned counsel for

parties and referring to documents relied upon by parties

has held that first defendant could be restrained by an order

of temporary injunction to obey the terms of contract of

employment with the plaintiff till disposal of the suit or for

one year from the date of order, whichever is earlier.

18. The learned trial judge has held that there was no

privity of contract between plaintiff and second defendant.

As per terms and conditions of employment contract, first

defendant after termination of his service with plaintiff was

not expected to serve for any of the companies for a period of

one year in India and suit would become infructuous after

the month of April'2010, thus dismissed the application

against second defendant.

19. The first defendant has not challenged the impugned

order.

20. In the circumstances, points that would arise for

consideration are:-

16

1) Whether the plaintiff has made out a prima-facie case for grant of temporary injunction against defendants No.1 and 2 pending disposal of the suit?

2) Whether balance of convenience lies in favour of plaintiff?

3) Whether plaintiff would suffer irreparable loss and injury in case if an order of temporary injunction is not granted?

4) Whether the impugned order is perverse, capricious and calls for interference?

21. The learned counsel for plaintiff and second defendant

have taken me through the impugned order and various

documents relied upon by them. They have also relied on

several decisions.

22. Before adverting to submissions made by learned

counsel for parties, it is necessary to state certain facts,

which are not in dispute.

17

23. The first defendant was employed in plaintiff's

company on 12.10.2006. Clause 12 and 13 of appointment

order dated 12.10.2006 reads thus:

"12. You shall not, at any time either during or after leaving the services of the company, disclose or divulge or make public to anyone any confidential information relating to the affairs, transactions or dealings of the company.

13. In the event of your leaving the services of the Company for any reason whatsoever, you shall not be employed, offer consultation, start on your own accord, or involve in any manner in any activity same or similar in nature to the operations of the company for a period of one year from the date of your leaving the services of the company."

It is not in dispute that first defendant submitted his

resignation to plaintiff on 25.03.2009. The first defendant

was relieved with effect from 24.04.2009.

24. It is the case of plaintiff that first defendant

while in service and also after submitting resignation on

25.03.2009 had transferred from the companies Email ID to

his personal Email ID the confidential information relating to

plaintiffs business such as technical data, information 18

pertaining to manufacturing process, marketing plans,

offers, pricing, customer list, software, specifications,

engineering methods and know-how, consumer grievances,

customer solutions, service logs, service history and service

feedback pertaining to clients or method of resolving area

specific problems.

25. It is the case of plaintiff that on 25.04.2009 first

defendant submitted a letter to plaintiff reading as

hereunder:

"I wish to state in the beginning that I am writing this affidavit of my own free will and I am under no compulsion or under any coercion to write this affidavit.

In 2008 during the Indiawood exhibition in Bangalore I was approached by the company IMA Klessmann GmbH represented by Mr.Marcus offering me a position in their company. It was originally agreed that I will be posted in Singapore for Sales and Service of machines manufactured by IMA and Schelling. They offered me more than two times my 19

remuneration with Homag and a large sales commission. I was therefore tempted to take their offer. I said 'Yes' but was shocked when I received the employment contract from them which said I will be posted in India. Mr.Marcus and Mr.Sydow told me that IMA will establisha subsidiary company in India and I will then be appointed as Director-Sales & Marketing in this company. Till the time the new company is formed I will work as employee of IMA.

During the course of these conversations regarding my appointment they persuaded me to take out as much of details as I can from Homag that may be useful later for business of IMA. Accordingly, I got lot of data transferred to my personal Yahoo account through my official Homag account. The data consisted of the entire address data base of Homag India, list of customers, list of offers and details, machinery installed and serviced and so on. I had transferred and stored all this data in my personal account.

I wish to state that I did this on being prompted to do so with higher remuneration, returns and 20

all kind of inducements. I regret this action which would have caused unbelievable damages to Homag.

Written this day 25th of April 2009, in the presence of witnesses below."

It is the contention of first defendant that the above

letter was obtained by plaintiff under duress and coercion.

26. In order to appreciate these rival contentions, it is

necessary to refer to the Emails sent from the official Email

ID of plaintiff to the personal Email ID of first defendant and

also Email correspondence between first defendant and

second defendant even before first defendant had submitted

resignation. At this stage of the case, there are no reasons to

suspect contents of these documents.

27. The plaintiff has made available the copy of

agreement of employment entered into between the first

defendant and second defendant on 18.03.2009, which

reads thus:

21

"This Agreement is made on 18th of March 2009 by and between:

IMA AG ASIA PACIFIC PTE. LTD, a Company incorporated under the Laws of Singapore and having its registered office at No.2, Kallang Pudding Road, #05-16, Mactech Industrial Building, SINGAPORE-349 307 (hereinafter referred to as "the company"

AND

Mr.ULFATH ALI KHAN, presently residing at 862, Coconut Garden Street, Dasarahalli Post, 560 057 Bangalore, Karnataka, India (hereinafter referred to as "Mr.KHAN"

WHEREAS, the Company is engaged in the business of machine sales and services to the furniture and wood processing industries;

AND WHEREAS Mr.Khan has approached the company and has offered to provide services in the field of market entry, sales and service for the company in India on the terms and conditions of the company.

AND WHEREAS the Company has agreed to appoint Mr.Khan to provide the services more fully described in Annexure-'A' on the following terms and conditions:

NOW THEREFORE, IN CONSIDERATION OF THE MUTUAL CONVENANTS AND UNDERTAKING HEREIN CONTAINED, THE PARTIES HERETO HEREBY AGREE AS FOLLOWS:

1. OBJECT 22

Mr.Khan has approached the company and has offered to provide the services for the company to establish and structure a sales and service subsidiary for the Company in India and the Company has agree to appoint Mr.Khan to provide the services on the terms and conditions detailed out in Annexure-'A'.

2. EMPLOYMENT IN INDIAN ENTITY

It is the intention of the company to set up a Private Limited Company in India. In the event of the company setting up a Private Limited Company in India and or any other entity in India (Indian Entity) then Mr.Khan shall be appointed as the Director of Sales and Service for the Indian Entity. The terms and conditions of such appointment and the designation of Mr.Khan shall be under a new contract during or after the employment contract attached hereafter in Annexure-A.

It being clarified and agree between the parties that a new employment contract with the Indian Entity shall be executed and signed between the parties if an only if the company has set up an Indian Entity. In the event of the company setting up an Indian Entity, the new employment contract will be executed with such entity and Mr.Khan will not be entitled to negotiate any of the terms and conditions stated in the Employment Contract under Annexure-A."

28. On perusal of relevant terms of contents of

Annexure-'A' referred to in the employment of contract, I find 23

that second defendant had appointed the first defendant as

an employee of second defendant on monthly salary of

2,750 SGD (Singapore Dollars). The second defendant had

also offered commission of 0.25% of the net machine value

on each deal.

Annexure-'A' also contains the confidentiality clauses,

which are similar to the confidentiality clauses contained in

the letter of appointment issued by plaintiff. From the letter

of appointment (Annexure-A), it is clear that the second

defendant had intention to set up a private limited company

in India. It was the intention of II-defendant to appoint I-

defendant as the Director of Sales and Service of its Indian

entity. Regarding terms and conditions of such appointment

and designation of first defendant, defendants 1 & 2 had

agreed to enter into a new contract. It was agreed between

defendants till such company is established, the first

defendant would be an employee of second defendant. 24

29. These documents would prima-facie establish that first

defendant was prompted by second defendant and he was

offered higher remuneration. The first defendant being

tempted by the offer made by second defendant had

committed breach of confidentiality and also transferred

from the plaintiff's Email ID to his personal Yahoo account

through his official Homag account the data consisting of list

of customers, list of offers and details, machinery installed

and serviced and so on. The e-mail correspondence

defendants interse would indicate that I-defendant was in

contact with II-defendant from 01.02.2008. There was email

correspondence defendants interese during period between

26.05.2008 and 20.04.2009. This correspondence relates

exchange of confidential business information of plaintiff.

The I-defendant tendered resignation on 25.03.2009 after

entering into agreement of employment with II-defendant on

18.03.2009.

It is true I-defendant had right to approach II-

defendant seeking appointment on higher remuneration. 25

Similarly II-defendant had right to appoint I-defendant.

However, such an agreement should not have been on

quid-pro-quo basis of I-defendant sharing with II-defendant,

confidential information of plaintiff's business detrimental to

interest of plaintiff.

30. The plaintiff has made out a prima-facie case of breach

of confidentiality by first defendant. The learned trial judge

on the premise that suit will be disposed of within one year

has granted an order of temporary injunction for a period of

one year from the date of order i.e., till April'2009. However,

the suit is still pending. In view of breach of confidentiality

committed by first defendant for being utilised by second

defendant for its business activities, the trial court was

justified in holding that plaintiff has made out a prima-facie

case against first defendant. In the circumstances, the trial

judge should have granted an order of temporary injunction

against first defendant pending disposal of suit. 26

The next point for consideration is whether the learned

trial judge was justified in refusing to grant an order of

temporary injunction against II-defendant?

31. The learned counsel for plaintiff has made following

submissions:-

I. The II-defendant had appointed I-defendant on

18.03.2009 to use I-defendant as a conduit to intrude into

plaintiff's business in India. The agreement of employment

(document No.9) would manifest the intention of II-defendant

to set up a private limited company in India and appoint I-

defendant as its Director and utilise confidential information

of plaintiff's business as a spring board for it's business

activity which is similar to business activity of plaintiff's

company.

II. The plaintiff has made out a prima facie case that

there was contrivance between I-defendant and II-defendant

by conduct of defendants and e-mails exchanged between

defendants 1 and 2. The plaintiff has produced these 27

documents to make out a prima facie case. The II-defendant

in connivance with I-defendant has invaded legal rights of

plaintiff to use confidential information relating to plaintiff's

business as a springboard to establish its business entity in

India. The learned trial Judge has committed an error in

refusing an order of temporary injunction against II-

defendant on the ground that there was no privity of contract

between plaintiff and I-defendant. The learned trial Judge

has ignored that plaintiff has placed prima facie material to

establish that II-defendant has invaded legal rights of

plaintiff.

The learned counsel for plaintiff has relied on various

decisions to contend that infringement of confidential

information of plaintiff's business would entitle plaintiff to

get an order of temporary injunction against both

defendants.

32. The learned counsel for II-defendant has made

following submissions:-

28

I. The reliefs sought for in plaint as also in the

application under Order 39 Rules 1 & 2 CPC are vague. The

application filed under Order 39 Rules 1 & 2 CPC lacks

clarity.

II. If an order of temporary injunction is granted on vague

assertions of plaintiff, plaintiff is likely to misuse the same to

curb business activities of II-defendant.

III. The products of plaintiff are not confidential. They are

very much in public domain. The plaintiff cannot claim right

of confidentiality, without making specific references.

IV. The plaintiff has filed the instant suit with an intention

to prevent II-defendant from establishing its business

activities in India. It is not for plaintiff or for the court to

decide whether II-defendant should establish its business in

India.

V. The plaintiff has filed this suit on the premise that

II-defendant is carrying on business similar to business of 29

plaintiff and II-defendant would use confidential information

from I-defendant as a springboard to establish its business

entity in India. These apprehensions are founded on

surmises and conjectures, without there being any material

to establish that II-defendant has invaded legal rights of

plaintiff.

VI. The plaintiff cannot enforce a negative covenant

against the provisions of section 41(h) of Specific Relief Act.

33. In the discussion made supra, I have referred to

averments of plaint application. The documents relied upon

by plaintiff would provide prima facie proof of activities of

defendants inter se. At this stage, there are no reasons to

suspect the contents of these documents.

The II-defendant had employed I-defendant on

18.03.2009 whilst I-defendant was under the employment of

plaintiff. The terms of employment would prima facie

establish that II-defendant had induced I-defendant to

commit breach of confidentiality. The I-defendant committed 30

breach of confidentiality and violated the terms of contract

of employment of I-defendant with plaintiff.

34. In a decision reported in (2012) 6 SCC 792 (in the case

of Best Sellers Retail (India) Private Limited Vs. Aditya Birla

Nuvo Limited & Others & connected matters), the Supreme

Court has held:-

"25. It is not necessary for us to deal with the contentions of the learned counsel for the parties based on the provisions of Sections 14, 41 and 42 of the Specific Relief Act, 1963 because Section 37 of the said Act makes it clear that temporary injunctions are to be regulated by CPC and not by the provisions of the Specific Relief Act, 1963. In fact, the application for temporary injunction of Respondent 1 before the trial court is under the provisions of Order 39 Rules 1 and 2 read with Section 151 CPC."

35. In view of what has been held in the above decision,

submission of learned counsel for II-defendant that plaintiff

is trying to enforce a negative covenant against provisions of 31 section 41(h) of the Specific Relief Act, 1963 cannot be

accepted.

36. The learned counsel for II-defendant relying on a

decision of High Court of Madras, reported in (2003) 3 MLJ

557 (in the case of Polaris Software Lab Limited rep. by its

Company Secretary Vs. Suren Khiwadkar) would submit that

plaintiff has sought for temporary injunction restraining

defendants from divulging any confidential information. The

plaintiff has not divulged nature of confidentiality. The

confidential information that I-defendant had in his mind is

purely subjective. Therefore, plaintiff is not entitled to an

order of temporary injunction.

37. In the aforestated judgment, plaintiff had sought for

an order of temporary injunction in the following terms:-

(1) restraining defendants from committing any act in breach of undertaking;

(2) restraining the defendants from disclosing any confidential information;

32

(3) Restraining them from giving out any adverse publicity to the media."

38. The Madras High Court having regard to nature of

relief sought for has held that confidential information is

purely subjective. The application for grant of an order of

temporary injunction was devoid of clarity. If an order of

temporary injunction is granted, the plaintiff is likely to

misuse the order.

39. In a decision reported in AIR 1967 SC 1098 (in the case

of Niranjan Shankar Golikari Vs. Century Spinning and

Manufacturing Co. Ltd.), the Supreme Court has held that

negative covenant in maintaining confidentiality of

information and negative covenant during subsistence of

contract are essential to fulfillment of contract.

40. Under Exception I to Section 27 of the Contract Act,

post service restraint in maintaining confidentiality and also

carrying on any other business for a limited period is

permissible.

33

41. In a decision reported in AIR 1987 Delhi 372 (in the

case of John Richard Brady and Others Vs. Chemical

Process Equipments P. Ltd. and another), it is held:-

"22. ....in general rules of equity, there can be restraint of breach of confidence.

The Delhi High Court relying on a judgment reported

in 1948 RFC 203 has held:-

"Secrecy

The maintenance of secrecy which plays sucha an important part in securing to the owner of an invention the uninterrupted proprietorship of marketable know-how, which thus remains at least a form of property, is enforceable at law. That statement may now be examined in the light of established rules making up the law of trade secrets. These rules may, according to the circumstances in any given case, either rest on the principles of equity, that is to say the application by the Court of the need for conscientiousness in the course of conduct, or by the common-law action for breach of confidence which is in effect a breach of contract.

34 In considering these alternatives there are three sets of circumstances out of which proceedings, may arise:

(a) Where an employee comes into possession of secret and confidential information in the normal course of his work, and either carelessly or deliberately passes that information to an unauthorized person;

(b) Where an unauthorized person (such as a new employer) incites such an employee to provide him with such information as has been mentioned above; and

(c) Where, under a license for the use of know-how, a licensee is in breach of a condition, either expressed in any agreement or implied from conduct, to maintain secrecy in respect of such know-how and fails to do so."

In the same judgment, it is held that if a defendant is

proved to have used confidential information, obtained

directly or indirectly, from a plaintiff, without the consent,

express or implied, of the plaintiff, he will be guilty of

infringement of plaintiff's rights.

35

In the case on hand, plaintiff has produced prima facie

material to prove that II-defendant had induced I-defendant

to gain confidential information of plaintiff business even

when I-defendant was very much in services of plaintiff.

There are reasons to believe that II-defendant had obtained

confidential information in connivance with I-defendant.

These facts are prima facie established by documents relied

upon by plaintiff, in particular, letter of agreement and

agreement of contract entered into between I-defendant and

II-defendant on 18.03.2009 and e-mails exchanged between

defendants 1 and 2. Therefore, plaintiff has prima facie

established that II-defendant has infringed legal rights of

plaintiff.

42. The learned counsel for II-defendant, referring to the

contents of application filed under Order 39 Rules 1 & 2 CPC

would submit that averments of application are general in

nature. There is no specific reference to any product or

technical know-how with reference to products dealt by

plaintiff. The learned counsel would submit that products 36

dealt by plaintiff such as Table Edgebander etc., are within

public domain. Therefore, there cannot be any

confidentiality.

43. The learned counsel for II-defendant would submit

that CNC machines said to be used by plaintiff are within

public domain. The application of CNC machines is not only

plaintiff's activities or II-defendant's activities, it is used in

industrial activities by other companies.

44. The learned counsel for II-defendant would submit

that CNC (Computerised Numerical Control) machine is used

in all industrial activities for precision and also to save

manual labour and time. The plaintiff cannot contend that

CNC is a confidential information of plaintiff's business.

45. On consideration of averments of application filed

under Order 39 Rules 1 & 2 CPC, I find that plaintiff has not

made any specific reference, however in the plaint, plaintiff

has stated nature of its business activities and range of

products dealt by plaintiff.

37

46. The learned counsel for plaintiff has made available

product range catalogue of plaintiff and submitted that an

order of temporary injunction against II-defendant may be

granted with reference to products stated in the catalogue.

47. After going through the contents of catalogue, I find

that plaintiff has been dealing with Table Edgebander,

Universal Edgebander, Through Feed Edgebander, Wide-Belt

Sanding Machine, Manual Beam Saw, CNC Beam Saw, CNC

Processing Centres, Double sided panel sizing and

Edgebanding Machines etc. Though CNC machines adopted

by plaintiff for its operations are available within public

domain, yet plaintiff has given brand names to its products

such as Optimat NKD 720, Optimat KTD 820, Ambition

1200, Ambition 1210/Ambition 1210F, Ambition 1220

C/Ambition 1220 FC, Ambition 1430 C/Ambition 1430 FC,

Ambition 1440 FC/Ambition 1440 F2C, Ambition 1650

FC/Highflex 1650, Optimat SWT 124 RK, Optimat SWT 315

X, Optimat SWT 325 RL, Optimat SWT 335 QCH, HPM 120, 38

HPP 180/38/38, HPP 230/31/31/HPP 250/31/31, HPL

430/38/22, Ambition 2260, Ambition 2262, Venture 20/22,

Venture 316 M, KFL 326C, FPR 225/FPR 226, BAZ

322/40/K, BAZ 722, WoodCAD/CAM, NDS 102, Optimat

BST 503, BHX 050 Optimat/BHX 055 Optimat, PTP 160

PLUS, Venture 2M and Vantage 100/480. Therefore, plaintiff

has its brand names for several machines such as Table

Edgebander, Universal Edgebander, Through Feed

Edgebander, Wide-Belt Sanding Machine, Manual Beam

Saw, CNC Beam Saw, CNC Processing Centres, Double sided

panel sizing and Edgebanding Machines etc. In the

circumstances, it cannot be held that technical data

information to manufacturing process and know-how of

these machines dealt by plaintiff are within public domain.

48. The learned counsel for II-defendant has submitted

that plaintiff has not placed prima facie material to show

that II-defendant has established its entity in India and it is

carrying on business similar to plaintiff's business in India. 39

Therefore, plaintiff merely on the basis of apprehensions

cannot seek an order of temporary injunction.

49. The learned counsel for plaintiff, relying on a judgment

of this court, reported in AIR 1976 KARNATAKA 53 (in the

case of M.K.Dasappa Vs. G.Ramachandra) would submit that

a temporary injunction should not be granted if there is no

imminent danger to the plaintiff or to his building. But the

word "imminent" in the context need not be literally

understood. If the plaintiff has to wait till the last moment,

disastrous consequences might follow which the Court

cannot prevent for want of time or procedural requirements.

The word should be understood in the sense that the remedy

sought by the plaintiff should not be premature.

50. The learned counsel for plaintiff would submit that

plaintiff has made out a prima facie case that defendants 1 &

2 have gathered confidential business information of plaintiff

to intrude to the business activities of plaintiff. Therefore, 40

II-defendant cannot be heard to say that relief sought for by

plaintiff is premature.

51. In the discussion made supra, I have referred to

various documents relied upon by plaintiff. I have held that

II-defendant had lured I-defendant to gather confidential

information of plaintiff's business with an intention to make

use of the same. In the circumstances, it is not necessary for

plaintiff to establish that II-defendant has been using

plaintiff's confidential business information to promote

business of II-defendant.

52. It is true that plaintiff's application for grant of

temporary injunction is not precise, however there is

reference to plaintiff's business activities and various

products dealt by plaintiff. In the circumstances, the grant of

an order of temporary injunction with reference to specific

names stated in the product catalogue of plaintiff for a

limited period would avoid situation of grant of an order of

temporary injunction on vague terms and this would also 41

avoid likelihood of plaintiff misusing the order to curb the

business activities of II-defendant. The learned trial judge

has not referred to documents relied upon by plaintiff. The

learned trial judge has failed to notice that breach of

confidentiality and misuse of confidentiality are actionable

rights. The learned trial judge has proceeded an erroneous

assumption that in the absence of contract and breach of

contract, the plaintiff had no actionable right against II-

defendant. Therefore, the impugned order cannot be

sustained.

53. In the result, I pass the following:-

ORDER

The appeals are accepted. Defendants 1 & 2 are

restrained by an order of temporary injunction from carrying

on business in India or carrying on business with, dealing or

in any manner transacting with any of customers of plaintiff

by utilizing confidential information whether in the form of

technical data, correspondence and information pertaining

to, manufacturing process, marketing plans, offers, pricing, 42

customer list, software, specifications, engineering methods

and know-how, consumer grievances, customer solutions,

service logs, service history and service feedback pertaining

to clients or method of resolving area specific problems in

relation to following namely :- Optimat NKD 720, Optimat

KTD 820, Ambition 1200, Ambition 1210/Ambition 1210F,

Ambition 1220 C/Ambition 1220 FC, Ambition 1430

C/Ambition 1430 FC, Ambition 1440 FC/Ambition 1440

F2C, Ambition 1650 FC/Highflex 1650, Optimat SWT 124

RK, Optimat SWT 315 X, Optimat SWT 325 RL, Optimat

SWT 335 QCH, HPM 120, HPP 180/38/38, HPP

230/31/31/HPP 250/31/31, HPL 430/38/22, Ambition

2260, Ambition 2262, Venture 20/22, Venture 316 M, KFL

326C, FPR 225/FPR 226, BAZ 322/40/K, BAZ 722,

WoodCAD/CAM, NDS 102, Optimat BST 503, BHX 050

Optimat/BHX 055 Optimat, PTP 160 PLUS, Venture 2M and

Vantage 100/480, pending disposal of suit.

Having regard to nature of restraint imposed in terms

of this order, the trial court shall decide the suit on merits 43

within a period of one year from today, for which both

parties shall extend their co-operation. If plaintiff does not

co-operate for disposal of suit within one year from today,

plaintiff cannot seek for extension of order of temporary

injunction. If defendants 1 & 2 fail to co-operate for disposal

of suit within one year from today, plaintiff will be at liberty

to seek for extension of order of temporary injunction for

such period as may warranted by situation.

Sd/-

JUDGE

SNN/Np