Plaintiffs are not entitled for injunction for the following reasons also : (a) The injunction, as prayed for by the plaintiffs, if granted would certainly have a direct impact of curtailing the freedom of employees for improving their future prospects and service conditions by changing their employment.
(b) Rights of an employee to seek and search for better employment cannot be restricted by an injunction.
(c) Injunction cannot be granted to create a situation such as "Once a Pepsi employee, always a Pepsi employee". It would almost be a situation of `economic terrorism' or a situation creating conditions of `bonded labour'.
(d) Freedom of changing employment for improving service conditions is a vital and important right of an employee, which cannot be restricted or curtailed by a Court injunction.
(e) Inter-changeability of service is an accepted norm of Service Jurisprudence which cannot be curtailed by a Court injunction.
(f) 'Employees' right to terminate their contracts also cannot be curtailed by Court injunction.
(g) An injunction can be granted only for protecting the rights of the plaintiffs, but cannot be granted to limit the legal rights of the defendants.
(h) An injunction cannot be granted where the Courts have a doubt in the credibility, veracity and truthfulness of the plaintiff's version.
(i) An injunction also cannot be granted in a case where the Court directly or indirectly gets the impression that the injunction has been sought for extraneous considerations or oblique motives.
(j) Rough and tumble of the business including stiff competition has to be faced in a free market economy. The problems which should be settled in the market place cannot be brought to Law Courts or settled by a Court injunction.
(k) In economic matters, while granting injunction, business ealities have to be taken into consideration. The employees seek betterment and advancement of their careers, while they are in service. It is impracticable and unrealistic to artificially create a situation by a Court injunction when employees would first leave the employment and then look for better service conditions and job opportunities elsewhere.
(l) Most of the senior employees of the plaintiffs or the defendants were working with other multinationals or business organisations. They joined the plaintiffs or the defendants because attractive salaries and better service conditions were offered by them. The plaintiffs themselves have engaged a large number of employees who were working in other multi national or business organisations. They were appointed because they had work experience with other organisations. The same plaintiffs are not justified in seeking an injuncion so that their employees may not join the defendants. All that is to be seen is whether the defendants had adopted unfair means in advancing their business interests or not.
(m) In a free market economy, everyone concerned, must learn that the only way to retain their employees is to provide them attractive salaries and better service conditions. The employees cannot be retained in the employment perpetually or by a Court injunction.
(n) Free, fair and uninterrupted competition is the life of the ade and business. This freedom in free market economy has to be zealously protected in the larger interest of free trade and business. No injunction cane be granted which is likely to restrict or curtail this freedom.
(o) It is difficult to hold at this stage that the predominant object and paramount consideration behind the actions of the defendants was designed to injure the plaintiffs.
(p) At this stage, it is also difficult to hold that the defendnts resorted to business practices which are unethical, illegal and constitute tortious interference in the business of the plaintiffs.
Dalveer Bhandari, J.
1. This Order shall dispose of application I.A. No. 3214/98 under Order 39, Rules 1 & 2 read with Section 151 CPC.
2. The plaintiffs have filed a suit for declaration and permanent injunction against the defendants. In this suit the plaintiffs have also prayed for the grant of an injunction during the pendency of the suit.
3. The plaintiffs are engaged in manufacturing, marketing and sale of soft or drink beverages, under the trade mark "Pepsi" all over the world including India. For the sake of convenience the plaintiffs are jointly referred as" Pepsi" and the defendants as "Coke"
4. It is alleged that main competitor of Pepsi in the soft drink beverage business in Coke. In India also, the main business rivals of the plaintiffs are the defendants, Coke. It is incorporated in the plaint that the soft drink business worldwide is extremely competitive and the business rivalry between Pepsi and Coke is fairly intense all over. Both the group of companies spend a large amount of money time and efforts to protect and develop their respective business interests. In India also, both Pepsi and Coke have spent a considerable amount of money on advertising and marketing of their products.
5. It is incorporated in the plaint that till recently these actions of aggressive sales, promotion and advertising were within the legal parameters and within acceptable worldwide and Indian marketing practices. However, over the past six months the plaintiffs have found that the defendants have been resorting not only to unethical business practices, but the defendants' actions in most cases constitute tortious interference in the business of the plaintiffs.
6. It is further mentioned in the plaint that the defendants have entered into a conspiracy to undertake concerted action against the plaintiffs to damage the plaintiffs' business interests in an unethical or illegal manner. It is alleged that the defendants are guilty of the tort of conspiracy too.
The plaintiffs have broadly categorised the illegal and unethical actions of the defendants in six heads, which are reproduced below:
(i) Inducing by unlawful means, groups of key marketing and other strategic employees of the plaintiffs to breach and/ or terminate their employment contracts with the plaintiffs and enter into employment contracts with the defendants.
(ii) Inducing by unlawful means, employees of Pepsi's independent bottlers, into breaking/ breaching their contracts.
(iii) Inducing by unlawful means, the independent business consultants under contract with the plaintiffs to break/breach their contracts with the plaintiffs.
(iv) Inducting by unlawful means, the distribution partners of the plaintiffs to breach their distribution agreements/arrange ments with the plaintiffs and enter into similar greements/arrangements with the defendants.
(v) Inducing by unlawful means, institutional accounts to breach their marketing and sponsorship agreements/arrangements with the plaintiffs and enter into similar agreements/arrangements with the defendants.
7. It is alleged that Pepsi started its business operations in India in the year 1990. It is also mentioned that Pepsi had literally commenced its beverages business in India from a scratch. Considerable investments were made to establish its infrastructure, which run into over 300 million U.S. Dollars. It is stated, that earlier the dominant player in the soft drink beverage industry in India was Parle Exports, the owner of trade marks Thums Up, Goldspot, Limca, Bisleri, Rim Zim etc. It is stated that Parle had enjoyed a national market share of about 70% of the soft drink beverage industry.
8. It is stated that Coke's entry strategy into the market was radically different. Coke entered the Indian market by acquiring Parle trademarks, from Parles and subsequently the entire infrastructure associated with the Parle trade mark. It is mentioned that Pepsi's success has been owing to a strong professional, well trained and motivated technical, finance, production and sales team that Pepsi has put together at its various locations all over India. It is alleged that in furtherance to the conspiracy, Coke started approaching the employees of Pepsi with inducements to terminate their existing contracts with Pepsi and enter into an employment contract with Coke. It is further mentioned that in certain cases Coke has successfully approached and induced some of Pepsi's employees into illegally terminating their existing contracts and entering into new employment contracts with coke. It is also incorporated in the plaint that initially these approaches were sporadic but over the last six months, it is clear that Coke has changed its strategy and has now decided to consciously target and approach the key employees of Pepsi at various locations in India. In the plaint, details of the six officials of Pepsi have been given, who were successfully approached by Coke and induced into terminating their employment contracts and confidentiality undertakings with Pepsi.
9. It is incorporated in the plaint that in or around December 1997 Pepsi approached one of the Territory Development Manager of the Pepsi in Kanpur, Mr. Kochin Wu. It is mentioned that Coke had approached Mr.Wu with and offer of increasing his salary and emoluments substantially in case he moved over along with his sales team to Coke. It is mentioned that the employment contract, inter alia, contained a provision that the contract can be terminated only by a three months notice. The employees have also executed a confidential undertaking in favour of Pepsi, wherein they have undertaken, inter alia, to keep all information, knowledge, data etc. acquired by them during the course of their employment with Pepsi and have also undertaken not to take up any employment with the competitor of Pepsi within one year of leaving Pepsi's employment for any reason whatsoever.
10. It is alleged that on 7.2.1998, the sales team of Pepsi was given an employment offer and was asked to join Coke immediately. The sales team members individually issued letters of termination of employment to Pepsi. The letters purported to terminate the employment contract forthwith, were not in accordance with the terms of the employment contract, which require a three months termination notice.
11. For various reasons 7 out of 10 sales team members changed their minds and decided to continue to work for Pepsi, and issued letters to Coke stating that they were retracting their acceptances. However, out of the remaining 3 members, including the lead person, Mr. Wu remained with Coke.
12. From the sequence of events Pepsi tried to establish that Coke had entered into a conspiracy with a specific objective to undertake tortious and illegal action against Pepsi and cause loss and damage to it.
13. It is also alleged that Coke has also approached several key employees of Pepsi, at Pepsi's various locations and have unabashedly made offers and inducements to their key employees from time to time. It is also alleged that on or about 10.2.1998 one Mr. Bipaschit Bose tried to contact many employees of Pepsi and even went to the extent of offering blank cheques, so that they would be induced to terminate their existing contracts with Pepsi and join Coke. In this process Coke has managed to successfully wean away some employees of Pepsi.
14. It is also incorporated in the plaint that the soft drink beverage industry depends heavily on a strong, well trained and motivated sales team, because the nature of business requires a constant interaction between the manufacturer and trade, distributors and retail outlets. The trade has to be regularly serviced to ensure adequate supplies of the products and to maintain market share. This onerous responsibility lies with the sales team. Accordingly, in the event Pepsi was to lose the entire sales team as was sought to be achieved by Coke in Kanpur, the loss and damage would be much greater than the mere loss of money spent on training of the sales personnel. The loss would be in terms of loss of time involved in replacing the sales team and consequent loss of business in the meanwhile.
15. It is also alleged that Goa Bottling Private Ltd. was earlier the franchisee bottlers of Coke with anufacturing facilities located in Goa and was servicing the Goa territory. The existing franchise contract between Goa Bottling Company and Coke terminated in accordance with the terms thereof on 22.11.1997. Upon the termination of the existing contract with Coke, Goa Bottling Company commenced production and distribution of Pepsi with effect from 23.11.1997. It is also mentioned that the entire sales team of Goa Bottling Company, comprising of 61 sales staff resigned en bloc from the employment with Goa Bottling Company on 21.11.1997 and took up employment with Coke and commenced working with Coke immediately. It is alleged that these employees did not give any notice of termination to Goa Bottling Company and their resignation was illegal and contrary to the terms of the employment contract with Goa Bottling Company. It is also incorporated that Coke had contacted each member of the sales team and induced them into illegally terminating their employment contracts with Goa Bottling Company and entering into employment contract with Coke. It is further alleged that Coke was fully aware that after the termination of the franchise agreement between Goa Bottling Company and Coke, Goa Bottling Company intended to manufacture and distribute the Pepsi products. It is alleged that the aforesaid action of Coke was carried out pursuant to a conspiracy to cause injury and prejudice the business of Goa Bottling Company and therefore, jeopardise the business of Pepsi.
16. It is also mentioned in the plaint that Pepsi had engaged the services of one 21st Century Media Pvt. Ltd. as their sports consultant. It is stated that the Sports Consultant was representing Mr. Javagal Srinath, one of the leading Indian Cricketers and it was intended to sign up Mr. Srinath with Pepsi whereby he would endorse the Pepsi products. But later it transpired that Coke was trying to induce Mr. Srinath into severing his contract with the Sports Consultant. It is also alleged that Coke was successful in inducing Mr. Srinath into signing with Coke, in complete violation of the aforesaid contract.
17. It is alleged that in addition to Sports, it is a part of Pepsi's global marketing strategy to market its products through sponsorship of major international and national music events in India. This is in consonance with the worldwide image of the beverage Pepsi being a fun product for the youth. It is stated that Pepsi had entered into an exclusive agreement dated 1.8.1996 with music consultant. In or around February 1998 Coke through its representative approached the Music Consultant. It is also alleged that Mr. Apurvi Seth, General Manager (Marketing) of Coke approached the Music Consultant and asked him to terminate his exclusive contract with Pepsi and to Start working with Coke.
18. On the basis of the aforesaid sequence of events Pepsi tried to make out a case against Coke and submitted that the actions of Coke amounted to tortious interference in the business of Pepsi. Pepsi had also mentioned that Plaintiff No.3 had an agreement with one Shrinathji Sales for distribution of Pepsi products in various long distance trains, emanating out of Ahmedabad Railway station. It is alleged that in March 1998, the officials of Coke, approached the said distribution partner of Pepsi and offered to pay an amount of Rs. 25 lakhs plus for the fulfillment of any other requirements of the distribution partner in consideration of the said distribution partner breaking his contract with Pepsi. However, the said distribution partner refused the offer and wrote to Pepsi vide letter dated 9.3.1998 informing it of the incident.
19. It is stated that Pepsi had an exclusive agreement with Hyatt Regency of New Delhi, that it would use only the Pepsi products. It was a fixed term contract and the hotel could not terminate the said agreement. It is further stated that at the behest of Coke, Hotel Hyatt Regency, terminated the said contract with Pepsi.
20. On the strength of the aforesaid sequence of events Pepsi tried to establish a prima facie case that Coke had offered inducements to various persons to breach their exiting contracts with Pepsi and prayed that the defendants be restrained from employing in any manner, offering employment to or inducing any employee of Pepsi to breach the existing employment contract and other obligations with Pepsi, or from in any manner interfering with and/or hindering the business of Pepsi through tortious actions and illegal means.
21. This Court issued summons to the defendants. The defendants in their separate written statements denied all averments, contentions and submissions raised in the plaint. A number of preliminary objections were taken such as (i) misjoinder of the plaintiffs and causes of action, (iii) nonjoinder of necessary parties, (iv) that the pleadings are frivolous/vexatious, and (v) the suppression of material facts. The defendants submitted that the suit is bad and liable to be dismissed in limine. It is also submitted that this suit is an abuse of the process of Court.
22. The defendants have also taken an objection that Mr. Pradip Agarwala and Mr. Purvez Billimoria, lacked authority to institute the plaint. The plaintiff have not placed on record any resolution passed by the Board of Directors of the company authorising Mr. Agarwala and Mr. Billimoria to institute the present suit. In the absence of any such expressed authority, presentation of the present plaint, on behalf the plaintiff companies, is clearly by unauthorised persons and the plaint has not been signed and verified by the competent person as required by Rules 14 and 15 of of Order VI read with Chapter IV of the Delhi High Court (Original Side) Rules. It is submitted that the plaint is liable to be rejected on this ground alone.
23. It is also mentioned in the written statements that the pleadings in the plaint are frivolous and/or vexatious and as such are liable to be struck down. It is stated that Pepsi is guilty of making indiscriminate allegations against Coke without specifying, which, of the actions of the defendants constitutes tort. It is also mentioned in the written statements that the allegations of conspiracy are also entirely devoid of any particulars.
24. It is also alleged that Pepsi is guilty of suppressio-veri and suggestio-falsi. It is further alleged that the material facts have been deliberately suppressed from this Court. A number of instances have been enumerated to establish that Pepsi has not stated the facts correctly. It is alleged that Pepsi has suppressed the material facts and has based the plaint on incorrect facts. In the written statements it is also mentioned that one Me. Gaurav Duggal was given a letter of release by Pepsi and it was only after this, he joined the employment of defendant No.8. The plaintiffs have suppressed this material fact from this Court. Similarly, another example was also mentioned in which Mr. Johnny George joined the employment of defendant No.8 in response to a public advertisement dated 18.12.1996. Similarly Mr. Jitendra Nayyar, whom the defendants are alleged to have induced into breaking his contract with Pepsi also left the plaintiff's employment in December 1995 and joined Ranbaxy Laboratories, where he worked from January 1996 to December 1996. It was only after this, that he joined the employment of defendant No.8 on 6.1.1997. Similarly Mr. Sailesh Joshi and Mr. Sushil Kumar Jain joined defendant Nos. 5 & 6 respectively, only after completing their notice period term of their contract of employment. It is also mentioned in the written statements that the true intent and purpose of this suit was to secure the enforcement of a term entered into by the plaintiffs with their employees, which is void and unenforceable.
25. It is also incorporated in the written statements that the following are the undisputed or undisputable facts:-
(a) that the salaries and perquisites offered by the defendant Nos. 1 to 8 are higher and better than those offered by any of the plaintiffs;
(b) that the contracts of service entered into by the plaintiffs with their employees are terminable upon three months notice or ayment of salary in lieu thereof;
(c) that such of the employees who joined the services of any of he defendant Companies have been engaged at salaries comparable to or paid to other employees of those defendants; and
(d) that the contracts entered into by the plaintiffs with their employees contain a clause by which the employee is restrained for a period of 12 months following his cessation of employment with Pepsi from taking up employment with any competing beverage company.
26. It is also mentioned in the written statement that while denying the averments in the plaint, in case the defendants have at all enticed the employees of the plaintiffs by offering them better terms, salaries and perquisites, by doing so these defendants have not committed any actionable wrong, but have acted only in furtherance of their egitimate business interests. It is also mentioned in the written statements that to restrain the defendants from doing so would be to stifle free competition. Similarly, these defendants as employers were entitled to the most meritorious employees and the employees similarly cannot be legitimately denied the opportunity of bettering their prospects and service conditions. It is further mentioned that the plaintiffs have sought to do so contractually by introducing the above clause which is void and unenforceable as being in violation of Section 27 of the Contract Act.
27. The defendants have mentioned in the written statements that the allegations contained in the plaint do not satisfy the requirement of any of the torts mentioned therein. The tort of conspiracy, as the plaint acknowledges, requires the use of unlawful means, but the allegations in the plaint do not set out any means used by the answering defendant or any of the defendants as are unlawful. It is stated that even where the means are unlawful, the tort is committed only, where the predominant purpose of the actions are designed to injure another. No wrong is otherwise committed and no action will lie where the real purpose is to advance the business interests of the defendants, although a damage may ensue to the plaintiffs.
28. As far as the tort of inducement of breach of contract is concerned, it is submitted that the tort is committed only where the alleged tortfeasor approaches the contractor, or where the contract is not terminable, or where the means are unlawful or where the predominant motive is to injure the other party to the contract. It is submitted that the allegations contained in the plaint, do not satisfy any of the requirements to justify the complaint that the answering defendant or any of the other defendants have committed the tort of inducement of breach of the contract.
29. In the written statements the defendants have denied that they have interfered with contractual obligations of the employees of the plaintiffs. It is submitted on behalf of the defendants that some of the reliefs prayed for, are by their very nature extremely wide and not cannot and ought not to be granted. It is further submitted that the Courts would only grant reliefs as would be just and proper in the circumstances of the case. The effect of granting relief (c) would be to prevent the defendants 1 to 8 from employing or offering employment to any of the employees of the plaintiffs and would prevent the defendants from dealing with any person who had any personal relationship or association with the plaintiffs.
30. Similarly if relief (d) is granted, it is submitted that it would result in introduction of a new clause in all existing contracts between the plaintiffs and their independent contractors, bottlers, consultants, distributors and/or other trade associates by which clause, they would be prohibited for all times and in all places from doing any business with the defendants or, any person similarly placed in the same trade or business. It is also incorporated that even though such contracts may be limited in time, relief in terms of prayer (d) will operate for all times to come and therefore, even after completion or determination of the contracts. It is stated that for the same reason reliefs (e) and (f) are also extremely wide and ought not be granted.
31. Regarding the main relief of prayer (a) and (b) the defendants have mentioned that the said reliefs are wholly uncalled for and this Court should not be required to pass a decree for declaration, declaring that the defendants have committed a tort of conspiracy or a tort of interference. It is submitted that the tort is actionable in claims for damages and injunctions. It is stated that the declaratory relief of the type prayed for in prayers (a) and (b) is unknown to law and the plaintiffs are not entitled to the reliefs as prayed for in the present form.
32. It is mentioned that competition is not only justified and permissible in any free market economy, but is also in the interest of millions of consumers. It has been specifically denied that for the past six months or so the defendants have been resorting to business practices which are unethical, illegal, and constitute tortious interference in the business of the plaintiffs. It is also denied that the practices and actions referred to in the plaint constitute tortious interference in the business. It is also incorporated that the answering defendant or the other defendants are only interested in furthering their own business interests, which in the circumstances are wholly justified and proper.
33. It is also mentioned in the written statements that the answering defendant and other defendant companies are furthering their business interests by employing only such number of people as they need and adopting such measures as are common to all business establishments. It is further mentioned that the defendants had no intention to damage the business interests of the plaintiffs. It is also incorporated that the plaintiffs are apprehensive of meeting stiff competition, and precisely for that reason the plaintiffs have filed the present suit, which is nothing but an attempt to stifle healthy competition.
34. The plaintiffs cannot have any grievance because the defendant companies are entitled to further improve their own business interests. The plaintiff, (a leading rival as per own admission in the market), cannot have a grievance, even if its market share falls or it is removed out of the competition altogether. It is also incorporated that defendants 1 to 7 have invested nearly Rs. 900 Crores till date, in furtherance of their business interests. Therefore, it is clear that the defendant companies have been accentuated by their interests of furthering their business and certainly not with the intent of causing or damaging the plaintiffs in any manner.
35. As alleged, it is specifically denied that the answering defendant or s employees have entered into any conspiracy, in any manner. It is specifically denied that the answering defendant has been approaching the employees of the plaintiffs at all levels much less with inducement to terminate their existing contracts with Pepsi and to enter into employment contracts either with the answering defendant or any of the other defendant companies. It is also denied that the answering defendant on approach has successfully induced, some of the employees of the plaintiffs or their business associates so as to illegally terminate their exiting contracts and enter into new employment contracts with the answering defendant. It is mentioned that defendants 1 to 8 employ over 2000 employees, of whom 1800 employees have been employed between August 1997 and April 1998. In the six months prior to the filing of the suit, the period during which the plain-tiffs have alleged tortious wrongs committed by the defendants, a mere handful of employees of lower to middle rank have been employed by the concerned defendants who were earlier employed by the plaintiffs. They were not key employees in any case.
36. It is incorporated in the written statements that these employees have determined their contracts on their own volition prior to joining the defendant companies. It is also mentioned that Mr. Gaurav Duggal and other employees have been employed only because of their skills, ability and capacity and not because they allegedly had any secret or confidential information relating to the plaintiffs.
37. In the written statements the defendants craved leave of the Court to set out true factual sequence as the narration in the plaint is a gross distortion of facts and contentions of the plaintiffs and consequently the suit deserves to be dismissed on this ground alone.
38. The sequence given by the defendant is as under:-
1) The answering defendant submits that defendant No.14, who was the Chief Executive Officer of Amitabh Bachan Corporation Ltd. (ABCL) from June 1995 to September 30,1997, apparently decided to leave the employment of ABCL in April 1997 and this fact was widely reported in the media. In early August 1997, the answering defendant was approached by a former Chairman of the Hindustan Lever Limited who forwarded a copy of defendant No.14's resume along with a request that defendant No.14 be considered for a job with the answering defendant.
2) Defendant No.14 met with executives of the answering defend ant in the first week of September 1997 and had further interviews with senior executives of the answering defendant based outside India later that month.
3) On September 26,1997 the answering defendant intimated to defendant No.14 made a formal offer to defendant No.14's on October 6,1997. The answering defendant received defendant No.14 acceptance of the offer on 6th October,1997.
4) The answering defendant states it had never been informed by defendant No.14 that he was in discussions with the plaintiffs.
39. It is mentioned in the written statements that the members of Kanpur sales team of the plaintiffs had approached the defendants for improving their service conditions and furthering their future prospects.
40. The defendants have denied that Mr. Bipaschit Bose was an employee of any of the defendant companies. It is mentioned that the plaintiffs are fully aware that Mr. Bose is a professional consultant who runs a placement agency and a part of his business introduces potential employers to potential employees. It is specifically denied that the defendants have induced Kanpur sales team or any other employee to leave Pepsi or that the answering defendant or other defendants had committed any tortious actions.
41. It is also incorporated in the written statements that the sequence of events set out in the plaint is incorrect and an attempt has been made to mislead this Court.
42. It is stated that Goa Bottling Company was an erstwhile bottler of Parle, who become a bottler or Coke in 1993, when Coke acquired various trade marks and they continued to be a bottler of Coke involved in preparing, packaging and distributing non-alcoholic beverages under the trade marks owned by Coke till 22.11.1997.
43. In the written statement filed on behalf of defendant No.8 it is incorporated that several applications were received which were scrutinised by the officials of Coke and it was decided to select only those who were found fit. It is also mentioned that the defendant companies were not aware of the existence of any restrictive clauses in the contracts of employment between these employees and Goa Bottling Company (for short "GBC") prohibiting the said employees from leaving the services of GBC. It is further mentioned that when the employees were asked as to when they could join, they said that they could do so immediately. As such, no fault could be found against the answering defendant.
44. It is also mentioned that the averment in the plaint, that the entire sales team of GBC was employed by defendant No.7 was incorrect. The strength of the sales team of the GBC was 100 and not 61 as mentioned in the plaint. 26 out of 61 employees were independent route agents and not employees of GBC or any of their associates, and they were being remunerated as independent contractors on a commission basis. Therefore, it is incorrect to suggest that they were employees of GBC. Accordingly, the question of issuing notices of termination by them could not arias. It is further mentioned that out of the remaining other alleged employees of GBC, six were trainees/temporary employees and as such were not required to give notices of termination. In any event, it is incorrect to state that the defendants or any of them had employed the entire sales team of GBC.
45. Defendant No.8 has also denied that GBC had made it clear to Coke that they did not intend to renew/continue their contract with Coke. Defendant No.8 has also denied that Mr. Steve Heath, Mr. Michel Beale, Mr. Prakash Wakankar, Ms. Harsimran Singh and Ms. Anjali Mahajeli camped in Hotel Golden Tulip at Kanpur before the imminent termination of the franchise agreement of GBC with Coke. It is denied that the presence of these persons was premeditated or had the object of carrying out an alleged corporate raid.
46. It is also denied that a high powered team was in Goa with the objective of inducing the employees to breach their employment contracts with GBC. It is also denied that Coke offered sales team inducement either in the form of higher remuneration or other benefits. It is also denied that there was any intention of causing loss, damage, injury and/or prejudice to GBC.
47. In the written statements it is mentioned that Coke has aggressive advertising and marketing programmes around the world, including India, which includes sponsership of local and national music events, as well as sports events. It is stated that Coke works with several music companies such as HMV, Sony Music, Music Channels, etc and they have entered into arrangements with them directly or with the help of event management agencies. It is also mentioned that Coke did not have any knowledge of any contract or arrangement between the plaintiffs and the Music Consultants, DNA Network Pvt Ltd etc. It is specifically denied that in or around February 1998, the answering defendant or any of the defendants had approached the Music Consultant for a meeting. It is denied that Coke had made an offer to the Music Consultant asking him to terminate his alleged exclusive contract with Pepsi and start working with Coke.
48. It is denied by Coke that they induced Hotel Hyatt Regency to terminate its alleged contract with Pepsi either in violation of the terms thereof or at all. It is denied that Coke was aware that Hotel Hyatt Regency had an exclusive arrangement for sponsoring of events with Pepsi.
49. In the written statement defendant No.8 has denied that it approached 21st Century Media or offered inducement to breach its contract with Pepsi. It also denied that it approached DNA Networks Pvt. Ltd. or offered inducement to breach its contracts with the Pepsi. It is further incorporated in the written statement that no inducement whatsoever has been offered to any of the employees by Coke or any other defendants, and the employees have voluntarily joined the defendant company at Kanpur, Goa and other places and are being given salaries in line with the existing remuneration package of the defendant companies. Nothing special is being offered to these employees, which is not offered to other employees in the same grade. It is also mentioned that there could be no question of Coke committing, a tort of procuring breach of contract in respect of contracts which are determinable at will. It is also mentioned that all recruitments have been made for promoting and developing its own business by the answering defendants as a part of their overall growth strategy.
50. In the written statement the objection of territorial jurisdiction has also been taken by defendant No.8.
51. Separate replications have been filed to the written statements. In the replications, averments mentioned in the plaints have been reiterated. It is mentioned that the defendants have caused considerable damage to the plaintiffs' business by hijacking their employees who have been trained by them and who have acquired confidential and exclusive business information during the course of their employment. It is also mentioned that the plaintiffs genuinely and bonafidely apprehend that the defendants are in the process of causing further damage to their business.
52. Mr. P.Chidambaram, learned Senior Advocate, who appeared for the plaintiffs, placed reliance on the judgments of our Courts (Supreme Court as well as High Courts) as well as judgments of the English and American Courts to support his submissions. He submitted that there is no direct judgment of the Indian Court, on the questions of law which are involved in this case. According to him, the principles of law as laid down in English case Greig Vs. Insole (1978) 3 ALL E.R. page 449 are fully applicable to the facts of this case particularly regarding the principles of the tort of inducement of breach of contract. The relevant observations of the said case are reproduced as under:-
"At common law, it constitutes a tort for a third person deliberately to interfere in the execution of a valid contract which has been concluded between two or more other parties, if five conditions are fulfillled:
First, there must be either (a) direct interference or (b) indi rect interference coupled with the use of unlawful means:
Secondly, the defendant must be shown to have had knowledge of the relevant contract:
Thirdly, he must be shown to have had the intent to interfere with it (the contract):
Fourthly, in bringing and action other than a quia timet action, the plaintiff must show that he has suffered special damage, that is more than nominal damage. In any quia timet action, the plaintiff must show the likelihood of damage to him resulting if the act of interference is successful:
Fifthly, so far as is necessary, the plaintiff must successfully rebut any defense based on justification, which the defendant may put forward."
53. The Court placed reliance on an earlier decision of the same Court in Torquay Hotel Vs. Cousins & Ors (1969(1) All E.R. 522 at pages 530, 531).
54. The defendant must be shown to have knowledge of the relevant contract. He must be shown to have the intent to interfere with the contract. In bringing an action other than "Quia Timet Action" the plaintiff must show that he has suffered a special damage i.e. more than the nominal damage. The Court also relied on the Judgment Rookes Vs. Barnard (1964) All E.R.36A 7). So far as is necessary, the plaintiff must successfully repudiate in defense based on justification which the defendant may put forward. The Court observed that if these five conditions are fulfillled and the defendant is shown to have had the intention to interfere with the relevant contract which is necessary to constitute a tort, it is quite irrelevant that he may have acted in good faith and without malice or under a mistaken understanding as to his legal rights. The Court also placed reliance on South Wales Miners Federation Vs. Glamorgan Coal Co. Ltd. (1904) All E.R. 211 at 217).
55. The main distinction between the aforesaid English case and our case is that Slade, J. decided the case after the evidence was recorded, whereas in this the evidence is yet to be recorded.
56. Mr. Chidambaram also placed reliance on another Judgment of the English court reported as Torquay Hotel Vs. Cousins & Ors (1969) 1 All E.R. 522 at pages 530,531). In the said case Lord Denning M.R. extended liability to direct, deliberate interference with the execution of a contract without causing a breach thereof. He stated that there are three requirements of such extended liability: (1) An interference in the execution of a contract, extending to cases where the defendant "prevents or hinders" performance (even though there is no breach) which is (ii) deliberate and (iii) direct. Such interference with business does not require proof that existing contracts have been breached; but the cause of action exists only when the defendant has brought about a damage.
57. Mr. Chidambaram also placed reliance on another celebrated case of Lumley Vs. Gye (All. E.R. 1843-60 page 208). This case established for the first time that recovery can be had for inducing breach of any kind of contract and not merely contracts of employment. This tort has three forms (i) direct persuasion, (ii) direct disablement and (iii) indirect disablement. It was submitted that the present case is limited to the first form of the tort, i.e. tort of inducing breaches of contract through direct persuasion and accordingly, the plaintiffs' submissions are restricted to only this form of the tort.
58. Mr. Chidambaram also cited the case of D.C.Thomson Vs. Deakin & Ors (1952) (2) All E.R. 361 at 373). In this case the Court observed that basic formulation of this tort can be stated as "Any violation of legal rights, including rights under contract, committed knowingly and without justification, is a borbious act."
59. Mr. Chidambaram, vehemently contended that the defendants Coke, had the knowledge of existence of the contract. On the basis of the principle as enunciated in add number of English judgments he submitted that it is necessary for the defendants to have a knowledge of the contract. However, it is not necessary that the precise terms of the contract be known. He cited Daily Mirror Newspapers Ltd. Vs. Gardner (1968) 2 QB 762, Greig Vs. Insole (1978) 3 All E.R. 449 at 494), Torquay Hotel Vs. Cousins & Ors (1969) 1 All E.R. 522 at 530, 531), Emerald Construction Co. Ltd Vs. Low- thian (1966) Ch.D. 1013 at 1017) and Merkur Island shipping Co. Vs. V.Laughton (1983) 2 All E.R. 189 at 196).
60. Mr. Chidambaram contended that Coke intentionally interfered with the contracts, the existence of which was known to it. As regards the intention, there need not be any spite or desire to injure the plaintiffs. It is irrelevant whether the may have acted in good faith, without malice or under a mistaken understanding as to his legal rights. Good faith as such provides no defense whatever to a claim based on tort. He also placed reliance on the Judgment of Emerald Construction Co. Ltd Vs. Lowthian (1966) Ch.D. 1013 at 1017) to show that intention includes reckless indifference. the defendant may not have the knowledge of the precise terms of the contract, but it is enough to show that it disregarded the means knowledge and/or acted recklessly.
61. Mr. Chidambaram also relied on the judgment of BMTA Vs. Salvadori 1949 All. F.R. 208 to show that it did not matter who opened the negotiations, which resulted in a breach. It did not matter that the contract breaker was willing to break it. The ease with which a person may be persuaded is also not a relevant consideration in determining whether the persuader was also at a fault or not, in what he was doing.
62. Mr. Chidambaram placed reliance on the case of M/s Tata Sons Ltd. Vs. Mastech Corp (C.S. No. 1457/94 dated 21.8.95) by the Single Judge of Madras High Court. The Court, while granting injunction mentioned that "there is a prima facie case made out by the plaintiff for getting an order of interim injunction, since it is alleged by the plaintiff that 135 employees of the plaintiff who have received training under the plaintiff, abandoned their employment (with the plaintiffs) in utter disregard of the agreement of service entered into with the plaintiff."
63. The Division Bench of the Madras High Court dismissed the appeal against the order of the learned Single Judge. The Special Leave Petition against the judgment of the Division Bench was dismissed by the Supreme Court.
64. Mr. Chidambaram also drawn my attention to the decision of the Bombay High Court in Ambience Space Sellers Ltd. Vs. Asia Industrial Technology Pvt. (NOM 2395/96 in Suit 3238/96 dated 17.12.96) wherein the learned Single Judge of the Bombay High Court held that the law of torts being a developing law, its frontiers are incapable of being strictly barricaded. The Supreme Court has held that the ambit of tortious law keeps on widening on the touchstone of fairness and practically of the situation. The learned Single Judge observed that "It is to be seen that the procurement of a breach with knowledge of contract is now considered to be a wrongful act in itself." The Court found that it was a case of an actionable interference in its primary form."
65. The Division Bench of the Bombay High Court in appeal Approved the observation of the learned Single Judge. The special leave Petition filed against the said judgment was also dismissed by the Supreme Court.
66. Mr. Chidambaram has also placed reliance on S. Wales Miners' Federation Vs. Glamorgan Coal Co. Ltd. (1904-7) All E.R. 211). In that case the Court held that acting in one's own interest is also no justification. The advancement of one's own interests will not suffice, nor will that of the interests of one's own group. Mere honest belief that one has a duty to act is irrelevant. There must be an actual duty which is objectively determined by law.
67. The judgment of the learned Single Judge of the Mysore High Court in Gangiah Vs. Gangadharan (AIR 1961 Mysore 178) was also cited in which the learned Single Judge observed that "as regards the interference with his contractual relationship he (plaintiff) must prove either that the damage has resulted or that is likely to result form the defendants procuring the breach". The motive or reason for procuring a breach of contract is irrelevant.
68. In another English Judgment if De Jetley Vs. Marks (1936) All E.R. 863 at 873) the Court observed that justification must be based upon a duty and not mere protection of the defendant's own interest. In Greig Vs. Insole (supra) the Court happened to deal with this aspect of the matter and observed that the defendant cannot escape by showing that his motives are impersonal, disinterested and altruistic.
69. Mr. Arun Jaitley, the learned Senior Advocate appearing for the plaintiffs has submitted that a negative covenant restraining an employee from engaging or undertaking employment only with the competitor for 12 months after he had left the plaintiffs' service is valid and does not violate Section 27 of the Indian Contract Act. Section 27 read as under:
"Every agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind, it to that extent void.
70. The plaintiffs had an agreement with the Contractees which can be broadly classified in two categories:
i) Commercial Contracts and
ii) Service/Employment Contracts:
71. Mr. Jaitely also submitted that the courts have adopted a more liberal approach with regard to the negative covenants. This is based on the prin-ciple that every member of the community is entitled to carry on trade or business as he chooses and in such manner as he thinks most desirable, in his own interest, so long as he does nothing unlawful.
72. This question was not answered in the case of Gujarat Bottling . The Court observed that we do not propose to go into the question whether reasonableness of restraint is outside the purview of Section 27 of the Contract Act and for the purpose of the present case we will proceed on the basis that an enquiry into reasonableness of the restrain is not envisaged by Section 27. The plaintiffs in order to justify the post employment restraints incorporated in the service and employment contracts placed reliance on Nordenfelt Vs. Maxim Nordenfelt (1891-94) All ER Rep. 1. The House of Lords held that "restraints of trade are divisible into two distinct categories (a) partial restraint, and (b) general restraint. The reasonableness is a lest applicable to partial restraint and inapplicable to general restraint. "The Court further held that the "Restraint of trade and interference with individual liberty of action, may be justified by the special circumstances of a particular case. Restriction is reasonable_ that is, in reference to the interest of the parties concerned and reasonable in reference to the interest of the public, so framed and so guarded as to afford adequate protection to the party in whose favour it is imposed, while at the same time it is in no way injurious to the public."
73. In the instant case, according to the plaintiffs, there are four commercial agreements where breaches were induced, i.e., termination before the stipulated duration and without notice, due to the interference of Coca-Cola.
"1. The agreement between Pepsi and BCCI to which 21st Century Media were also a consenting party, signed in 1996 which entitles Pepsi to sponsor all test matches and all one day internationals with upto three teams participating till the year 2000.
2. The agreement between Hyatt Regency Delhi and Pepsi, which was for a fixed period of one year i.e. 1.7.1997 to 31.12.1997, was breached in September, 1997 by Hyatt at the behest of Coke.
3. The agreement between Black Cadilac Pub Bangalore and Pepsi, which was also for a period of one year, and was sought to be terminated by Black Cadillac before its term, at the behest of Coke.
4. The agreement between. T. Srinath and 21st Century Media for Managing Srinath for a period of three years."
74. According to the plaintiffs all these 4 contracts had an exclusivity clause and were for a fixed period of time which by no stretch of imagination can be considered so unreasonable. Reliance has been placed on Super- intendence Co. of India Vs. Krishan Murgai . Unless the Courts, view with disfavour a restrictive covenant by an employee not to engage in a business similar to or competitive with the employer after the termination of his contract of employment." It was justified by the plaintiffs that the judgment in this case really turned on the facts of the case wherein the key question was that the employer after erminating the contract could not force the employee into idleness by enforcing the postemployment covenant.
75. The question of negative covenants was also considered by the Supreme Court in the case of Niranjan Golikari's case . Wherein the Court held that negative covenants
operative during the period of employment when the employee is bound to serve his employer exclusively are not to be regarded as restraint of trade and therefore do not fall under Section 27 of the Contract Act.
76. The plaintiffs also placed reliance on Fitch Vs. Dewes (1921) ALL ER Rep. 13 and on Home Counties Dairies Ltd. Vs. Skilton (1970) 1 All ER 1227. In the Fitch case, a solicitor's managing clerk was restrained for 25 years from being engaged or concerned in the business of any other solicitor within a radius of seven miles and in the case of Home Counties, the service agreement had a clause whereby the employee would not the enter into the service of any other person or firm carrying on dairy business during the period of employment and for a period of one year after the determina- tion of his employment. This restraint was held valid as it applied only to the employer's trade as a dairyman and the employee's trade as a milk roundsman and would not prevent the employee from entering into the employment of someone other than a dairyman. According to the plaintiffs, the controversy involved in the present case is quite akin to the said English case. The principles decided therein are quite applicable to this case. It is submitted that the employees do not work for a rival soft drink company and that too only for a period of one year. The employees are, however, free to leave and work for other soft drink companies.
77. The plaintiffs placed reliance on the judgment of the learned Single Judge of the Rajasthan High Court in Lloyd Electric Engg. Vs. Dr. Rajeshwar Kr. Malhotra Civil Revision No. 715/96 dt. 24.10.1996. There was a negative covenant, not to compete with the company directly or indirectly for three years as not being excessively harsh or opposed to public policy so as to attract section 27. The plaintiffs entioned that the Government of India which is the largest employer in the country also imposes restriction of employment, on post retirement of its employees. Reliance has been placed on Y.G. Ramamurthy Vs. Chairman Central Board Excise & Customs; [1983(2) S.L.J. 59] and Iqbal Ahmad Vs. Chief Justice of High Court of Judicature at Allahabad and also on Indra Bahadur Singh Vs. Bar Council of U.P. . Post employment restrictions were held to be invalid and violative of Article 19(1)(g) of the Constitution.
78. On behalf of defendants Nos. 1 to 8, the main submissions were made by Mr. Iqbal M.Chagla, Senior Advocate. On behalf of defendants Nos. 9 to 16 submissions were made by Mr. Dushyant Deve, Senior Advocate.
79. It would be appropriate to briefly mention the submission of Mr. Dave first, and then take up the submissions made by Mr. Chagla on behalf of the defendants 1 to 8.
80. Mr. Dave submitted that Mr. Pradeep Aggarwal and Mr. Parvez Billimoria claimed to be constituted attorneys of the plaintiff companies and they signed and verified the plaint on behalf of the plaintiffs. Mr. Dave Sub-mitted that however, along with the plaint, no authorisation granted by the plaintiffs in favour of Mr. Aggarwal and Mr. Billimoria have been filed. There was no resolution of the Board of Directors for instituting the suit. Therefore, both Mr. Aggarwal and Mr. Billimoria lacked authority to institute the suit and the suit is liable to be dismissed because of this inher- ent defect. Reference was also made to Chapter IV of the Delhi High Court (Original Side) Rules and Order 29, Rule 1 of CPC. Mr. Dave placed reliance on the decided case Oberoi Hotels (India) Pvt. Ltd. Vs. M/s Observer Publications (P) Ltd. (Suit No. 469 of 1966 decided on 26.11.1968). This judgment was followed In Sooth India Insurance Co. Ltd. Vs. Globe Motors (Suit No. 68 of 1969 decoded on 19.4.1974). The same view was reiterated by this Court in Nibro Limited Vs. National Insurance Co. . It is also mentioned that ordinarily the Court will not non suit a person on account of technicalities. However, the question of authority to institute a suit on behalf of a company is not a technical matter. It has far reaching effects. It often affects the policy and finance of the company. Thus, unless the power to institute a suit is specifically conferred on a particular Director, he has no authority to institute a suit on behalf of the company and such power can only be conferred by the Board of Directors by passing a resolution in that regard and no such resolution has been produced in the instant case.
81. It was submitted by Mr. Dave that the plaintiffs have made general and grossly inadequate pleadings as to the damages suffered by them. No particulars of what damage has been caused to the plaintiffs, how has that come about and the quantum of damage has been shown. All that has been mentioned in the plaint is that the plaintiffs have suffered loss and damage and they are in the process of working out the same and for which they sought leave of the Court under Order 2, Rule 2 CPC to institute a separate action. It was submitted by Mr. Dave that the plaintiffs are unable to identify any such loss or damage as no measurable loss has occurred. This being the position, unless the plaintiffs allege and prove the kind of damage which forms a part of the factual situation, giving rise as a matter of law to the cause of action upon which they rely, their claim will fail and unless they allege such damage the claim can even be struck down at the prelimi- nary state.
82. Reference was made to Order 6, Rules 1,2 & 7 and Order 7 Rule 11 CPC to demonstrate that the present suit, as instituted, is not maintainable and in this view of the matter, the plaintiffs are in any event not entitled to any injunction.
83. Mr. Dave, the learned counsel for defendants 9 to 16 placed reliance on the judgment in Rohtas Industries Vs. Rohtas Industries Staff Union to point out the definition of tort of conspiracy as given by Salmond and accepted by the Supreme Court. Salmond defines tort of conspiracy as under:
"a combination wilfully to do an act causing damage to a man in his trade or other interests in unlawful and if damage in fact is caused, is actionable as a conspiracy."
84. Mr. Dave also placed reliance on Rookes Vs. Barnard (1964) 1 All E.R. 367 at 401). In that case while dealing with a case of tort of interference the Court observed as under:
"there must be, besides the act of inducement, knowledge by the defendant of the contract in question and of the fact that the act induced will be a breach of it; there must also be malice in the legal sense, i.e. an intention to cause the breach and to injure the plaintiff thereby and an absence of justification; and there must be special damage, i.e. more than nominal damage, caused to the plaintiff by the breach. These three elements or requisites, are the grounds on which an action for inducing a breach of contract must be based. If any one of them is missing, there is no cause of action."
85. Mr.Dave also placed reliance on Lonrho Plc and Ors Vs. Fayed & Ors. (1994) 1 All E.R. 188) wherein the three Lord Justices Dillon, Steward Smith and Evans observed as under:-
"an action based on tort, in that case. conspiracy, must contain specific pleading as to damage. General averments would be wholly inadequate. General averments in that case to the effect by reason of the matters set out above, the plaintiffs have suffered loss, damage and injury."
86. Mr. Dave submitted on the strength of the aforesaid judgments that the Court should refuse injunction, in cases where the plaintiffs are guilty of unconscionable behaviour and do not approach the Court with clean hands.
87. Mr. Dave also submitted that the present suit as filed by the plaintiffs is not a Quia timet action. Quia timet is defined in Black's Law Dictionary as "Because he fears or apprehends', in equity practice, the technical name of a bill filled by a party who seeks the aid of a court of equity, because he fears some future probable injury to his rights or interests, and relief granted must depend upon circumstances."
88. Mr. Dave submitted that in the present suit the entire cause of action as per the plaintiffs is actions, which have already taken place before filing of the suit and between December 31, 1996 to March 1998. Vague averments have been made in the various paragraphs of the plaint. para 50 of the plaint discloses the entire cause of action according to the plaintiffs themselves. It does not speak about any future apprehended loss and need to secure against the same. Since the plaintiffs have not pleaded particulars, there is an absence of specific and detailed averments as to likelihood of damage or future loss. It was submitted that the plaintiffs cannot be allowed to plead vague and unspecified general allegations as to loss, damage and injury to be found in every action in equity for injunctions to convert their suit into a suit "Quia timet". The law does not permit it.
89. Mr. Dave also placed reliance on Gangabai Vs. Purshotam Atmaram (1907 Vol.9, Bombay Law Reporter 912). Mr. Dave submitted that this is neither Quia timet action nor have the plaintiffs shown reasonable likelihood of substantial, irreparable or imminent damage. Mr. Dave also submitted that there is an absence of tortious conduct of interference and tortious conduct by way of conspiracy and consequently the plaintiffs are not entitled to relief of injunction.
90. Mr. Dave referred to the Halsbury's Laws of England, Fourth Edition, where "Interference with the performance of a contract" is defined in Para 1518 as "Where one person by unlawful means intentionally induces a second person to commit a breach of contract against a third person or prevents or hinders the performance of that contract, so that the third person suffers damage, the first commits a wrong actionable at the suit of the third, unless the inducement is justifiable. Mr. Dave also placed reliance on in D.C. Thomson & Co. Ltd. Vs. Deakin (1952) 2 All E.R. 361) wherein the Court observed as under:-
".....First, that the person charged with actionable interference knew of the existence of the contract and intended to procure its reach; secondly, that the person so charged did definitely and unequivocally persuade, induce or procure the employees concerned to break their contracts of employment with the intent that have been mentioned; thirdly, that the employees so persuaded, induced or procured did in fact break their contracts of employment; and fourthly, that breach of the contract forming the alleged subject of interference ensued as a necessary consequence of the breaches by the employees concerned of their contracts of employment."
91. Mr. Dave contended that in respect of kanpur sales team there is no tort, because there is no inducement or procurement. It is submitted that Mr. Kochin Wu of Kanpur had approached the defendants on his own behalf and on behalf of the fellow employees working for Pepsi in Kanpur. It was submitted that direct inducement occurs when persuasion, and procuration is brought about on the mind of person of one of the contracting parties. It was also submitted that the defendants have a better salary structure in general and no special offers have been made to the employees of Pepsi.
92. Mr. Dave submitted that the plaintiffs have not made out a case for grant of injunction. He submitted that the plaintiffs did not have the balance of convenience nor are the plaintiffs likely to suffer any irreparable injury. He placed reliance on the decision of the House of Lords in NWL Ltd. Vs. Woods (1979) 3 All E.R. 614 at 625). Lord Diplock cautioned against granting of injunctions merely balancing convenience of parties "at a stage when the evidence is incomplete. "He also relied on Duport Steels Ltd. Vs. Sirs (1980) 1 All E.R. 529 at 549) wherein the House of Lords observed that unless that threat is imminent or there is serious danger to public safety or health, the court would not grant any interim injunction.
93. Principal submissions on behalf of defendant Nos. 1 to 8 were advanced by Mr. Iqbal M. Chagla, Senior Advocate. Mr. Chagla has also taken preliminary objections regarding the maintainability of the suit. He formulated the following points to demonstrate that the suit, as filed, by the plaintiffs is not maintainable. Therefore, in a suit of this nature, the plaintiffs are not entitled to injunction in any event. He enumerated the following defects in the plaint, as filed, by the plaintiffs which are as under:
(i) The very maintainability of the Suit is challenged as set out in I.A. No. 4172/98 filed by Defendant Nos. 1 to 6 and 8 under order 7 Rule 11 CPC and in paras 1 to 10 of the written statement filed by defendant Nos. 5,7 and 8 on several independent grounds including :-
(a) Misjoinder of plaintiffs and causes of action;
(b) Misjoinder of defendants and causes of action;
(c) Non-joinder of necessary parties;
(d) Lack of authority of the alleged Constituted Attorneys of the plaintiffs;
(e) Failure to ever the necessary material facts as required by Order VI Rules 2,3 and 10 CPC;
(f) Under-valuation of the Suit since damages (an essential ngredient of plaintiffs' cause of action) have not been quantified;
(g) As against defendant No.7 (which does not carry on business in Delhi and had no office in Delhi) there is no jurisdiction al all. A separate application under Order 7 Rule 11 CPC has been filed seeking dismissal of the Suit as against Defendant No.7 (being IA No.4171/98).
94. Mr. Chagla submitted that the plaintiffs have not approached the court with clean hands and are consequently not entitled to any interlocutory reliefs, since, such reliefs are equitable and discretionary in nature. According to him, the plaintiffs are also guilty of suppression of material facts. Mr. Chagla submitted that the entire edifice of the plaintiffs' case is without any foundation and if the plaint is rationally analysed, then the irresistible conclusion would be that the plaintiffs cannot be granted any interim relief in this case.
95. Mr. Chagla submitted that the plaintiffs have been failed to allege the necessary legal ingredients required for the torts sought to be pleaded in the plaint:-
(a) Inducing a breach of contract between the plaintiffs and its employees/third parties.
(b) Unlawful interference by the defendants in the performance of contracts between the plaintiffs and its employees/third parties, by the use of unlawful means.
96. These two Lords essentially require pleading and proof that :-
(i) The defendants had knowledge of the existence of the con tracts (and its essential terms) between the plaintiff and its employees/third parties, the breach or interference with, which is alleged.
(ii) There was in fact, a breach and not merely a lawful termination of such contract or that there was in fact, an actual interference with performance under the contract.
(iii) Such breach or interference with performance was in duced by the defendants for the purpose and with the intention of injuring the plaintiffs.
(iv) The inducement/interference was with the aforesaid intenion/purpose and not justifiable being caused by any intention on the part of the defendant to further its own business interests by free competition.
(v) Such breach or interference by the defendants resulted in special (actual) damage to the plaintiffs.
(vi) If no breach was actually caused, there had been the use of unlawful means by the defendants to interfere with the performance of the contract.
97. Mr. Chagla also submitted that the plaintiffs have deliberately confused the concept of termination of contract (which is not actionable) with breach of contract. The employers should be free to terminate their contracts with their employers. He submitted that the following seven employees have lawfully terminated their contracts with the plaintiffs. There is no impropriety, much less any illegality, in the following seven employees terminating their contracts lawfully. Their names as follows:-
1. Jitender Nayyar.
2. Sailesh Joshi.
3. Gaurav Duggal.
4. Johnny George.
5. V. Sushil Kumar.
6. Basukinath Sarkar.
7. Siraj Chakrabarti.
98. Mr. Chagla submitted that Mr. Jitender Nayyar had left the plaintiffs' employment on 6.1.1996 and had joined Ranbaxy Laboratory Ltd with whom he served till 31st December 1996. It was only after this employment that Mr. Jitenter Nayyar joined the employment of the defendants. This fact is admitted in the plaintiffs' replication to the written statement of defendant No.5 at para 5. The plaint had suppressed this material fact. It is stated that Mr. Sailesh Joshi resigned from the employment of plaintiff No.3 in Surat on 30.9.1997 and joined defendant No.5 only 1.1.1998. Mr. Gaurav Duggal was duly released from the employment by the plaintiffs in December 1996 and was given a letter of release by them Mr. Duggal was only thereafter employed by defendant No.8 and immediately sent abroad for training. After returning from abroad he joined the employment of defendant No.5 in April 1998.
99. It is stated that Mr. Johnny George joined the employment of defendant No.8 in response to a public advertisement dated 18th December 1997 in "The Hindu". Similarly, Mr. V. Sushil Kumar voluntarily resigned from the plaintiff's employment. Mr.Basukinath Sarkar and Mr. Siraj Chakrabarti were both employed only after they resigned from the employment of the plaintiffs. It may be pertinent to mention that the resignations of the aforesaid employees were not at the behest or at instance of the defendants.
100. The allegations that the defendants approached certain key employees of the plaintiffs which was a part of a conspiracy to cause prejudice, loss and damage to the Plaintiff's business interests and that "if it was successful will result in huge losses and damage to the plaintiffs"., have been vehemently denied by Mr. Chagla, the learned counsel for the defendants. He submitted that none of the senior employees actually left the employment of the plaintiffs and thus no termination of their contracts, or much less any prejudice is caused to the plaintiffs. According to him, it is not even alleged by the plaintiffs that there has been any interference with the performance of the contracts of the said senior employees, by the use of any unlawful means.
101. Mr. Chagla submitted that the affidavits filed by two of the plaintiffs' employees, namely, Mr.George Kavoor and Mr. Varun Berry are obviously self-serving and are made at the behest of the plaintiffs with whom the said two persons continue to be employment. The truth can be revealed only by questioning these two witnesses at the time of the trial.
102. Mr. Chagla submitted that Mr. Bipaschit Bose is not even an employee of the defendants. He is a professional and independent consultant who runs a placement agency. There was no mandate from the defendants to Mr. Bose in any form nor had he been requested to approach/target the plaintiffs' employees.
103. The allegations regarding 21st Century Media Private Limited (Sports Consultant) whose services were engaged by the defendants to break its contract with the plaintiffs by inducing Mr. Javagal Srinath, the Indian Cricketer into breaking his exclusive contract with the Sports Consultant, were denied as false by Mr. Chagla. He contended that though the conspiracy is required to be proved as alleged, the plaintiffs have failed to show how were any of the other defendants involved in this alleged conspiracy. The letter dated 10.12.1997 from the Sports Consultant to the plaintiffs is self serving and unreliable. The contents of the letter are also contrary to the facts on records and to the documents produced by the plaintiffs themselves and significantly there is no affidavit from Mr. Lokesh Sharma, who had allegedly signed the letter. It is submitted that the truth can only be revealed after the examination of the concerned witnesses.
104. Mr. Chagla submitted that the contract dated 20.2.1997 between the Sports Consultant and Mr. Srinath in fact establishes that Mr. Srinath is not exclusively bound by the agreement of the Sports Consultant but he is entitled to enter into an agreement or arrangement with or through other entities or persons, subject only to an obligation to pay a commission of 25% to the Sports Consultant. Admittedly, no complaint proceeding or demand has been made against Mr. Srinath by the Sports Consultant. It is stated that Mr. Srinath was entitled to enter into a contract with the defendants and that this did not amount to any breach of his contract with the Sports Consultant. Mr. Srinath himself confirmed in letters to defendant Nos. 13 and 14 that there was no inducement from the defendants to break his con-tract with the Sports Cunsultant and further that there was no offer to him from the plaintiffs at any point of time before or during his negotiations with the defendants. Under these circumstances, no tort at all can, therefore, arise in a case where admittedly there is no contract in existence between the plaintiffs and Mr. Srinath. Mr. Chagla submitted that the mere intention on the part of the Sports Consultant to sign an agreement with Mr. Srinath (even assuming whilst denying such intention) cannot be to the subject matter of any breach or unlawful interference by the defendants. The allegation that defendant No.14 tried to induce Mr. Srinath to breach his contract with the plaintiffs is false and has been denied by defendant No.14 in his affidavit.
105. Regarding Mr. Sanath Jayasuriya, a Sri Lankan cricket celebrity, Mr. Chagla submitted that it was the plaintiffs who directly negotiated with the Sri Lankan Test Cricketer in breach of the exclusive contract that World Tel Inc had with him. When World Tel Complained, the plaintiffs alleged that Mr. Jayasuriya had repeatedly assured the plaintiffs that he was free to sign a contract with them and suggested the World Tel Inc to resolve the issue directly with him.
106. In reply to the allegation that the defendants in February 1998 sought to induce DNA Networks Private Limited-the Music Consultant of the plaintiffs, to break his contract with the plaintiffs. It has been submitted that admittedly there has been no breach of the contract between the plaintiffs and the Music Consultant and this complaint must fail at the threshold.
107. Mr. Chagla submitted that defendant No.13 had no knowledge of any contract between the plaintiffs and the Music Consultant. He stated that a meeting took place between defendant No.13 and the Music Consultant at Bangalore in November 1997 and not in February 1998 as alleged.
108. The allegation of the offer of retainership in exchange for the Music Consultant terminating its contract with the plaintiffs and working exclusively with the defendants is false and has been specifically denied.
109. Through the plaintiffs allege that the defendants approached several distribution partners of the plaintiffs and sought to induce them into breaking their contracts with the plaintiffs, they have given only instance concerning Srinathji Sales, a distributor of the plaintiffs' products at the Ahmedabad Railway Station. It is alleged that a self serving letter from Srinathji Sales to the plaintiffs is sought to be relief upon. The correct facts are that the proprietor of Srinathji Sales Mr. Harish Aggarwal approached Mr. Aditya Sanyal, an employee of defendant No.7 and tried to convince Sanyal to enter into an arrangement with Srinathji Sales. It is further stated that Mr. Sanyal declined to discuss the matter further as soon as he learnt of Srinathji Sales arrangement with the plaintiffs. The allegations, particularly, the one regarding the offer of money has been categorically denied. Here too, no breach of contracts is alleged and there is no evidence of any unlawful means used by the defendants.
110. Mr. Chagla submitted that there is no merit in the allegations pertaining to Hotel Hyatt Regency. It is stated that Hotel Hyatt Regency stocked and served, amongst other beverages, both Pepsi and Coke and was not a one-product hotel.
111. It is submitted on behalf of the defendants in reply to the allegation that the entire team of GBC comprising of 61 sales staff resigned en bloc from GBC to take up employment with the defendants is factually incorrect to the knowledge of the plaintiffs. Only 3 out of 61 individuals preferred to work for GBC. 26 out of 61 individuals were independent route agents and not employees of GBC or its associates and therefore, they were not re quired to give any notice of termination. 6 out of 61 individuals were trainees/temporary employees who were not required to give any notice of termination.
112. Remaining 26 out of 61 individuals were not the employees of GBC but of two other associate companies viz. Beverage Venture Pvt. Ltd and Trupti Marketing Pvt. Ltd. The defendants believe that all the aforesaid individuals validly terminated their employment. It is stated that the letter dated 14.2.1998 is a self serving letter, procured by the plaintiffs from Mr. Prashant Timblo of GBC just two days prior to the filling of the suit. The learned counsel for the defendants stated that no complaint had been made nor were proceedings taken by the GBC or its associate companies.
113. Similarly, the plaintiffs have also not filed any affidavit either of Mr. Prashant Timblo or any other officer of GBC or its associate companies nor of any other individual actually connected with the matters in Goa. On the other hand, the defendants have filed the affidavits of defendant No.9 and Mr.Joel Peres and the written statements of defendant Nos.9 and 15 who were all concerned personally with these matters.
114. In reply to the allegations that the defendants 9,10,11 & 12 in conspiracy with defendant No.16 took away the entire sales team of the plaintiffs at Kanpur with a view to directly injure and damage the plaintiffs, Mr. Chagla submitted that only three employees of the plaintiffs joined employment with the defendants. None of these three employees breached their respective contracts of employment with the plaintiffs. The contracts of employment were terminable at will, upon giving three months notice, or salary in lieu thereof. It is also submitted that each of these three employees had to recover much larger amounts from the plaintiffs.
115. Mr. Chagla seriously disputed the facts and events of the Kanpur episode. He submitted that the 8 tandardised affidavits taken from the employees were clearly unreliable being filed by the individuals who were currently in the employment of the plaintiffs and who had a vested interest in assisting the plaintiffs. He further submitted that the defendants must be given an opportunity to cross-examine these individuals in order to ascertain the truth. Mr. Chagla submitted that the defendants did not approach any of the 11 individuals in Kanpur to terminate, much less, breach their contracts with the plaintiffs. He also submitted that the defendants have never used unlawful means. Mr.Chagla further contended that the employees of Pepsi approached the defendants for better employment opportunities with Coke. He submitted that some employees such as Mr.M.P.Pandey has independently approached Mr. Rajeev Saxena, a representative of defendant No.5, seeking possible employment with the defendants for himself and some of his colleagues, as they were apparently dissatisfied with their employment with the plaintiffs.
116. In reply to the submissions of the plaintiffs that interviews were a mere formality and the defendants wanted the entire Kanpur team to cross over from the employment of the plaintiffs to the defendants, Mr. Chagla submitted that separate interviews were held and each of these individuals were asked about their expertise, experience, competence and skills to evaluate their suitability for employment with the defendants. However, no information about the plaintiffs, much less any confidential information nor information about their salaries or salary structure was asked or discussed. It is also submitted that 7 out of 11 individuals who had appointment letters from the defendants were not given any special benefits but were absorbed into the regular grade structure of the defendants, which was more liberal and remunerative than the grade and emolument structure of the plaintiffs.
117. Mr. Chagla while denying the charge that the defendants induced any breach of contract, submitted that it was in fact the plaintiffs who had induced breach of contract of employment with the defendants in respect of 5 out of 7 individuals employed by the defendants. These five individuals, namely, Mr. Pandey, Mr. Udhaniniya, Mr. Mishra, Mr. Aggarwal, and Mr. Dwivedi were coerced into issuing standardised typed letters of resignation to defendant No.5 prepared obviously by the plaintiffs wherein only the address of defendant No.5. the date of the appointment letter, the designa- tion and signature of the person concerned were filled in, by hand. The postal receipts in respect of the Registered A.D. postings by 4 of the aforesaid 5 individuals to whom letters of appointment had not been issued are all dated 12th February 1998 and consecutively numbered from No.3772 to 3779. It was submitted that Mr. Pandey retracted his resignation by his handwritten letter dated 16th February 1998 in which he referred to the physical intimidation and coercion on the part of the plaintiffs that had compelled him to address the letter of resignation to the defendants against his will.
118. Mr. Chagla submitted that in services there is either vertical or horizontal mobility. The employees change their jobs in search of better rospects either vertically or horizontally. Mr. Chagla also contended that the plaintiffs themselves have employed several persons previously employed by the defendants' bottlers.
119. Mr. Chagla further submitted that the intent of the defendants was to advance their own legitimate business interests by rapidly recruiting a large number of individuals. The actions of the defendants were not directed towards harming or injuring the plaintiffs and committing a tort of inducing breach or unlawful interference. Mr. Chagla submitted that at no stage the defendants employed unlawful means to promote their own growth and development. He submitted that free and fair competition is inherent in business activities.
120. Mr. Chagla submitted that between August 1997 and April 1998 in less than 9 months defendant Nos.1 to 8 invested nearly Rs. 900 Crores and have employed 1800 out of their 2000 employees. It was also submitted that from a mere 23 employees in 1993-94, the employees strength of defendant Nos.1 to 8 in May 1998 rose to 2122 and is currently over 3000 employees.
121. Mr. Chagla contended that the plaintiffs have post termination restraint with their employees. He submitted that it is well settled that such post-termination restraints, under Indian law, are in violation of Section 27 of the Contract Act in restraint of trade, against public policy, void and unenforceable in law. He placed reliance on Gujarat Bottling Company Vs. Cocacola and Ors and N.S. Golikeri Vs. Century Spinning &
Manufacturing Co. Ltd. .
122. Mr. Chagla submitted that it is also well settled that no action lies for inducing a breach of a void contract or for interference with performance of a contract which must be regarded as contrary to public policy. He also placed reliance on Grieg Vs. Insole (supra) Hi-line Electric Company Vs. Dowco Electrical Products (765 F 2d 1359, Court of Appeal 5th Circuit).
123. Mr. Chagla submitted that contracts which are not for a fixed period but are terminable at will or upon giving notice, are terminable at the option of either party. Terminating such contracts would not amount to any breach of contract since such termination is merely the exercise of an option available in law. He further submitted that there is no tort to procure the termination of a terminable contract where the person induced is the party who enjoys the right to terminate such a contract. He referred to Halsbury's Laws of England, 4th Edition, Volume 45, para 1519 which reads as under:-
1519. Liability for inducing a breach of contract by an employee. Since it is a violation of legal right to interfere with contractual relations recognised by law if there is not sufficient justification for the interference, an action lies at the suit of an employer against any person who knowingly and intentionally, and without justification, induces the employees to commit a breach of the contract of service and leave his employer before the time fixed for the lawful determination of his service.
A person may be liable for procuring a breach of a contract not only where he directly persuades a party to the contract to break it, but also if he commits a wrongful act so as to prevent the party from performing the contract, or he persuades a third person to do an act in itself wrongful or not legitimate which renders performance of the contract impossible, but he is not liable if he persuades a third person to perform an act which in itself lawful even if the result is to induce a breach of contract by the party to it. If a person has acted individually, no action lies against him if no breach of the contract of serv ice is two or more persons join together in a combination of which the predominant purpose is to damage a third person and damage actually results, they may be liable to the third person for a tortious conspiracy, even though they have not induced any actual breach of a contract.
Apart from the effects of combination, any person may, with impunity, induce an employee to leave his employer when the period for which he was engaged expires, even though, until that person interfered, the employee had no intention of leaving, or to decline to renew an engagement which in the ordinary course, but for such interference, would have been renewed by the employe without question. In accordance with the same principle it is not actionable for a person to induce the employee to give such notice to his employer as may be requisite for the lawful deter mination of his contract of service, even though the effect of giving notice, may be to determine the contract at a date earlier than either of the parties to it had anticipated. In these cases there is no violation of the employer's legal right to the services of his employee and the motive by which the person who induces the employee to leave his employer is therefore immateri al."
124. Mr. Chagla also referred to D.C. Thompson & Co. Ltd. Vs. Deakin (supra), Grieg Vs. Insole (supra), Macmanus vs. Bowes (1938) 1 KB 98. Reliance was also placed on a judgment delivered by the Bombay High Court in Harjit Singh Kang Vs. Jet Airways delivered on 24th July 1996 (in Appeal from Order No.837 of 1996) the Court recognised and gave effect to a clause which provided for termination of the contract on either side on giving three months notice in writing or by payment of the months' salary in lieu of notice. The Court refused to grant an injunction prohibiting the employee from leaving his service although he had been trained at the expense of Jet Airways both in India and abroad.
125. Mr. Chagla also placed reliance on the judgment of the Madras High Court; Tata Sons Limited Vs. Mastech Corporation & Others; delivered in C.S. No. 1457 of 1994 on 21.8.1995 and another decision of the Division Bench of the Same High Court by Srinivasan, J. and Abdul Wahab, J. In these judgments, the Court highlighted the requirement that the contract should be a contract at will, in this the contracts were for a term of three years which were prematurely broken. They were not contracts terminable at will.
126. Mr. Chagla also placed reliance on a large number of judgments of the American and English Courts. He submitted that even in American Law where the contract is terminated at will, the position is not different. In Triangle Film Corporation Vs. Artcraft Pictures Corporation (250 F 981 at 982) in which the Court observed as under:-
"Nobody has ever thought, so far as we can find, that in the absence of some monopolistic purpose every one has not the right to offer better terms to another's employees, so long as the latter is free to leave. The result of the contrary would be intolerable both to such employees as could use the employee more effectively and to such employees as might receive added pay. It would put an end to any kind of competition."
127. In the said judgment the Court observed that so far as we have found, it has never been thought actionable to take away another's employee, when the defendant wants to use him in his own business, however, much the plaintiff may suffer.
128. Mr. Chagla placed reliance on Dale Vs. Thompson (1997) 962 F. Supp. 181 @ 184 (DC Circuit). In the said judgment it is mentioned that:
"Under an at will arrangement the prerequisite does not exist for the tort of interference with employment relationship. A third party who interferes with such a tenuous relationship is not liable to the employer, since no wrongful breach of contract can result from his interference. To put it another way, if there is no fixed or assured employment there is nothing tangible with which to interfere."
129. Mr. Chagla also placed reliance on Diodes Incorporated Vs. Gustav Franzen (960 Cal. App. 2nd 244) the Court of Appeals of california in which the Court observed and relevant part is extracted as under:-
"Even though the relationship between an employer and his employee is an advantageous one, no actionable wrong is committed by a competitor who solicits his competitors' employees or who hires away one or more of his competitor' employees who are not under contract, so long as the inducement to leave is not accompanied by unlawful action.....Int the employee situation the courts are concerned not solely with the interests of the competing employers, but also with the employees interests. The interests of the employee in his own mobility and betterment are deemed paramount o the competitive business interests of the employees where neither the employee nor his new employer has committed any illegal act accompanying the employment change."
130. Mr. Chagla also cited a number of decisions in support of his contention that in case where the defendant was motivated by an intent to injure the plaintiffs and not to further the defendant's legitimate business interests, actions of the defendant, will result in interfering with or inducing a breach of contract. In cases where the defendant was motivated to further his own legitimate business interests in that event the defendant cannot be held guilty for interfering with or inducing a breach of the plaintiff's contract.
131. He placed reliance on Mogul Steamship Co. Vs. McGregor, Gow & Co. and others (1891) (4) All ER 263 (HL) which recognises that, in the absence of unlawful means, a trader could not be held liable for these torts if his actions be motivated by this own gain in furtherance of free competition.
132. Mr. Chagla has also drawn my attention to the judgment in People's Security Life Insurance Co. Vs. Milton S. Hooks (1988) 322 N.C. 216; 367 S.E. 2nd 647. In this case the Supreme Court of North Carolina held that a claim for tortious interference would not be lie where the defendant had only offered the plaintiff's employees job opportunities which induced them to terminate their terminable at will contracts and by locating these employees in their previously assigned territories. The Court observed as under:
"We conclude that the hiring and placing of the plaintiff's former employees by the defendant for the purpose of developing the territory assigned to him by a company competing with the plaintiff amounted to justifiable interference. In reaching this conclusion we recognised and apply the general principle that interference may be justified when the plaintiff and defendant are competitors."
The Court also observed that:
"Competition is the life of trade. Every act done by a trader for the purpose of diverting trade from a rival and attracting it to himself, is an act intentionally done, and, insofar as it is successful to the injury to the rival in his business.......to hold such an act wrongful and illegal would be to stifle competition. Trade should be free and unrestricted and hence every trader is left to conduct his business in his own way and cannot be held accountable to a rival who suffers a loss or profits by anything he may do, so long as the methods he employs are not of a class of which fraud, misrepresentation, intimidation, coercion, obstruction or molestation of the rival or his servants........are instances."
133. The reliance was also placed on Mosler Safe Company Vs. Lamson Corpotion; (1981) U.S. District Lexis 9894 in which the Court observed as under:
"This tort requires a showing that defendants sole motive was to inflict injury and that the defendant employed unlawful means to do so.. the mere interference of a competitor in another's business conduct creates no cause of action."
134. On analysis of various American judgments cited at bar, the following are the important factors which are relevant in order to determine the guilt of the defendants:
(a) Defendant's motive or conduct;
(b) Whether the defendant was acting legitimately for business purposes or his actions were designed to injure the plaintiff;
(c) The competition in business constitutes justifiable interference and is not actionable so long as it is carried out in furtherance to one's own interest and by means and where the interests are pursued by adopting lawful means.
135. Mr. Chagla also cited a number of English judgments to demonstrate that English Law also preserves the sanctity of free competition. He placed reliance on Mogul Steamship Co. (Supra) in which their Lordships held as under:
"It is not illegal for a trader to aim at driving a competitor out of trade, provided the motive be his own gain by appropriation of the trade, and the means he uses be lawful weapons."
136. In Ambience Space Sellers Limited & Others Vs. Asia Industrial Tech- nology private Limited & Another, learned Single Judge of Bombay High Court S.N. Variava, J. in notice of Motion No.2395 of 1996 in Suit No. 3283 of 96 reported in 1998 PTC 18 observed as under:
"Of course any act honestly done by a person in furtherance of his own trade/profession, will not amount to a Tort of Inducing breach of contract, merely because it has induced such a breach. This because free and fair competition cannot be curtailed. The difference in all such cases is whether the act is done solely to carry on one's own trade or whether the act was done with intent to induce a breach or profiteer from somebody else's efforts."
137. Mr. Chagla also placed reliance on Asia Industrial Technology Pvt. Ltd. & Anr. Vs. Ambience Space Sellers Limited Decision dated 1.8.1997 of A.P. Shah, J. and B.B.Vagyani, J. in appeal No. 405 of 1997. He submitted that this decision not only does not disturb the decision of Variava, J. but also recognises justification as a defense to this tort.
138. Mr. Chagla submitted that the plaintiffs have miserable failed to prove any conspiracy on the part of the plaintiffs to damage the defendants and he placed reliance on Mulcahy Vs. the Queen; 1868 LR (lll) 306. The relevant portion reads as under:
"A combination wilfully to do an act causing damage to a man in his trade or other interests is unlawful and if damage is caused, is actionable as a conspiracy. To this there is an exception where the Defendants' real and predominant purpose is to advance their own lawful interests in a matter in which they honestly believe that these interests would directly suffer if the action against the plaintiff was not taken."
139. The definition of 'Conspiracy' enunciated in Salmond's Law of Torts 15 Ed., has been accepted by the Hon'ble Supreme Court of India in Rohtas Industries Vs. Union of India; , the Court observed that, where there are mixed motives, liability will depend on ascertaining which is the predominant object or the true motive or the real purpose of the defendants. He submitted that the plaint itself does not disclose any unlawful acts having been committed by using or adopting unlawful means by the defendants.
140. Mr. Chagla submitted that the suit filed by the plaintiffs is ostensibly for the protection of their economic interests, but in fact as demonstrated above, their purpose is a nefarious one. Mr. Chagla further submitted that in the case of the plaintiffs' employees, the enforcement of a post-employment contract restraint which restricts the freedom of the plaintiffs' employees to obtain improved job opportunities is clearly void and unenforceable to their knowledge. He also contended that the plaintiffs are guilty of making false statements to their knowledge and have attempted deliberately to mislead this Court.
141. He submitted that the damage, if any, has been incidentally caused to the plaintiffs which is not actionable, because the plaintiffs have failed to show that the defendants have indulged in any tortious or unlawful acts. On the contrary, the defendants have acted solely in furtherance of their own legitimate business interests.
142. Mr. Chagla submitted that this suit has been filed to stifle free competition. He also placed reliance on the following observations of their Lordships in Gujarat Bottling Company's case (supra). The relevant portion reads as under:
"there is a long history of trade rivalry between these multinational corporations" (Pepsi and Coca-Cola) and their wars are fought on the economic plane but some of the battles spill over the courts of law."
143. He submitted that the present battle is one which should have never disturbed a Court of law and should have been ought to be relegated to the market place.
144. I have heard the arguments of the learned counsel for the parties at length. I have also carefully examined the pleadings and documents on record.
145. The grant of injunctions is an equitable relief and various factors have to be carefully taken into consideration before granting it.
146. On consideration of the totality of the facts and circumstances of this case, prima facie, in my considered opinion, the plaintiffs are not entitled to injunction for the following reasons:
(I) Admittedly in the service and employment contracts of the plaintiffs, there is a negative covenant clause, restraining an employee from engaging or undertaking employment for 12 months after he has left the plaintiffs' service. It is well settled that such post termination restraint, under Indian Law, is in violation of Section 27 of the Contract Act. Such contracts are unenforceable, void and against the public policy. What is prohibited by law cannot be permitted by Court's injunction.
(II) All crucial, vital and important averments of the plaint have been specifically denied in the written statements. The defendants on the basis of documentary evidence have tried to discredit the veracity and truthfullness of the plaintiffs aver ments. Some of the averments of the plaintiffs which have been specifically denied in the written statements are recapitulated as under:-
(II) (a) Mr. Jitender Nayyar : In this case the plaintiffs have alleged that the defendants have induced him to break his contract with Pepsi. In the written statements, this averment is pecifically denied and it is incorporated, that he left the plaintiffs' employment in December, 1995 and joined Ranbaxy aboratory where he worked from January, 1996 to December, 1996. It is only after working for one year that he joined the employment with defendant No.8 on 6.1.1997.
(II) (b) Mr. Gaurav Duggal : The same allegations were made against the defendants with regard to Mr. Gaurav Duggal. In the written statements, it is clearly mentioned that Mr. Gaurav Duggal was transferred to a remote part of Gujrat. He did not want to shift and chose to leave the employment of the plaintiffs. Mr. Duggal was given a letter of release by Pepsi and it was only after this that he joined the employment of defendant No.8.
(II) (c) Mr. Johny George : Similar allegations were made by the plaintiffs against the defendants in the case of Mr. Johny George. In the written statements it is mentioned that he joined the employment of defendant No.8 in response to a public advertisement dated 18.12.1996.
(II) (d) Mr. Sailesh Joshi and Mr. Sushil Kr. Jain : Similar allegations were made against the defendants with regards to these two employees also. In the written statement it is clearly mentioned that these two employees joined defendant Nos. 5 and 6 only after completing their notice period on the terms of their contract of employment.
(II) (e) Mr. Bipaschit Bose: The defendants while denying the averments of the plaint have specifically incorporated in their written statements that he was not an employee of the defendants. He is a professional and independent consultant who runs his placement agency.
(II) (f) Similarly the averments regarding Hotel Hyatt Regency have also been specifically denied. In the written statements it is clearly mentioned that Hotel Hyatt Regency stocked and served amongst other beverages, both Pepsi and Coke and was not and is not a one product hotel.
(II) (g) Goa Bottling Company : The allegation that the entire team of GBC comprising of 61 sales officer resigned to take up employment with the defendants is factually incorrect. According to the written statements of the defendants, only three out of 61 individuals preferred to work for GBC.
(II) (h) Kanpur Sales Team : In reply to the allegation, defendants 9,10,11 and 12 in conspiracy with defendant No. 16 took away the entire Kanpur Sales Team of the plaintiffs with a view to directly injure the plaintiffs. In reply to this allegation, it is submitted that only three employees of the plaintiff have joined employment with the defendants. It is further incorporated in the written statements and none of these three employees breached their respective contracts of employment with the plain tiffs. The contracts of employment were terminable upon three months notice or salary in lieu thereof.
147. These instances can be multiplied. In view of the categorical denial in the written statements, at this stage, it is difficult for the court to ascertain the veracity and truthfulness of the averments and allegations mentioned in the plaint. This can only be ascertained after the parties have been given an opportunity of adducing their evidence and opportunity to cross-examine the witnesses.
148. I do not deem it appropriate to give my findings on the aforesaid averments and submissions. Any expression of definite opinion at this stage may eventually prejudice the trial of this suit.
149. However, I deem it appropriate to observe that equitable relief of injunction can only be granted if the plaintiffs have approached the Court by disclosing the whole truth and have inspired implicit trust and confidence of the Court by demonstrating their conduct.
150. The plaintiffs are not entitled for injunction for the following reasons also :
(a) The injunction, as prayed for by the plaintiffs, if granted would certainly have a direct impact of curtailing the freedom of employees for improving their future prospects and service conditions by changing their employment.
(b) Rights of an employee to seek and search for better employment cannot be restricted by an injunction.
(c) Injunction cannot be granted to create a situation such as "Once a Pepsi employee, always a Pepsi employee". It would almost be a situation of `economic terrorism' or a situation creating conditions of `bonded labour'.
(d) Freedom of changing employment for improving service conditions is a vital and important right of an employee, which cannot be restricted or curtailed by a Court injunction.
(e) Inter-changeability of service is an accepted norm of Service Jurisprudence which cannot be curtailed by a Court injunction.
(f) 'Employees' right to terminate their contracts also cannot be curtailed by Court injunction.
(g) An injunction can be granted only for protecting the rights of the plaintiffs, but cannot be granted to limit the legal rights of the defendants.
(h) An injunction cannot be granted where the Courts have a doubt in the credibility, veracity and truthfulness of the plaintiff's version.
(i) An injunction also cannot be granted in a case where the Court directly or indirectly gets the impression that the injunction has been sought for extraneous considerations or oblique motives.
(j) Rough and tumble of the business including stiff competition has to be faced in a free market economy. The problems which should be settled in the market place cannot be brought to Law Courts or settled by a Court injunction.
(k) In economic matters, while granting injunction, business ealities have to be taken into consideration. The employees seek betterment and advancement of their careers, while they are in service. It is impracticable and unrealistic to artificially create a situation by a Court injunction when employees would first leave the employment and then look for better service conditions and job opportunities elsewhere.
(l) Most of the senior employees of the plaintiffs or the defendants were working with other multinationals or business organisations. They joined the plaintiffs or the defendants because attractive salaries and better service conditions were offered by them. The plaintiffs themselves have engaged a large number of employees who were working in other multi national or business organisations. They were appointed because they had work experience with other organisations. The same plaintiffs are not justified in seeking an injuncion so that their employees may not join the defendants. All that is to be seen is whether the defendants had adopted unfair means in advancing their business interests or not.
(m) In a free market economy, everyone concerned, must learn that the only way to retain their employees is to provide them attractive salaries and better service conditions. The employees cannot be retained in the employment perpetually or by a Court injunction.
(n) Free, fair and uninterrupted competition is the life of the ade and business. This freedom in free market economy has to be zealously protected in the larger interest of free trade and business. No injunction cane be granted which is likely to restrict or curtail this freedom.
(o) It is difficult to hold at this stage that the predominant object and paramount consideration behind the actions of the defendants was designed to injure the plaintiffs.
(p) At this stage, it is also difficult to hold that the defendnts resorted to business practices which are unethical, illegal and constitute tortious interference in the business of the plaintiffs.
151. On consideration of the totality of the facts and circumstances, the aintiffs have not made out a strong prima facie case for the grant of injunction at this stage. The balance of convenience is also not in favour of the plaintiffs. No irreparable injury is likely to be caused to the plaintiffs.
152. The plaintiffs application under Order 39 Rules 1 & 2 CPC at this stage being devoid of any merit is rejected. However, looking to the important questions of law of general public importance which are involved in the suit, I deem it appropriate that the hearing of the suit be expedited and accordingly, I direct that the suit be listed before the Court for framing of issues on 23.9.1999. The list of witnesses be furnished by the parties within four weeks. The suit shall be listed for recording of the evidence from 2nd to 5th November, 1999. The preliminary submissions ad- vanced by Mr. D.Dave, Sr. Advocate for the plaintiffs 9-16 shall be decided at the time of hearing of the suit.
153. Before parting with this case, I would like to place on record my deep appreciation for the extremely able assistance provided by the learned counsels appearing for the parties.
Print Page
(b) Rights of an employee to seek and search for better employment cannot be restricted by an injunction.
(c) Injunction cannot be granted to create a situation such as "Once a Pepsi employee, always a Pepsi employee". It would almost be a situation of `economic terrorism' or a situation creating conditions of `bonded labour'.
(d) Freedom of changing employment for improving service conditions is a vital and important right of an employee, which cannot be restricted or curtailed by a Court injunction.
(e) Inter-changeability of service is an accepted norm of Service Jurisprudence which cannot be curtailed by a Court injunction.
(f) 'Employees' right to terminate their contracts also cannot be curtailed by Court injunction.
(g) An injunction can be granted only for protecting the rights of the plaintiffs, but cannot be granted to limit the legal rights of the defendants.
(h) An injunction cannot be granted where the Courts have a doubt in the credibility, veracity and truthfulness of the plaintiff's version.
(i) An injunction also cannot be granted in a case where the Court directly or indirectly gets the impression that the injunction has been sought for extraneous considerations or oblique motives.
(j) Rough and tumble of the business including stiff competition has to be faced in a free market economy. The problems which should be settled in the market place cannot be brought to Law Courts or settled by a Court injunction.
(k) In economic matters, while granting injunction, business ealities have to be taken into consideration. The employees seek betterment and advancement of their careers, while they are in service. It is impracticable and unrealistic to artificially create a situation by a Court injunction when employees would first leave the employment and then look for better service conditions and job opportunities elsewhere.
(l) Most of the senior employees of the plaintiffs or the defendants were working with other multinationals or business organisations. They joined the plaintiffs or the defendants because attractive salaries and better service conditions were offered by them. The plaintiffs themselves have engaged a large number of employees who were working in other multi national or business organisations. They were appointed because they had work experience with other organisations. The same plaintiffs are not justified in seeking an injuncion so that their employees may not join the defendants. All that is to be seen is whether the defendants had adopted unfair means in advancing their business interests or not.
(m) In a free market economy, everyone concerned, must learn that the only way to retain their employees is to provide them attractive salaries and better service conditions. The employees cannot be retained in the employment perpetually or by a Court injunction.
(n) Free, fair and uninterrupted competition is the life of the ade and business. This freedom in free market economy has to be zealously protected in the larger interest of free trade and business. No injunction cane be granted which is likely to restrict or curtail this freedom.
(o) It is difficult to hold at this stage that the predominant object and paramount consideration behind the actions of the defendants was designed to injure the plaintiffs.
(p) At this stage, it is also difficult to hold that the defendnts resorted to business practices which are unethical, illegal and constitute tortious interference in the business of the plaintiffs.
Delhi High Court
Pepsi Foods Ltd. And Others vs Bharat Coca-Cola Holdings Pvt. ... on 30 July, 1999
Equivalent citations: 1999 VAD Delhi 93, 81 (1999) DLT 122, 1999 (50) DRJ 656
Bench: D Bhandari
ORDERDalveer Bhandari, J.
1. This Order shall dispose of application I.A. No. 3214/98 under Order 39, Rules 1 & 2 read with Section 151 CPC.
2. The plaintiffs have filed a suit for declaration and permanent injunction against the defendants. In this suit the plaintiffs have also prayed for the grant of an injunction during the pendency of the suit.
3. The plaintiffs are engaged in manufacturing, marketing and sale of soft or drink beverages, under the trade mark "Pepsi" all over the world including India. For the sake of convenience the plaintiffs are jointly referred as" Pepsi" and the defendants as "Coke"
4. It is alleged that main competitor of Pepsi in the soft drink beverage business in Coke. In India also, the main business rivals of the plaintiffs are the defendants, Coke. It is incorporated in the plaint that the soft drink business worldwide is extremely competitive and the business rivalry between Pepsi and Coke is fairly intense all over. Both the group of companies spend a large amount of money time and efforts to protect and develop their respective business interests. In India also, both Pepsi and Coke have spent a considerable amount of money on advertising and marketing of their products.
5. It is incorporated in the plaint that till recently these actions of aggressive sales, promotion and advertising were within the legal parameters and within acceptable worldwide and Indian marketing practices. However, over the past six months the plaintiffs have found that the defendants have been resorting not only to unethical business practices, but the defendants' actions in most cases constitute tortious interference in the business of the plaintiffs.
6. It is further mentioned in the plaint that the defendants have entered into a conspiracy to undertake concerted action against the plaintiffs to damage the plaintiffs' business interests in an unethical or illegal manner. It is alleged that the defendants are guilty of the tort of conspiracy too.
The plaintiffs have broadly categorised the illegal and unethical actions of the defendants in six heads, which are reproduced below:
(i) Inducing by unlawful means, groups of key marketing and other strategic employees of the plaintiffs to breach and/ or terminate their employment contracts with the plaintiffs and enter into employment contracts with the defendants.
(ii) Inducing by unlawful means, employees of Pepsi's independent bottlers, into breaking/ breaching their contracts.
(iii) Inducing by unlawful means, the independent business consultants under contract with the plaintiffs to break/breach their contracts with the plaintiffs.
(iv) Inducting by unlawful means, the distribution partners of the plaintiffs to breach their distribution agreements/arrange ments with the plaintiffs and enter into similar greements/arrangements with the defendants.
(v) Inducing by unlawful means, institutional accounts to breach their marketing and sponsorship agreements/arrangements with the plaintiffs and enter into similar agreements/arrangements with the defendants.
7. It is alleged that Pepsi started its business operations in India in the year 1990. It is also mentioned that Pepsi had literally commenced its beverages business in India from a scratch. Considerable investments were made to establish its infrastructure, which run into over 300 million U.S. Dollars. It is stated, that earlier the dominant player in the soft drink beverage industry in India was Parle Exports, the owner of trade marks Thums Up, Goldspot, Limca, Bisleri, Rim Zim etc. It is stated that Parle had enjoyed a national market share of about 70% of the soft drink beverage industry.
8. It is stated that Coke's entry strategy into the market was radically different. Coke entered the Indian market by acquiring Parle trademarks, from Parles and subsequently the entire infrastructure associated with the Parle trade mark. It is mentioned that Pepsi's success has been owing to a strong professional, well trained and motivated technical, finance, production and sales team that Pepsi has put together at its various locations all over India. It is alleged that in furtherance to the conspiracy, Coke started approaching the employees of Pepsi with inducements to terminate their existing contracts with Pepsi and enter into an employment contract with Coke. It is further mentioned that in certain cases Coke has successfully approached and induced some of Pepsi's employees into illegally terminating their existing contracts and entering into new employment contracts with coke. It is also incorporated in the plaint that initially these approaches were sporadic but over the last six months, it is clear that Coke has changed its strategy and has now decided to consciously target and approach the key employees of Pepsi at various locations in India. In the plaint, details of the six officials of Pepsi have been given, who were successfully approached by Coke and induced into terminating their employment contracts and confidentiality undertakings with Pepsi.
9. It is incorporated in the plaint that in or around December 1997 Pepsi approached one of the Territory Development Manager of the Pepsi in Kanpur, Mr. Kochin Wu. It is mentioned that Coke had approached Mr.Wu with and offer of increasing his salary and emoluments substantially in case he moved over along with his sales team to Coke. It is mentioned that the employment contract, inter alia, contained a provision that the contract can be terminated only by a three months notice. The employees have also executed a confidential undertaking in favour of Pepsi, wherein they have undertaken, inter alia, to keep all information, knowledge, data etc. acquired by them during the course of their employment with Pepsi and have also undertaken not to take up any employment with the competitor of Pepsi within one year of leaving Pepsi's employment for any reason whatsoever.
10. It is alleged that on 7.2.1998, the sales team of Pepsi was given an employment offer and was asked to join Coke immediately. The sales team members individually issued letters of termination of employment to Pepsi. The letters purported to terminate the employment contract forthwith, were not in accordance with the terms of the employment contract, which require a three months termination notice.
11. For various reasons 7 out of 10 sales team members changed their minds and decided to continue to work for Pepsi, and issued letters to Coke stating that they were retracting their acceptances. However, out of the remaining 3 members, including the lead person, Mr. Wu remained with Coke.
12. From the sequence of events Pepsi tried to establish that Coke had entered into a conspiracy with a specific objective to undertake tortious and illegal action against Pepsi and cause loss and damage to it.
13. It is also alleged that Coke has also approached several key employees of Pepsi, at Pepsi's various locations and have unabashedly made offers and inducements to their key employees from time to time. It is also alleged that on or about 10.2.1998 one Mr. Bipaschit Bose tried to contact many employees of Pepsi and even went to the extent of offering blank cheques, so that they would be induced to terminate their existing contracts with Pepsi and join Coke. In this process Coke has managed to successfully wean away some employees of Pepsi.
14. It is also incorporated in the plaint that the soft drink beverage industry depends heavily on a strong, well trained and motivated sales team, because the nature of business requires a constant interaction between the manufacturer and trade, distributors and retail outlets. The trade has to be regularly serviced to ensure adequate supplies of the products and to maintain market share. This onerous responsibility lies with the sales team. Accordingly, in the event Pepsi was to lose the entire sales team as was sought to be achieved by Coke in Kanpur, the loss and damage would be much greater than the mere loss of money spent on training of the sales personnel. The loss would be in terms of loss of time involved in replacing the sales team and consequent loss of business in the meanwhile.
15. It is also alleged that Goa Bottling Private Ltd. was earlier the franchisee bottlers of Coke with anufacturing facilities located in Goa and was servicing the Goa territory. The existing franchise contract between Goa Bottling Company and Coke terminated in accordance with the terms thereof on 22.11.1997. Upon the termination of the existing contract with Coke, Goa Bottling Company commenced production and distribution of Pepsi with effect from 23.11.1997. It is also mentioned that the entire sales team of Goa Bottling Company, comprising of 61 sales staff resigned en bloc from the employment with Goa Bottling Company on 21.11.1997 and took up employment with Coke and commenced working with Coke immediately. It is alleged that these employees did not give any notice of termination to Goa Bottling Company and their resignation was illegal and contrary to the terms of the employment contract with Goa Bottling Company. It is also incorporated that Coke had contacted each member of the sales team and induced them into illegally terminating their employment contracts with Goa Bottling Company and entering into employment contract with Coke. It is further alleged that Coke was fully aware that after the termination of the franchise agreement between Goa Bottling Company and Coke, Goa Bottling Company intended to manufacture and distribute the Pepsi products. It is alleged that the aforesaid action of Coke was carried out pursuant to a conspiracy to cause injury and prejudice the business of Goa Bottling Company and therefore, jeopardise the business of Pepsi.
16. It is also mentioned in the plaint that Pepsi had engaged the services of one 21st Century Media Pvt. Ltd. as their sports consultant. It is stated that the Sports Consultant was representing Mr. Javagal Srinath, one of the leading Indian Cricketers and it was intended to sign up Mr. Srinath with Pepsi whereby he would endorse the Pepsi products. But later it transpired that Coke was trying to induce Mr. Srinath into severing his contract with the Sports Consultant. It is also alleged that Coke was successful in inducing Mr. Srinath into signing with Coke, in complete violation of the aforesaid contract.
17. It is alleged that in addition to Sports, it is a part of Pepsi's global marketing strategy to market its products through sponsorship of major international and national music events in India. This is in consonance with the worldwide image of the beverage Pepsi being a fun product for the youth. It is stated that Pepsi had entered into an exclusive agreement dated 1.8.1996 with music consultant. In or around February 1998 Coke through its representative approached the Music Consultant. It is also alleged that Mr. Apurvi Seth, General Manager (Marketing) of Coke approached the Music Consultant and asked him to terminate his exclusive contract with Pepsi and to Start working with Coke.
18. On the basis of the aforesaid sequence of events Pepsi tried to make out a case against Coke and submitted that the actions of Coke amounted to tortious interference in the business of Pepsi. Pepsi had also mentioned that Plaintiff No.3 had an agreement with one Shrinathji Sales for distribution of Pepsi products in various long distance trains, emanating out of Ahmedabad Railway station. It is alleged that in March 1998, the officials of Coke, approached the said distribution partner of Pepsi and offered to pay an amount of Rs. 25 lakhs plus for the fulfillment of any other requirements of the distribution partner in consideration of the said distribution partner breaking his contract with Pepsi. However, the said distribution partner refused the offer and wrote to Pepsi vide letter dated 9.3.1998 informing it of the incident.
19. It is stated that Pepsi had an exclusive agreement with Hyatt Regency of New Delhi, that it would use only the Pepsi products. It was a fixed term contract and the hotel could not terminate the said agreement. It is further stated that at the behest of Coke, Hotel Hyatt Regency, terminated the said contract with Pepsi.
20. On the strength of the aforesaid sequence of events Pepsi tried to establish a prima facie case that Coke had offered inducements to various persons to breach their exiting contracts with Pepsi and prayed that the defendants be restrained from employing in any manner, offering employment to or inducing any employee of Pepsi to breach the existing employment contract and other obligations with Pepsi, or from in any manner interfering with and/or hindering the business of Pepsi through tortious actions and illegal means.
21. This Court issued summons to the defendants. The defendants in their separate written statements denied all averments, contentions and submissions raised in the plaint. A number of preliminary objections were taken such as (i) misjoinder of the plaintiffs and causes of action, (iii) nonjoinder of necessary parties, (iv) that the pleadings are frivolous/vexatious, and (v) the suppression of material facts. The defendants submitted that the suit is bad and liable to be dismissed in limine. It is also submitted that this suit is an abuse of the process of Court.
22. The defendants have also taken an objection that Mr. Pradip Agarwala and Mr. Purvez Billimoria, lacked authority to institute the plaint. The plaintiff have not placed on record any resolution passed by the Board of Directors of the company authorising Mr. Agarwala and Mr. Billimoria to institute the present suit. In the absence of any such expressed authority, presentation of the present plaint, on behalf the plaintiff companies, is clearly by unauthorised persons and the plaint has not been signed and verified by the competent person as required by Rules 14 and 15 of of Order VI read with Chapter IV of the Delhi High Court (Original Side) Rules. It is submitted that the plaint is liable to be rejected on this ground alone.
23. It is also mentioned in the written statements that the pleadings in the plaint are frivolous and/or vexatious and as such are liable to be struck down. It is stated that Pepsi is guilty of making indiscriminate allegations against Coke without specifying, which, of the actions of the defendants constitutes tort. It is also mentioned in the written statements that the allegations of conspiracy are also entirely devoid of any particulars.
24. It is also alleged that Pepsi is guilty of suppressio-veri and suggestio-falsi. It is further alleged that the material facts have been deliberately suppressed from this Court. A number of instances have been enumerated to establish that Pepsi has not stated the facts correctly. It is alleged that Pepsi has suppressed the material facts and has based the plaint on incorrect facts. In the written statements it is also mentioned that one Me. Gaurav Duggal was given a letter of release by Pepsi and it was only after this, he joined the employment of defendant No.8. The plaintiffs have suppressed this material fact from this Court. Similarly, another example was also mentioned in which Mr. Johnny George joined the employment of defendant No.8 in response to a public advertisement dated 18.12.1996. Similarly Mr. Jitendra Nayyar, whom the defendants are alleged to have induced into breaking his contract with Pepsi also left the plaintiff's employment in December 1995 and joined Ranbaxy Laboratories, where he worked from January 1996 to December 1996. It was only after this, that he joined the employment of defendant No.8 on 6.1.1997. Similarly Mr. Sailesh Joshi and Mr. Sushil Kumar Jain joined defendant Nos. 5 & 6 respectively, only after completing their notice period term of their contract of employment. It is also mentioned in the written statements that the true intent and purpose of this suit was to secure the enforcement of a term entered into by the plaintiffs with their employees, which is void and unenforceable.
25. It is also incorporated in the written statements that the following are the undisputed or undisputable facts:-
(a) that the salaries and perquisites offered by the defendant Nos. 1 to 8 are higher and better than those offered by any of the plaintiffs;
(b) that the contracts of service entered into by the plaintiffs with their employees are terminable upon three months notice or ayment of salary in lieu thereof;
(c) that such of the employees who joined the services of any of he defendant Companies have been engaged at salaries comparable to or paid to other employees of those defendants; and
(d) that the contracts entered into by the plaintiffs with their employees contain a clause by which the employee is restrained for a period of 12 months following his cessation of employment with Pepsi from taking up employment with any competing beverage company.
26. It is also mentioned in the written statement that while denying the averments in the plaint, in case the defendants have at all enticed the employees of the plaintiffs by offering them better terms, salaries and perquisites, by doing so these defendants have not committed any actionable wrong, but have acted only in furtherance of their egitimate business interests. It is also mentioned in the written statements that to restrain the defendants from doing so would be to stifle free competition. Similarly, these defendants as employers were entitled to the most meritorious employees and the employees similarly cannot be legitimately denied the opportunity of bettering their prospects and service conditions. It is further mentioned that the plaintiffs have sought to do so contractually by introducing the above clause which is void and unenforceable as being in violation of Section 27 of the Contract Act.
27. The defendants have mentioned in the written statements that the allegations contained in the plaint do not satisfy the requirement of any of the torts mentioned therein. The tort of conspiracy, as the plaint acknowledges, requires the use of unlawful means, but the allegations in the plaint do not set out any means used by the answering defendant or any of the defendants as are unlawful. It is stated that even where the means are unlawful, the tort is committed only, where the predominant purpose of the actions are designed to injure another. No wrong is otherwise committed and no action will lie where the real purpose is to advance the business interests of the defendants, although a damage may ensue to the plaintiffs.
28. As far as the tort of inducement of breach of contract is concerned, it is submitted that the tort is committed only where the alleged tortfeasor approaches the contractor, or where the contract is not terminable, or where the means are unlawful or where the predominant motive is to injure the other party to the contract. It is submitted that the allegations contained in the plaint, do not satisfy any of the requirements to justify the complaint that the answering defendant or any of the other defendants have committed the tort of inducement of breach of the contract.
29. In the written statements the defendants have denied that they have interfered with contractual obligations of the employees of the plaintiffs. It is submitted on behalf of the defendants that some of the reliefs prayed for, are by their very nature extremely wide and not cannot and ought not to be granted. It is further submitted that the Courts would only grant reliefs as would be just and proper in the circumstances of the case. The effect of granting relief (c) would be to prevent the defendants 1 to 8 from employing or offering employment to any of the employees of the plaintiffs and would prevent the defendants from dealing with any person who had any personal relationship or association with the plaintiffs.
30. Similarly if relief (d) is granted, it is submitted that it would result in introduction of a new clause in all existing contracts between the plaintiffs and their independent contractors, bottlers, consultants, distributors and/or other trade associates by which clause, they would be prohibited for all times and in all places from doing any business with the defendants or, any person similarly placed in the same trade or business. It is also incorporated that even though such contracts may be limited in time, relief in terms of prayer (d) will operate for all times to come and therefore, even after completion or determination of the contracts. It is stated that for the same reason reliefs (e) and (f) are also extremely wide and ought not be granted.
31. Regarding the main relief of prayer (a) and (b) the defendants have mentioned that the said reliefs are wholly uncalled for and this Court should not be required to pass a decree for declaration, declaring that the defendants have committed a tort of conspiracy or a tort of interference. It is submitted that the tort is actionable in claims for damages and injunctions. It is stated that the declaratory relief of the type prayed for in prayers (a) and (b) is unknown to law and the plaintiffs are not entitled to the reliefs as prayed for in the present form.
32. It is mentioned that competition is not only justified and permissible in any free market economy, but is also in the interest of millions of consumers. It has been specifically denied that for the past six months or so the defendants have been resorting to business practices which are unethical, illegal, and constitute tortious interference in the business of the plaintiffs. It is also denied that the practices and actions referred to in the plaint constitute tortious interference in the business. It is also incorporated that the answering defendant or the other defendants are only interested in furthering their own business interests, which in the circumstances are wholly justified and proper.
33. It is also mentioned in the written statements that the answering defendant and other defendant companies are furthering their business interests by employing only such number of people as they need and adopting such measures as are common to all business establishments. It is further mentioned that the defendants had no intention to damage the business interests of the plaintiffs. It is also incorporated that the plaintiffs are apprehensive of meeting stiff competition, and precisely for that reason the plaintiffs have filed the present suit, which is nothing but an attempt to stifle healthy competition.
34. The plaintiffs cannot have any grievance because the defendant companies are entitled to further improve their own business interests. The plaintiff, (a leading rival as per own admission in the market), cannot have a grievance, even if its market share falls or it is removed out of the competition altogether. It is also incorporated that defendants 1 to 7 have invested nearly Rs. 900 Crores till date, in furtherance of their business interests. Therefore, it is clear that the defendant companies have been accentuated by their interests of furthering their business and certainly not with the intent of causing or damaging the plaintiffs in any manner.
35. As alleged, it is specifically denied that the answering defendant or s employees have entered into any conspiracy, in any manner. It is specifically denied that the answering defendant has been approaching the employees of the plaintiffs at all levels much less with inducement to terminate their existing contracts with Pepsi and to enter into employment contracts either with the answering defendant or any of the other defendant companies. It is also denied that the answering defendant on approach has successfully induced, some of the employees of the plaintiffs or their business associates so as to illegally terminate their exiting contracts and enter into new employment contracts with the answering defendant. It is mentioned that defendants 1 to 8 employ over 2000 employees, of whom 1800 employees have been employed between August 1997 and April 1998. In the six months prior to the filing of the suit, the period during which the plain-tiffs have alleged tortious wrongs committed by the defendants, a mere handful of employees of lower to middle rank have been employed by the concerned defendants who were earlier employed by the plaintiffs. They were not key employees in any case.
36. It is incorporated in the written statements that these employees have determined their contracts on their own volition prior to joining the defendant companies. It is also mentioned that Mr. Gaurav Duggal and other employees have been employed only because of their skills, ability and capacity and not because they allegedly had any secret or confidential information relating to the plaintiffs.
37. In the written statements the defendants craved leave of the Court to set out true factual sequence as the narration in the plaint is a gross distortion of facts and contentions of the plaintiffs and consequently the suit deserves to be dismissed on this ground alone.
38. The sequence given by the defendant is as under:-
1) The answering defendant submits that defendant No.14, who was the Chief Executive Officer of Amitabh Bachan Corporation Ltd. (ABCL) from June 1995 to September 30,1997, apparently decided to leave the employment of ABCL in April 1997 and this fact was widely reported in the media. In early August 1997, the answering defendant was approached by a former Chairman of the Hindustan Lever Limited who forwarded a copy of defendant No.14's resume along with a request that defendant No.14 be considered for a job with the answering defendant.
2) Defendant No.14 met with executives of the answering defend ant in the first week of September 1997 and had further interviews with senior executives of the answering defendant based outside India later that month.
3) On September 26,1997 the answering defendant intimated to defendant No.14 made a formal offer to defendant No.14's on October 6,1997. The answering defendant received defendant No.14 acceptance of the offer on 6th October,1997.
4) The answering defendant states it had never been informed by defendant No.14 that he was in discussions with the plaintiffs.
39. It is mentioned in the written statements that the members of Kanpur sales team of the plaintiffs had approached the defendants for improving their service conditions and furthering their future prospects.
40. The defendants have denied that Mr. Bipaschit Bose was an employee of any of the defendant companies. It is mentioned that the plaintiffs are fully aware that Mr. Bose is a professional consultant who runs a placement agency and a part of his business introduces potential employers to potential employees. It is specifically denied that the defendants have induced Kanpur sales team or any other employee to leave Pepsi or that the answering defendant or other defendants had committed any tortious actions.
41. It is also incorporated in the written statements that the sequence of events set out in the plaint is incorrect and an attempt has been made to mislead this Court.
42. It is stated that Goa Bottling Company was an erstwhile bottler of Parle, who become a bottler or Coke in 1993, when Coke acquired various trade marks and they continued to be a bottler of Coke involved in preparing, packaging and distributing non-alcoholic beverages under the trade marks owned by Coke till 22.11.1997.
43. In the written statement filed on behalf of defendant No.8 it is incorporated that several applications were received which were scrutinised by the officials of Coke and it was decided to select only those who were found fit. It is also mentioned that the defendant companies were not aware of the existence of any restrictive clauses in the contracts of employment between these employees and Goa Bottling Company (for short "GBC") prohibiting the said employees from leaving the services of GBC. It is further mentioned that when the employees were asked as to when they could join, they said that they could do so immediately. As such, no fault could be found against the answering defendant.
44. It is also mentioned that the averment in the plaint, that the entire sales team of GBC was employed by defendant No.7 was incorrect. The strength of the sales team of the GBC was 100 and not 61 as mentioned in the plaint. 26 out of 61 employees were independent route agents and not employees of GBC or any of their associates, and they were being remunerated as independent contractors on a commission basis. Therefore, it is incorrect to suggest that they were employees of GBC. Accordingly, the question of issuing notices of termination by them could not arias. It is further mentioned that out of the remaining other alleged employees of GBC, six were trainees/temporary employees and as such were not required to give notices of termination. In any event, it is incorrect to state that the defendants or any of them had employed the entire sales team of GBC.
45. Defendant No.8 has also denied that GBC had made it clear to Coke that they did not intend to renew/continue their contract with Coke. Defendant No.8 has also denied that Mr. Steve Heath, Mr. Michel Beale, Mr. Prakash Wakankar, Ms. Harsimran Singh and Ms. Anjali Mahajeli camped in Hotel Golden Tulip at Kanpur before the imminent termination of the franchise agreement of GBC with Coke. It is denied that the presence of these persons was premeditated or had the object of carrying out an alleged corporate raid.
46. It is also denied that a high powered team was in Goa with the objective of inducing the employees to breach their employment contracts with GBC. It is also denied that Coke offered sales team inducement either in the form of higher remuneration or other benefits. It is also denied that there was any intention of causing loss, damage, injury and/or prejudice to GBC.
47. In the written statements it is mentioned that Coke has aggressive advertising and marketing programmes around the world, including India, which includes sponsership of local and national music events, as well as sports events. It is stated that Coke works with several music companies such as HMV, Sony Music, Music Channels, etc and they have entered into arrangements with them directly or with the help of event management agencies. It is also mentioned that Coke did not have any knowledge of any contract or arrangement between the plaintiffs and the Music Consultants, DNA Network Pvt Ltd etc. It is specifically denied that in or around February 1998, the answering defendant or any of the defendants had approached the Music Consultant for a meeting. It is denied that Coke had made an offer to the Music Consultant asking him to terminate his alleged exclusive contract with Pepsi and start working with Coke.
48. It is denied by Coke that they induced Hotel Hyatt Regency to terminate its alleged contract with Pepsi either in violation of the terms thereof or at all. It is denied that Coke was aware that Hotel Hyatt Regency had an exclusive arrangement for sponsoring of events with Pepsi.
49. In the written statement defendant No.8 has denied that it approached 21st Century Media or offered inducement to breach its contract with Pepsi. It also denied that it approached DNA Networks Pvt. Ltd. or offered inducement to breach its contracts with the Pepsi. It is further incorporated in the written statement that no inducement whatsoever has been offered to any of the employees by Coke or any other defendants, and the employees have voluntarily joined the defendant company at Kanpur, Goa and other places and are being given salaries in line with the existing remuneration package of the defendant companies. Nothing special is being offered to these employees, which is not offered to other employees in the same grade. It is also mentioned that there could be no question of Coke committing, a tort of procuring breach of contract in respect of contracts which are determinable at will. It is also mentioned that all recruitments have been made for promoting and developing its own business by the answering defendants as a part of their overall growth strategy.
50. In the written statement the objection of territorial jurisdiction has also been taken by defendant No.8.
51. Separate replications have been filed to the written statements. In the replications, averments mentioned in the plaints have been reiterated. It is mentioned that the defendants have caused considerable damage to the plaintiffs' business by hijacking their employees who have been trained by them and who have acquired confidential and exclusive business information during the course of their employment. It is also mentioned that the plaintiffs genuinely and bonafidely apprehend that the defendants are in the process of causing further damage to their business.
52. Mr. P.Chidambaram, learned Senior Advocate, who appeared for the plaintiffs, placed reliance on the judgments of our Courts (Supreme Court as well as High Courts) as well as judgments of the English and American Courts to support his submissions. He submitted that there is no direct judgment of the Indian Court, on the questions of law which are involved in this case. According to him, the principles of law as laid down in English case Greig Vs. Insole (1978) 3 ALL E.R. page 449 are fully applicable to the facts of this case particularly regarding the principles of the tort of inducement of breach of contract. The relevant observations of the said case are reproduced as under:-
"At common law, it constitutes a tort for a third person deliberately to interfere in the execution of a valid contract which has been concluded between two or more other parties, if five conditions are fulfillled:
First, there must be either (a) direct interference or (b) indi rect interference coupled with the use of unlawful means:
Secondly, the defendant must be shown to have had knowledge of the relevant contract:
Thirdly, he must be shown to have had the intent to interfere with it (the contract):
Fourthly, in bringing and action other than a quia timet action, the plaintiff must show that he has suffered special damage, that is more than nominal damage. In any quia timet action, the plaintiff must show the likelihood of damage to him resulting if the act of interference is successful:
Fifthly, so far as is necessary, the plaintiff must successfully rebut any defense based on justification, which the defendant may put forward."
53. The Court placed reliance on an earlier decision of the same Court in Torquay Hotel Vs. Cousins & Ors (1969(1) All E.R. 522 at pages 530, 531).
54. The defendant must be shown to have knowledge of the relevant contract. He must be shown to have the intent to interfere with the contract. In bringing an action other than "Quia Timet Action" the plaintiff must show that he has suffered a special damage i.e. more than the nominal damage. The Court also relied on the Judgment Rookes Vs. Barnard (1964) All E.R.36A 7). So far as is necessary, the plaintiff must successfully repudiate in defense based on justification which the defendant may put forward. The Court observed that if these five conditions are fulfillled and the defendant is shown to have had the intention to interfere with the relevant contract which is necessary to constitute a tort, it is quite irrelevant that he may have acted in good faith and without malice or under a mistaken understanding as to his legal rights. The Court also placed reliance on South Wales Miners Federation Vs. Glamorgan Coal Co. Ltd. (1904) All E.R. 211 at 217).
55. The main distinction between the aforesaid English case and our case is that Slade, J. decided the case after the evidence was recorded, whereas in this the evidence is yet to be recorded.
56. Mr. Chidambaram also placed reliance on another Judgment of the English court reported as Torquay Hotel Vs. Cousins & Ors (1969) 1 All E.R. 522 at pages 530,531). In the said case Lord Denning M.R. extended liability to direct, deliberate interference with the execution of a contract without causing a breach thereof. He stated that there are three requirements of such extended liability: (1) An interference in the execution of a contract, extending to cases where the defendant "prevents or hinders" performance (even though there is no breach) which is (ii) deliberate and (iii) direct. Such interference with business does not require proof that existing contracts have been breached; but the cause of action exists only when the defendant has brought about a damage.
57. Mr. Chidambaram also placed reliance on another celebrated case of Lumley Vs. Gye (All. E.R. 1843-60 page 208). This case established for the first time that recovery can be had for inducing breach of any kind of contract and not merely contracts of employment. This tort has three forms (i) direct persuasion, (ii) direct disablement and (iii) indirect disablement. It was submitted that the present case is limited to the first form of the tort, i.e. tort of inducing breaches of contract through direct persuasion and accordingly, the plaintiffs' submissions are restricted to only this form of the tort.
58. Mr. Chidambaram also cited the case of D.C.Thomson Vs. Deakin & Ors (1952) (2) All E.R. 361 at 373). In this case the Court observed that basic formulation of this tort can be stated as "Any violation of legal rights, including rights under contract, committed knowingly and without justification, is a borbious act."
59. Mr. Chidambaram, vehemently contended that the defendants Coke, had the knowledge of existence of the contract. On the basis of the principle as enunciated in add number of English judgments he submitted that it is necessary for the defendants to have a knowledge of the contract. However, it is not necessary that the precise terms of the contract be known. He cited Daily Mirror Newspapers Ltd. Vs. Gardner (1968) 2 QB 762, Greig Vs. Insole (1978) 3 All E.R. 449 at 494), Torquay Hotel Vs. Cousins & Ors (1969) 1 All E.R. 522 at 530, 531), Emerald Construction Co. Ltd Vs. Low- thian (1966) Ch.D. 1013 at 1017) and Merkur Island shipping Co. Vs. V.Laughton (1983) 2 All E.R. 189 at 196).
60. Mr. Chidambaram contended that Coke intentionally interfered with the contracts, the existence of which was known to it. As regards the intention, there need not be any spite or desire to injure the plaintiffs. It is irrelevant whether the may have acted in good faith, without malice or under a mistaken understanding as to his legal rights. Good faith as such provides no defense whatever to a claim based on tort. He also placed reliance on the Judgment of Emerald Construction Co. Ltd Vs. Lowthian (1966) Ch.D. 1013 at 1017) to show that intention includes reckless indifference. the defendant may not have the knowledge of the precise terms of the contract, but it is enough to show that it disregarded the means knowledge and/or acted recklessly.
61. Mr. Chidambaram also relied on the judgment of BMTA Vs. Salvadori 1949 All. F.R. 208 to show that it did not matter who opened the negotiations, which resulted in a breach. It did not matter that the contract breaker was willing to break it. The ease with which a person may be persuaded is also not a relevant consideration in determining whether the persuader was also at a fault or not, in what he was doing.
62. Mr. Chidambaram placed reliance on the case of M/s Tata Sons Ltd. Vs. Mastech Corp (C.S. No. 1457/94 dated 21.8.95) by the Single Judge of Madras High Court. The Court, while granting injunction mentioned that "there is a prima facie case made out by the plaintiff for getting an order of interim injunction, since it is alleged by the plaintiff that 135 employees of the plaintiff who have received training under the plaintiff, abandoned their employment (with the plaintiffs) in utter disregard of the agreement of service entered into with the plaintiff."
63. The Division Bench of the Madras High Court dismissed the appeal against the order of the learned Single Judge. The Special Leave Petition against the judgment of the Division Bench was dismissed by the Supreme Court.
64. Mr. Chidambaram also drawn my attention to the decision of the Bombay High Court in Ambience Space Sellers Ltd. Vs. Asia Industrial Technology Pvt. (NOM 2395/96 in Suit 3238/96 dated 17.12.96) wherein the learned Single Judge of the Bombay High Court held that the law of torts being a developing law, its frontiers are incapable of being strictly barricaded. The Supreme Court has held that the ambit of tortious law keeps on widening on the touchstone of fairness and practically of the situation. The learned Single Judge observed that "It is to be seen that the procurement of a breach with knowledge of contract is now considered to be a wrongful act in itself." The Court found that it was a case of an actionable interference in its primary form."
65. The Division Bench of the Bombay High Court in appeal Approved the observation of the learned Single Judge. The special leave Petition filed against the said judgment was also dismissed by the Supreme Court.
66. Mr. Chidambaram has also placed reliance on S. Wales Miners' Federation Vs. Glamorgan Coal Co. Ltd. (1904-7) All E.R. 211). In that case the Court held that acting in one's own interest is also no justification. The advancement of one's own interests will not suffice, nor will that of the interests of one's own group. Mere honest belief that one has a duty to act is irrelevant. There must be an actual duty which is objectively determined by law.
67. The judgment of the learned Single Judge of the Mysore High Court in Gangiah Vs. Gangadharan (AIR 1961 Mysore 178) was also cited in which the learned Single Judge observed that "as regards the interference with his contractual relationship he (plaintiff) must prove either that the damage has resulted or that is likely to result form the defendants procuring the breach". The motive or reason for procuring a breach of contract is irrelevant.
68. In another English Judgment if De Jetley Vs. Marks (1936) All E.R. 863 at 873) the Court observed that justification must be based upon a duty and not mere protection of the defendant's own interest. In Greig Vs. Insole (supra) the Court happened to deal with this aspect of the matter and observed that the defendant cannot escape by showing that his motives are impersonal, disinterested and altruistic.
69. Mr. Arun Jaitley, the learned Senior Advocate appearing for the plaintiffs has submitted that a negative covenant restraining an employee from engaging or undertaking employment only with the competitor for 12 months after he had left the plaintiffs' service is valid and does not violate Section 27 of the Indian Contract Act. Section 27 read as under:
"Every agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind, it to that extent void.
70. The plaintiffs had an agreement with the Contractees which can be broadly classified in two categories:
i) Commercial Contracts and
ii) Service/Employment Contracts:
71. Mr. Jaitely also submitted that the courts have adopted a more liberal approach with regard to the negative covenants. This is based on the prin-ciple that every member of the community is entitled to carry on trade or business as he chooses and in such manner as he thinks most desirable, in his own interest, so long as he does nothing unlawful.
72. This question was not answered in the case of Gujarat Bottling . The Court observed that we do not propose to go into the question whether reasonableness of restraint is outside the purview of Section 27 of the Contract Act and for the purpose of the present case we will proceed on the basis that an enquiry into reasonableness of the restrain is not envisaged by Section 27. The plaintiffs in order to justify the post employment restraints incorporated in the service and employment contracts placed reliance on Nordenfelt Vs. Maxim Nordenfelt (1891-94) All ER Rep. 1. The House of Lords held that "restraints of trade are divisible into two distinct categories (a) partial restraint, and (b) general restraint. The reasonableness is a lest applicable to partial restraint and inapplicable to general restraint. "The Court further held that the "Restraint of trade and interference with individual liberty of action, may be justified by the special circumstances of a particular case. Restriction is reasonable_ that is, in reference to the interest of the parties concerned and reasonable in reference to the interest of the public, so framed and so guarded as to afford adequate protection to the party in whose favour it is imposed, while at the same time it is in no way injurious to the public."
73. In the instant case, according to the plaintiffs, there are four commercial agreements where breaches were induced, i.e., termination before the stipulated duration and without notice, due to the interference of Coca-Cola.
"1. The agreement between Pepsi and BCCI to which 21st Century Media were also a consenting party, signed in 1996 which entitles Pepsi to sponsor all test matches and all one day internationals with upto three teams participating till the year 2000.
2. The agreement between Hyatt Regency Delhi and Pepsi, which was for a fixed period of one year i.e. 1.7.1997 to 31.12.1997, was breached in September, 1997 by Hyatt at the behest of Coke.
3. The agreement between Black Cadilac Pub Bangalore and Pepsi, which was also for a period of one year, and was sought to be terminated by Black Cadillac before its term, at the behest of Coke.
4. The agreement between. T. Srinath and 21st Century Media for Managing Srinath for a period of three years."
74. According to the plaintiffs all these 4 contracts had an exclusivity clause and were for a fixed period of time which by no stretch of imagination can be considered so unreasonable. Reliance has been placed on Super- intendence Co. of India Vs. Krishan Murgai . Unless the Courts, view with disfavour a restrictive covenant by an employee not to engage in a business similar to or competitive with the employer after the termination of his contract of employment." It was justified by the plaintiffs that the judgment in this case really turned on the facts of the case wherein the key question was that the employer after erminating the contract could not force the employee into idleness by enforcing the postemployment covenant.
75. The question of negative covenants was also considered by the Supreme Court in the case of Niranjan Golikari's case . Wherein the Court held that negative covenants
operative during the period of employment when the employee is bound to serve his employer exclusively are not to be regarded as restraint of trade and therefore do not fall under Section 27 of the Contract Act.
76. The plaintiffs also placed reliance on Fitch Vs. Dewes (1921) ALL ER Rep. 13 and on Home Counties Dairies Ltd. Vs. Skilton (1970) 1 All ER 1227. In the Fitch case, a solicitor's managing clerk was restrained for 25 years from being engaged or concerned in the business of any other solicitor within a radius of seven miles and in the case of Home Counties, the service agreement had a clause whereby the employee would not the enter into the service of any other person or firm carrying on dairy business during the period of employment and for a period of one year after the determina- tion of his employment. This restraint was held valid as it applied only to the employer's trade as a dairyman and the employee's trade as a milk roundsman and would not prevent the employee from entering into the employment of someone other than a dairyman. According to the plaintiffs, the controversy involved in the present case is quite akin to the said English case. The principles decided therein are quite applicable to this case. It is submitted that the employees do not work for a rival soft drink company and that too only for a period of one year. The employees are, however, free to leave and work for other soft drink companies.
77. The plaintiffs placed reliance on the judgment of the learned Single Judge of the Rajasthan High Court in Lloyd Electric Engg. Vs. Dr. Rajeshwar Kr. Malhotra Civil Revision No. 715/96 dt. 24.10.1996. There was a negative covenant, not to compete with the company directly or indirectly for three years as not being excessively harsh or opposed to public policy so as to attract section 27. The plaintiffs entioned that the Government of India which is the largest employer in the country also imposes restriction of employment, on post retirement of its employees. Reliance has been placed on Y.G. Ramamurthy Vs. Chairman Central Board Excise & Customs; [1983(2) S.L.J. 59] and Iqbal Ahmad Vs. Chief Justice of High Court of Judicature at Allahabad and also on Indra Bahadur Singh Vs. Bar Council of U.P. . Post employment restrictions were held to be invalid and violative of Article 19(1)(g) of the Constitution.
78. On behalf of defendants Nos. 1 to 8, the main submissions were made by Mr. Iqbal M.Chagla, Senior Advocate. On behalf of defendants Nos. 9 to 16 submissions were made by Mr. Dushyant Deve, Senior Advocate.
79. It would be appropriate to briefly mention the submission of Mr. Dave first, and then take up the submissions made by Mr. Chagla on behalf of the defendants 1 to 8.
80. Mr. Dave submitted that Mr. Pradeep Aggarwal and Mr. Parvez Billimoria claimed to be constituted attorneys of the plaintiff companies and they signed and verified the plaint on behalf of the plaintiffs. Mr. Dave Sub-mitted that however, along with the plaint, no authorisation granted by the plaintiffs in favour of Mr. Aggarwal and Mr. Billimoria have been filed. There was no resolution of the Board of Directors for instituting the suit. Therefore, both Mr. Aggarwal and Mr. Billimoria lacked authority to institute the suit and the suit is liable to be dismissed because of this inher- ent defect. Reference was also made to Chapter IV of the Delhi High Court (Original Side) Rules and Order 29, Rule 1 of CPC. Mr. Dave placed reliance on the decided case Oberoi Hotels (India) Pvt. Ltd. Vs. M/s Observer Publications (P) Ltd. (Suit No. 469 of 1966 decided on 26.11.1968). This judgment was followed In Sooth India Insurance Co. Ltd. Vs. Globe Motors (Suit No. 68 of 1969 decoded on 19.4.1974). The same view was reiterated by this Court in Nibro Limited Vs. National Insurance Co. . It is also mentioned that ordinarily the Court will not non suit a person on account of technicalities. However, the question of authority to institute a suit on behalf of a company is not a technical matter. It has far reaching effects. It often affects the policy and finance of the company. Thus, unless the power to institute a suit is specifically conferred on a particular Director, he has no authority to institute a suit on behalf of the company and such power can only be conferred by the Board of Directors by passing a resolution in that regard and no such resolution has been produced in the instant case.
81. It was submitted by Mr. Dave that the plaintiffs have made general and grossly inadequate pleadings as to the damages suffered by them. No particulars of what damage has been caused to the plaintiffs, how has that come about and the quantum of damage has been shown. All that has been mentioned in the plaint is that the plaintiffs have suffered loss and damage and they are in the process of working out the same and for which they sought leave of the Court under Order 2, Rule 2 CPC to institute a separate action. It was submitted by Mr. Dave that the plaintiffs are unable to identify any such loss or damage as no measurable loss has occurred. This being the position, unless the plaintiffs allege and prove the kind of damage which forms a part of the factual situation, giving rise as a matter of law to the cause of action upon which they rely, their claim will fail and unless they allege such damage the claim can even be struck down at the prelimi- nary state.
82. Reference was made to Order 6, Rules 1,2 & 7 and Order 7 Rule 11 CPC to demonstrate that the present suit, as instituted, is not maintainable and in this view of the matter, the plaintiffs are in any event not entitled to any injunction.
83. Mr. Dave, the learned counsel for defendants 9 to 16 placed reliance on the judgment in Rohtas Industries Vs. Rohtas Industries Staff Union to point out the definition of tort of conspiracy as given by Salmond and accepted by the Supreme Court. Salmond defines tort of conspiracy as under:
"a combination wilfully to do an act causing damage to a man in his trade or other interests in unlawful and if damage in fact is caused, is actionable as a conspiracy."
84. Mr. Dave also placed reliance on Rookes Vs. Barnard (1964) 1 All E.R. 367 at 401). In that case while dealing with a case of tort of interference the Court observed as under:
"there must be, besides the act of inducement, knowledge by the defendant of the contract in question and of the fact that the act induced will be a breach of it; there must also be malice in the legal sense, i.e. an intention to cause the breach and to injure the plaintiff thereby and an absence of justification; and there must be special damage, i.e. more than nominal damage, caused to the plaintiff by the breach. These three elements or requisites, are the grounds on which an action for inducing a breach of contract must be based. If any one of them is missing, there is no cause of action."
85. Mr.Dave also placed reliance on Lonrho Plc and Ors Vs. Fayed & Ors. (1994) 1 All E.R. 188) wherein the three Lord Justices Dillon, Steward Smith and Evans observed as under:-
"an action based on tort, in that case. conspiracy, must contain specific pleading as to damage. General averments would be wholly inadequate. General averments in that case to the effect by reason of the matters set out above, the plaintiffs have suffered loss, damage and injury."
86. Mr. Dave submitted on the strength of the aforesaid judgments that the Court should refuse injunction, in cases where the plaintiffs are guilty of unconscionable behaviour and do not approach the Court with clean hands.
87. Mr. Dave also submitted that the present suit as filed by the plaintiffs is not a Quia timet action. Quia timet is defined in Black's Law Dictionary as "Because he fears or apprehends', in equity practice, the technical name of a bill filled by a party who seeks the aid of a court of equity, because he fears some future probable injury to his rights or interests, and relief granted must depend upon circumstances."
88. Mr. Dave submitted that in the present suit the entire cause of action as per the plaintiffs is actions, which have already taken place before filing of the suit and between December 31, 1996 to March 1998. Vague averments have been made in the various paragraphs of the plaint. para 50 of the plaint discloses the entire cause of action according to the plaintiffs themselves. It does not speak about any future apprehended loss and need to secure against the same. Since the plaintiffs have not pleaded particulars, there is an absence of specific and detailed averments as to likelihood of damage or future loss. It was submitted that the plaintiffs cannot be allowed to plead vague and unspecified general allegations as to loss, damage and injury to be found in every action in equity for injunctions to convert their suit into a suit "Quia timet". The law does not permit it.
89. Mr. Dave also placed reliance on Gangabai Vs. Purshotam Atmaram (1907 Vol.9, Bombay Law Reporter 912). Mr. Dave submitted that this is neither Quia timet action nor have the plaintiffs shown reasonable likelihood of substantial, irreparable or imminent damage. Mr. Dave also submitted that there is an absence of tortious conduct of interference and tortious conduct by way of conspiracy and consequently the plaintiffs are not entitled to relief of injunction.
90. Mr. Dave referred to the Halsbury's Laws of England, Fourth Edition, where "Interference with the performance of a contract" is defined in Para 1518 as "Where one person by unlawful means intentionally induces a second person to commit a breach of contract against a third person or prevents or hinders the performance of that contract, so that the third person suffers damage, the first commits a wrong actionable at the suit of the third, unless the inducement is justifiable. Mr. Dave also placed reliance on in D.C. Thomson & Co. Ltd. Vs. Deakin (1952) 2 All E.R. 361) wherein the Court observed as under:-
".....First, that the person charged with actionable interference knew of the existence of the contract and intended to procure its reach; secondly, that the person so charged did definitely and unequivocally persuade, induce or procure the employees concerned to break their contracts of employment with the intent that have been mentioned; thirdly, that the employees so persuaded, induced or procured did in fact break their contracts of employment; and fourthly, that breach of the contract forming the alleged subject of interference ensued as a necessary consequence of the breaches by the employees concerned of their contracts of employment."
91. Mr. Dave contended that in respect of kanpur sales team there is no tort, because there is no inducement or procurement. It is submitted that Mr. Kochin Wu of Kanpur had approached the defendants on his own behalf and on behalf of the fellow employees working for Pepsi in Kanpur. It was submitted that direct inducement occurs when persuasion, and procuration is brought about on the mind of person of one of the contracting parties. It was also submitted that the defendants have a better salary structure in general and no special offers have been made to the employees of Pepsi.
92. Mr. Dave submitted that the plaintiffs have not made out a case for grant of injunction. He submitted that the plaintiffs did not have the balance of convenience nor are the plaintiffs likely to suffer any irreparable injury. He placed reliance on the decision of the House of Lords in NWL Ltd. Vs. Woods (1979) 3 All E.R. 614 at 625). Lord Diplock cautioned against granting of injunctions merely balancing convenience of parties "at a stage when the evidence is incomplete. "He also relied on Duport Steels Ltd. Vs. Sirs (1980) 1 All E.R. 529 at 549) wherein the House of Lords observed that unless that threat is imminent or there is serious danger to public safety or health, the court would not grant any interim injunction.
93. Principal submissions on behalf of defendant Nos. 1 to 8 were advanced by Mr. Iqbal M. Chagla, Senior Advocate. Mr. Chagla has also taken preliminary objections regarding the maintainability of the suit. He formulated the following points to demonstrate that the suit, as filed, by the plaintiffs is not maintainable. Therefore, in a suit of this nature, the plaintiffs are not entitled to injunction in any event. He enumerated the following defects in the plaint, as filed, by the plaintiffs which are as under:
(i) The very maintainability of the Suit is challenged as set out in I.A. No. 4172/98 filed by Defendant Nos. 1 to 6 and 8 under order 7 Rule 11 CPC and in paras 1 to 10 of the written statement filed by defendant Nos. 5,7 and 8 on several independent grounds including :-
(a) Misjoinder of plaintiffs and causes of action;
(b) Misjoinder of defendants and causes of action;
(c) Non-joinder of necessary parties;
(d) Lack of authority of the alleged Constituted Attorneys of the plaintiffs;
(e) Failure to ever the necessary material facts as required by Order VI Rules 2,3 and 10 CPC;
(f) Under-valuation of the Suit since damages (an essential ngredient of plaintiffs' cause of action) have not been quantified;
(g) As against defendant No.7 (which does not carry on business in Delhi and had no office in Delhi) there is no jurisdiction al all. A separate application under Order 7 Rule 11 CPC has been filed seeking dismissal of the Suit as against Defendant No.7 (being IA No.4171/98).
94. Mr. Chagla submitted that the plaintiffs have not approached the court with clean hands and are consequently not entitled to any interlocutory reliefs, since, such reliefs are equitable and discretionary in nature. According to him, the plaintiffs are also guilty of suppression of material facts. Mr. Chagla submitted that the entire edifice of the plaintiffs' case is without any foundation and if the plaint is rationally analysed, then the irresistible conclusion would be that the plaintiffs cannot be granted any interim relief in this case.
95. Mr. Chagla submitted that the plaintiffs have been failed to allege the necessary legal ingredients required for the torts sought to be pleaded in the plaint:-
(a) Inducing a breach of contract between the plaintiffs and its employees/third parties.
(b) Unlawful interference by the defendants in the performance of contracts between the plaintiffs and its employees/third parties, by the use of unlawful means.
96. These two Lords essentially require pleading and proof that :-
(i) The defendants had knowledge of the existence of the con tracts (and its essential terms) between the plaintiff and its employees/third parties, the breach or interference with, which is alleged.
(ii) There was in fact, a breach and not merely a lawful termination of such contract or that there was in fact, an actual interference with performance under the contract.
(iii) Such breach or interference with performance was in duced by the defendants for the purpose and with the intention of injuring the plaintiffs.
(iv) The inducement/interference was with the aforesaid intenion/purpose and not justifiable being caused by any intention on the part of the defendant to further its own business interests by free competition.
(v) Such breach or interference by the defendants resulted in special (actual) damage to the plaintiffs.
(vi) If no breach was actually caused, there had been the use of unlawful means by the defendants to interfere with the performance of the contract.
97. Mr. Chagla also submitted that the plaintiffs have deliberately confused the concept of termination of contract (which is not actionable) with breach of contract. The employers should be free to terminate their contracts with their employers. He submitted that the following seven employees have lawfully terminated their contracts with the plaintiffs. There is no impropriety, much less any illegality, in the following seven employees terminating their contracts lawfully. Their names as follows:-
1. Jitender Nayyar.
2. Sailesh Joshi.
3. Gaurav Duggal.
4. Johnny George.
5. V. Sushil Kumar.
6. Basukinath Sarkar.
7. Siraj Chakrabarti.
98. Mr. Chagla submitted that Mr. Jitender Nayyar had left the plaintiffs' employment on 6.1.1996 and had joined Ranbaxy Laboratory Ltd with whom he served till 31st December 1996. It was only after this employment that Mr. Jitenter Nayyar joined the employment of the defendants. This fact is admitted in the plaintiffs' replication to the written statement of defendant No.5 at para 5. The plaint had suppressed this material fact. It is stated that Mr. Sailesh Joshi resigned from the employment of plaintiff No.3 in Surat on 30.9.1997 and joined defendant No.5 only 1.1.1998. Mr. Gaurav Duggal was duly released from the employment by the plaintiffs in December 1996 and was given a letter of release by them Mr. Duggal was only thereafter employed by defendant No.8 and immediately sent abroad for training. After returning from abroad he joined the employment of defendant No.5 in April 1998.
99. It is stated that Mr. Johnny George joined the employment of defendant No.8 in response to a public advertisement dated 18th December 1997 in "The Hindu". Similarly, Mr. V. Sushil Kumar voluntarily resigned from the plaintiff's employment. Mr.Basukinath Sarkar and Mr. Siraj Chakrabarti were both employed only after they resigned from the employment of the plaintiffs. It may be pertinent to mention that the resignations of the aforesaid employees were not at the behest or at instance of the defendants.
100. The allegations that the defendants approached certain key employees of the plaintiffs which was a part of a conspiracy to cause prejudice, loss and damage to the Plaintiff's business interests and that "if it was successful will result in huge losses and damage to the plaintiffs"., have been vehemently denied by Mr. Chagla, the learned counsel for the defendants. He submitted that none of the senior employees actually left the employment of the plaintiffs and thus no termination of their contracts, or much less any prejudice is caused to the plaintiffs. According to him, it is not even alleged by the plaintiffs that there has been any interference with the performance of the contracts of the said senior employees, by the use of any unlawful means.
101. Mr. Chagla submitted that the affidavits filed by two of the plaintiffs' employees, namely, Mr.George Kavoor and Mr. Varun Berry are obviously self-serving and are made at the behest of the plaintiffs with whom the said two persons continue to be employment. The truth can be revealed only by questioning these two witnesses at the time of the trial.
102. Mr. Chagla submitted that Mr. Bipaschit Bose is not even an employee of the defendants. He is a professional and independent consultant who runs a placement agency. There was no mandate from the defendants to Mr. Bose in any form nor had he been requested to approach/target the plaintiffs' employees.
103. The allegations regarding 21st Century Media Private Limited (Sports Consultant) whose services were engaged by the defendants to break its contract with the plaintiffs by inducing Mr. Javagal Srinath, the Indian Cricketer into breaking his exclusive contract with the Sports Consultant, were denied as false by Mr. Chagla. He contended that though the conspiracy is required to be proved as alleged, the plaintiffs have failed to show how were any of the other defendants involved in this alleged conspiracy. The letter dated 10.12.1997 from the Sports Consultant to the plaintiffs is self serving and unreliable. The contents of the letter are also contrary to the facts on records and to the documents produced by the plaintiffs themselves and significantly there is no affidavit from Mr. Lokesh Sharma, who had allegedly signed the letter. It is submitted that the truth can only be revealed after the examination of the concerned witnesses.
104. Mr. Chagla submitted that the contract dated 20.2.1997 between the Sports Consultant and Mr. Srinath in fact establishes that Mr. Srinath is not exclusively bound by the agreement of the Sports Consultant but he is entitled to enter into an agreement or arrangement with or through other entities or persons, subject only to an obligation to pay a commission of 25% to the Sports Consultant. Admittedly, no complaint proceeding or demand has been made against Mr. Srinath by the Sports Consultant. It is stated that Mr. Srinath was entitled to enter into a contract with the defendants and that this did not amount to any breach of his contract with the Sports Consultant. Mr. Srinath himself confirmed in letters to defendant Nos. 13 and 14 that there was no inducement from the defendants to break his con-tract with the Sports Cunsultant and further that there was no offer to him from the plaintiffs at any point of time before or during his negotiations with the defendants. Under these circumstances, no tort at all can, therefore, arise in a case where admittedly there is no contract in existence between the plaintiffs and Mr. Srinath. Mr. Chagla submitted that the mere intention on the part of the Sports Consultant to sign an agreement with Mr. Srinath (even assuming whilst denying such intention) cannot be to the subject matter of any breach or unlawful interference by the defendants. The allegation that defendant No.14 tried to induce Mr. Srinath to breach his contract with the plaintiffs is false and has been denied by defendant No.14 in his affidavit.
105. Regarding Mr. Sanath Jayasuriya, a Sri Lankan cricket celebrity, Mr. Chagla submitted that it was the plaintiffs who directly negotiated with the Sri Lankan Test Cricketer in breach of the exclusive contract that World Tel Inc had with him. When World Tel Complained, the plaintiffs alleged that Mr. Jayasuriya had repeatedly assured the plaintiffs that he was free to sign a contract with them and suggested the World Tel Inc to resolve the issue directly with him.
106. In reply to the allegation that the defendants in February 1998 sought to induce DNA Networks Private Limited-the Music Consultant of the plaintiffs, to break his contract with the plaintiffs. It has been submitted that admittedly there has been no breach of the contract between the plaintiffs and the Music Consultant and this complaint must fail at the threshold.
107. Mr. Chagla submitted that defendant No.13 had no knowledge of any contract between the plaintiffs and the Music Consultant. He stated that a meeting took place between defendant No.13 and the Music Consultant at Bangalore in November 1997 and not in February 1998 as alleged.
108. The allegation of the offer of retainership in exchange for the Music Consultant terminating its contract with the plaintiffs and working exclusively with the defendants is false and has been specifically denied.
109. Through the plaintiffs allege that the defendants approached several distribution partners of the plaintiffs and sought to induce them into breaking their contracts with the plaintiffs, they have given only instance concerning Srinathji Sales, a distributor of the plaintiffs' products at the Ahmedabad Railway Station. It is alleged that a self serving letter from Srinathji Sales to the plaintiffs is sought to be relief upon. The correct facts are that the proprietor of Srinathji Sales Mr. Harish Aggarwal approached Mr. Aditya Sanyal, an employee of defendant No.7 and tried to convince Sanyal to enter into an arrangement with Srinathji Sales. It is further stated that Mr. Sanyal declined to discuss the matter further as soon as he learnt of Srinathji Sales arrangement with the plaintiffs. The allegations, particularly, the one regarding the offer of money has been categorically denied. Here too, no breach of contracts is alleged and there is no evidence of any unlawful means used by the defendants.
110. Mr. Chagla submitted that there is no merit in the allegations pertaining to Hotel Hyatt Regency. It is stated that Hotel Hyatt Regency stocked and served, amongst other beverages, both Pepsi and Coke and was not a one-product hotel.
111. It is submitted on behalf of the defendants in reply to the allegation that the entire team of GBC comprising of 61 sales staff resigned en bloc from GBC to take up employment with the defendants is factually incorrect to the knowledge of the plaintiffs. Only 3 out of 61 individuals preferred to work for GBC. 26 out of 61 individuals were independent route agents and not employees of GBC or its associates and therefore, they were not re quired to give any notice of termination. 6 out of 61 individuals were trainees/temporary employees who were not required to give any notice of termination.
112. Remaining 26 out of 61 individuals were not the employees of GBC but of two other associate companies viz. Beverage Venture Pvt. Ltd and Trupti Marketing Pvt. Ltd. The defendants believe that all the aforesaid individuals validly terminated their employment. It is stated that the letter dated 14.2.1998 is a self serving letter, procured by the plaintiffs from Mr. Prashant Timblo of GBC just two days prior to the filling of the suit. The learned counsel for the defendants stated that no complaint had been made nor were proceedings taken by the GBC or its associate companies.
113. Similarly, the plaintiffs have also not filed any affidavit either of Mr. Prashant Timblo or any other officer of GBC or its associate companies nor of any other individual actually connected with the matters in Goa. On the other hand, the defendants have filed the affidavits of defendant No.9 and Mr.Joel Peres and the written statements of defendant Nos.9 and 15 who were all concerned personally with these matters.
114. In reply to the allegations that the defendants 9,10,11 & 12 in conspiracy with defendant No.16 took away the entire sales team of the plaintiffs at Kanpur with a view to directly injure and damage the plaintiffs, Mr. Chagla submitted that only three employees of the plaintiffs joined employment with the defendants. None of these three employees breached their respective contracts of employment with the plaintiffs. The contracts of employment were terminable at will, upon giving three months notice, or salary in lieu thereof. It is also submitted that each of these three employees had to recover much larger amounts from the plaintiffs.
115. Mr. Chagla seriously disputed the facts and events of the Kanpur episode. He submitted that the 8 tandardised affidavits taken from the employees were clearly unreliable being filed by the individuals who were currently in the employment of the plaintiffs and who had a vested interest in assisting the plaintiffs. He further submitted that the defendants must be given an opportunity to cross-examine these individuals in order to ascertain the truth. Mr. Chagla submitted that the defendants did not approach any of the 11 individuals in Kanpur to terminate, much less, breach their contracts with the plaintiffs. He also submitted that the defendants have never used unlawful means. Mr.Chagla further contended that the employees of Pepsi approached the defendants for better employment opportunities with Coke. He submitted that some employees such as Mr.M.P.Pandey has independently approached Mr. Rajeev Saxena, a representative of defendant No.5, seeking possible employment with the defendants for himself and some of his colleagues, as they were apparently dissatisfied with their employment with the plaintiffs.
116. In reply to the submissions of the plaintiffs that interviews were a mere formality and the defendants wanted the entire Kanpur team to cross over from the employment of the plaintiffs to the defendants, Mr. Chagla submitted that separate interviews were held and each of these individuals were asked about their expertise, experience, competence and skills to evaluate their suitability for employment with the defendants. However, no information about the plaintiffs, much less any confidential information nor information about their salaries or salary structure was asked or discussed. It is also submitted that 7 out of 11 individuals who had appointment letters from the defendants were not given any special benefits but were absorbed into the regular grade structure of the defendants, which was more liberal and remunerative than the grade and emolument structure of the plaintiffs.
117. Mr. Chagla while denying the charge that the defendants induced any breach of contract, submitted that it was in fact the plaintiffs who had induced breach of contract of employment with the defendants in respect of 5 out of 7 individuals employed by the defendants. These five individuals, namely, Mr. Pandey, Mr. Udhaniniya, Mr. Mishra, Mr. Aggarwal, and Mr. Dwivedi were coerced into issuing standardised typed letters of resignation to defendant No.5 prepared obviously by the plaintiffs wherein only the address of defendant No.5. the date of the appointment letter, the designa- tion and signature of the person concerned were filled in, by hand. The postal receipts in respect of the Registered A.D. postings by 4 of the aforesaid 5 individuals to whom letters of appointment had not been issued are all dated 12th February 1998 and consecutively numbered from No.3772 to 3779. It was submitted that Mr. Pandey retracted his resignation by his handwritten letter dated 16th February 1998 in which he referred to the physical intimidation and coercion on the part of the plaintiffs that had compelled him to address the letter of resignation to the defendants against his will.
118. Mr. Chagla submitted that in services there is either vertical or horizontal mobility. The employees change their jobs in search of better rospects either vertically or horizontally. Mr. Chagla also contended that the plaintiffs themselves have employed several persons previously employed by the defendants' bottlers.
119. Mr. Chagla further submitted that the intent of the defendants was to advance their own legitimate business interests by rapidly recruiting a large number of individuals. The actions of the defendants were not directed towards harming or injuring the plaintiffs and committing a tort of inducing breach or unlawful interference. Mr. Chagla submitted that at no stage the defendants employed unlawful means to promote their own growth and development. He submitted that free and fair competition is inherent in business activities.
120. Mr. Chagla submitted that between August 1997 and April 1998 in less than 9 months defendant Nos.1 to 8 invested nearly Rs. 900 Crores and have employed 1800 out of their 2000 employees. It was also submitted that from a mere 23 employees in 1993-94, the employees strength of defendant Nos.1 to 8 in May 1998 rose to 2122 and is currently over 3000 employees.
121. Mr. Chagla contended that the plaintiffs have post termination restraint with their employees. He submitted that it is well settled that such post-termination restraints, under Indian law, are in violation of Section 27 of the Contract Act in restraint of trade, against public policy, void and unenforceable in law. He placed reliance on Gujarat Bottling Company Vs. Cocacola and Ors and N.S. Golikeri Vs. Century Spinning &
Manufacturing Co. Ltd. .
122. Mr. Chagla submitted that it is also well settled that no action lies for inducing a breach of a void contract or for interference with performance of a contract which must be regarded as contrary to public policy. He also placed reliance on Grieg Vs. Insole (supra) Hi-line Electric Company Vs. Dowco Electrical Products (765 F 2d 1359, Court of Appeal 5th Circuit).
123. Mr. Chagla submitted that contracts which are not for a fixed period but are terminable at will or upon giving notice, are terminable at the option of either party. Terminating such contracts would not amount to any breach of contract since such termination is merely the exercise of an option available in law. He further submitted that there is no tort to procure the termination of a terminable contract where the person induced is the party who enjoys the right to terminate such a contract. He referred to Halsbury's Laws of England, 4th Edition, Volume 45, para 1519 which reads as under:-
1519. Liability for inducing a breach of contract by an employee. Since it is a violation of legal right to interfere with contractual relations recognised by law if there is not sufficient justification for the interference, an action lies at the suit of an employer against any person who knowingly and intentionally, and without justification, induces the employees to commit a breach of the contract of service and leave his employer before the time fixed for the lawful determination of his service.
A person may be liable for procuring a breach of a contract not only where he directly persuades a party to the contract to break it, but also if he commits a wrongful act so as to prevent the party from performing the contract, or he persuades a third person to do an act in itself wrongful or not legitimate which renders performance of the contract impossible, but he is not liable if he persuades a third person to perform an act which in itself lawful even if the result is to induce a breach of contract by the party to it. If a person has acted individually, no action lies against him if no breach of the contract of serv ice is two or more persons join together in a combination of which the predominant purpose is to damage a third person and damage actually results, they may be liable to the third person for a tortious conspiracy, even though they have not induced any actual breach of a contract.
Apart from the effects of combination, any person may, with impunity, induce an employee to leave his employer when the period for which he was engaged expires, even though, until that person interfered, the employee had no intention of leaving, or to decline to renew an engagement which in the ordinary course, but for such interference, would have been renewed by the employe without question. In accordance with the same principle it is not actionable for a person to induce the employee to give such notice to his employer as may be requisite for the lawful deter mination of his contract of service, even though the effect of giving notice, may be to determine the contract at a date earlier than either of the parties to it had anticipated. In these cases there is no violation of the employer's legal right to the services of his employee and the motive by which the person who induces the employee to leave his employer is therefore immateri al."
124. Mr. Chagla also referred to D.C. Thompson & Co. Ltd. Vs. Deakin (supra), Grieg Vs. Insole (supra), Macmanus vs. Bowes (1938) 1 KB 98. Reliance was also placed on a judgment delivered by the Bombay High Court in Harjit Singh Kang Vs. Jet Airways delivered on 24th July 1996 (in Appeal from Order No.837 of 1996) the Court recognised and gave effect to a clause which provided for termination of the contract on either side on giving three months notice in writing or by payment of the months' salary in lieu of notice. The Court refused to grant an injunction prohibiting the employee from leaving his service although he had been trained at the expense of Jet Airways both in India and abroad.
125. Mr. Chagla also placed reliance on the judgment of the Madras High Court; Tata Sons Limited Vs. Mastech Corporation & Others; delivered in C.S. No. 1457 of 1994 on 21.8.1995 and another decision of the Division Bench of the Same High Court by Srinivasan, J. and Abdul Wahab, J. In these judgments, the Court highlighted the requirement that the contract should be a contract at will, in this the contracts were for a term of three years which were prematurely broken. They were not contracts terminable at will.
126. Mr. Chagla also placed reliance on a large number of judgments of the American and English Courts. He submitted that even in American Law where the contract is terminated at will, the position is not different. In Triangle Film Corporation Vs. Artcraft Pictures Corporation (250 F 981 at 982) in which the Court observed as under:-
"Nobody has ever thought, so far as we can find, that in the absence of some monopolistic purpose every one has not the right to offer better terms to another's employees, so long as the latter is free to leave. The result of the contrary would be intolerable both to such employees as could use the employee more effectively and to such employees as might receive added pay. It would put an end to any kind of competition."
127. In the said judgment the Court observed that so far as we have found, it has never been thought actionable to take away another's employee, when the defendant wants to use him in his own business, however, much the plaintiff may suffer.
128. Mr. Chagla placed reliance on Dale Vs. Thompson (1997) 962 F. Supp. 181 @ 184 (DC Circuit). In the said judgment it is mentioned that:
"Under an at will arrangement the prerequisite does not exist for the tort of interference with employment relationship. A third party who interferes with such a tenuous relationship is not liable to the employer, since no wrongful breach of contract can result from his interference. To put it another way, if there is no fixed or assured employment there is nothing tangible with which to interfere."
129. Mr. Chagla also placed reliance on Diodes Incorporated Vs. Gustav Franzen (960 Cal. App. 2nd 244) the Court of Appeals of california in which the Court observed and relevant part is extracted as under:-
"Even though the relationship between an employer and his employee is an advantageous one, no actionable wrong is committed by a competitor who solicits his competitors' employees or who hires away one or more of his competitor' employees who are not under contract, so long as the inducement to leave is not accompanied by unlawful action.....Int the employee situation the courts are concerned not solely with the interests of the competing employers, but also with the employees interests. The interests of the employee in his own mobility and betterment are deemed paramount o the competitive business interests of the employees where neither the employee nor his new employer has committed any illegal act accompanying the employment change."
130. Mr. Chagla also cited a number of decisions in support of his contention that in case where the defendant was motivated by an intent to injure the plaintiffs and not to further the defendant's legitimate business interests, actions of the defendant, will result in interfering with or inducing a breach of contract. In cases where the defendant was motivated to further his own legitimate business interests in that event the defendant cannot be held guilty for interfering with or inducing a breach of the plaintiff's contract.
131. He placed reliance on Mogul Steamship Co. Vs. McGregor, Gow & Co. and others (1891) (4) All ER 263 (HL) which recognises that, in the absence of unlawful means, a trader could not be held liable for these torts if his actions be motivated by this own gain in furtherance of free competition.
132. Mr. Chagla has also drawn my attention to the judgment in People's Security Life Insurance Co. Vs. Milton S. Hooks (1988) 322 N.C. 216; 367 S.E. 2nd 647. In this case the Supreme Court of North Carolina held that a claim for tortious interference would not be lie where the defendant had only offered the plaintiff's employees job opportunities which induced them to terminate their terminable at will contracts and by locating these employees in their previously assigned territories. The Court observed as under:
"We conclude that the hiring and placing of the plaintiff's former employees by the defendant for the purpose of developing the territory assigned to him by a company competing with the plaintiff amounted to justifiable interference. In reaching this conclusion we recognised and apply the general principle that interference may be justified when the plaintiff and defendant are competitors."
The Court also observed that:
"Competition is the life of trade. Every act done by a trader for the purpose of diverting trade from a rival and attracting it to himself, is an act intentionally done, and, insofar as it is successful to the injury to the rival in his business.......to hold such an act wrongful and illegal would be to stifle competition. Trade should be free and unrestricted and hence every trader is left to conduct his business in his own way and cannot be held accountable to a rival who suffers a loss or profits by anything he may do, so long as the methods he employs are not of a class of which fraud, misrepresentation, intimidation, coercion, obstruction or molestation of the rival or his servants........are instances."
133. The reliance was also placed on Mosler Safe Company Vs. Lamson Corpotion; (1981) U.S. District Lexis 9894 in which the Court observed as under:
"This tort requires a showing that defendants sole motive was to inflict injury and that the defendant employed unlawful means to do so.. the mere interference of a competitor in another's business conduct creates no cause of action."
134. On analysis of various American judgments cited at bar, the following are the important factors which are relevant in order to determine the guilt of the defendants:
(a) Defendant's motive or conduct;
(b) Whether the defendant was acting legitimately for business purposes or his actions were designed to injure the plaintiff;
(c) The competition in business constitutes justifiable interference and is not actionable so long as it is carried out in furtherance to one's own interest and by means and where the interests are pursued by adopting lawful means.
135. Mr. Chagla also cited a number of English judgments to demonstrate that English Law also preserves the sanctity of free competition. He placed reliance on Mogul Steamship Co. (Supra) in which their Lordships held as under:
"It is not illegal for a trader to aim at driving a competitor out of trade, provided the motive be his own gain by appropriation of the trade, and the means he uses be lawful weapons."
136. In Ambience Space Sellers Limited & Others Vs. Asia Industrial Tech- nology private Limited & Another, learned Single Judge of Bombay High Court S.N. Variava, J. in notice of Motion No.2395 of 1996 in Suit No. 3283 of 96 reported in 1998 PTC 18 observed as under:
"Of course any act honestly done by a person in furtherance of his own trade/profession, will not amount to a Tort of Inducing breach of contract, merely because it has induced such a breach. This because free and fair competition cannot be curtailed. The difference in all such cases is whether the act is done solely to carry on one's own trade or whether the act was done with intent to induce a breach or profiteer from somebody else's efforts."
137. Mr. Chagla also placed reliance on Asia Industrial Technology Pvt. Ltd. & Anr. Vs. Ambience Space Sellers Limited Decision dated 1.8.1997 of A.P. Shah, J. and B.B.Vagyani, J. in appeal No. 405 of 1997. He submitted that this decision not only does not disturb the decision of Variava, J. but also recognises justification as a defense to this tort.
138. Mr. Chagla submitted that the plaintiffs have miserable failed to prove any conspiracy on the part of the plaintiffs to damage the defendants and he placed reliance on Mulcahy Vs. the Queen; 1868 LR (lll) 306. The relevant portion reads as under:
"A combination wilfully to do an act causing damage to a man in his trade or other interests is unlawful and if damage is caused, is actionable as a conspiracy. To this there is an exception where the Defendants' real and predominant purpose is to advance their own lawful interests in a matter in which they honestly believe that these interests would directly suffer if the action against the plaintiff was not taken."
139. The definition of 'Conspiracy' enunciated in Salmond's Law of Torts 15 Ed., has been accepted by the Hon'ble Supreme Court of India in Rohtas Industries Vs. Union of India; , the Court observed that, where there are mixed motives, liability will depend on ascertaining which is the predominant object or the true motive or the real purpose of the defendants. He submitted that the plaint itself does not disclose any unlawful acts having been committed by using or adopting unlawful means by the defendants.
140. Mr. Chagla submitted that the suit filed by the plaintiffs is ostensibly for the protection of their economic interests, but in fact as demonstrated above, their purpose is a nefarious one. Mr. Chagla further submitted that in the case of the plaintiffs' employees, the enforcement of a post-employment contract restraint which restricts the freedom of the plaintiffs' employees to obtain improved job opportunities is clearly void and unenforceable to their knowledge. He also contended that the plaintiffs are guilty of making false statements to their knowledge and have attempted deliberately to mislead this Court.
141. He submitted that the damage, if any, has been incidentally caused to the plaintiffs which is not actionable, because the plaintiffs have failed to show that the defendants have indulged in any tortious or unlawful acts. On the contrary, the defendants have acted solely in furtherance of their own legitimate business interests.
142. Mr. Chagla submitted that this suit has been filed to stifle free competition. He also placed reliance on the following observations of their Lordships in Gujarat Bottling Company's case (supra). The relevant portion reads as under:
"there is a long history of trade rivalry between these multinational corporations" (Pepsi and Coca-Cola) and their wars are fought on the economic plane but some of the battles spill over the courts of law."
143. He submitted that the present battle is one which should have never disturbed a Court of law and should have been ought to be relegated to the market place.
144. I have heard the arguments of the learned counsel for the parties at length. I have also carefully examined the pleadings and documents on record.
145. The grant of injunctions is an equitable relief and various factors have to be carefully taken into consideration before granting it.
146. On consideration of the totality of the facts and circumstances of this case, prima facie, in my considered opinion, the plaintiffs are not entitled to injunction for the following reasons:
(I) Admittedly in the service and employment contracts of the plaintiffs, there is a negative covenant clause, restraining an employee from engaging or undertaking employment for 12 months after he has left the plaintiffs' service. It is well settled that such post termination restraint, under Indian Law, is in violation of Section 27 of the Contract Act. Such contracts are unenforceable, void and against the public policy. What is prohibited by law cannot be permitted by Court's injunction.
(II) All crucial, vital and important averments of the plaint have been specifically denied in the written statements. The defendants on the basis of documentary evidence have tried to discredit the veracity and truthfullness of the plaintiffs aver ments. Some of the averments of the plaintiffs which have been specifically denied in the written statements are recapitulated as under:-
(II) (a) Mr. Jitender Nayyar : In this case the plaintiffs have alleged that the defendants have induced him to break his contract with Pepsi. In the written statements, this averment is pecifically denied and it is incorporated, that he left the plaintiffs' employment in December, 1995 and joined Ranbaxy aboratory where he worked from January, 1996 to December, 1996. It is only after working for one year that he joined the employment with defendant No.8 on 6.1.1997.
(II) (b) Mr. Gaurav Duggal : The same allegations were made against the defendants with regard to Mr. Gaurav Duggal. In the written statements, it is clearly mentioned that Mr. Gaurav Duggal was transferred to a remote part of Gujrat. He did not want to shift and chose to leave the employment of the plaintiffs. Mr. Duggal was given a letter of release by Pepsi and it was only after this that he joined the employment of defendant No.8.
(II) (c) Mr. Johny George : Similar allegations were made by the plaintiffs against the defendants in the case of Mr. Johny George. In the written statements it is mentioned that he joined the employment of defendant No.8 in response to a public advertisement dated 18.12.1996.
(II) (d) Mr. Sailesh Joshi and Mr. Sushil Kr. Jain : Similar allegations were made against the defendants with regards to these two employees also. In the written statement it is clearly mentioned that these two employees joined defendant Nos. 5 and 6 only after completing their notice period on the terms of their contract of employment.
(II) (e) Mr. Bipaschit Bose: The defendants while denying the averments of the plaint have specifically incorporated in their written statements that he was not an employee of the defendants. He is a professional and independent consultant who runs his placement agency.
(II) (f) Similarly the averments regarding Hotel Hyatt Regency have also been specifically denied. In the written statements it is clearly mentioned that Hotel Hyatt Regency stocked and served amongst other beverages, both Pepsi and Coke and was not and is not a one product hotel.
(II) (g) Goa Bottling Company : The allegation that the entire team of GBC comprising of 61 sales officer resigned to take up employment with the defendants is factually incorrect. According to the written statements of the defendants, only three out of 61 individuals preferred to work for GBC.
(II) (h) Kanpur Sales Team : In reply to the allegation, defendants 9,10,11 and 12 in conspiracy with defendant No. 16 took away the entire Kanpur Sales Team of the plaintiffs with a view to directly injure the plaintiffs. In reply to this allegation, it is submitted that only three employees of the plaintiff have joined employment with the defendants. It is further incorporated in the written statements and none of these three employees breached their respective contracts of employment with the plain tiffs. The contracts of employment were terminable upon three months notice or salary in lieu thereof.
147. These instances can be multiplied. In view of the categorical denial in the written statements, at this stage, it is difficult for the court to ascertain the veracity and truthfulness of the averments and allegations mentioned in the plaint. This can only be ascertained after the parties have been given an opportunity of adducing their evidence and opportunity to cross-examine the witnesses.
148. I do not deem it appropriate to give my findings on the aforesaid averments and submissions. Any expression of definite opinion at this stage may eventually prejudice the trial of this suit.
149. However, I deem it appropriate to observe that equitable relief of injunction can only be granted if the plaintiffs have approached the Court by disclosing the whole truth and have inspired implicit trust and confidence of the Court by demonstrating their conduct.
150. The plaintiffs are not entitled for injunction for the following reasons also :
(a) The injunction, as prayed for by the plaintiffs, if granted would certainly have a direct impact of curtailing the freedom of employees for improving their future prospects and service conditions by changing their employment.
(b) Rights of an employee to seek and search for better employment cannot be restricted by an injunction.
(c) Injunction cannot be granted to create a situation such as "Once a Pepsi employee, always a Pepsi employee". It would almost be a situation of `economic terrorism' or a situation creating conditions of `bonded labour'.
(d) Freedom of changing employment for improving service conditions is a vital and important right of an employee, which cannot be restricted or curtailed by a Court injunction.
(e) Inter-changeability of service is an accepted norm of Service Jurisprudence which cannot be curtailed by a Court injunction.
(f) 'Employees' right to terminate their contracts also cannot be curtailed by Court injunction.
(g) An injunction can be granted only for protecting the rights of the plaintiffs, but cannot be granted to limit the legal rights of the defendants.
(h) An injunction cannot be granted where the Courts have a doubt in the credibility, veracity and truthfulness of the plaintiff's version.
(i) An injunction also cannot be granted in a case where the Court directly or indirectly gets the impression that the injunction has been sought for extraneous considerations or oblique motives.
(j) Rough and tumble of the business including stiff competition has to be faced in a free market economy. The problems which should be settled in the market place cannot be brought to Law Courts or settled by a Court injunction.
(k) In economic matters, while granting injunction, business ealities have to be taken into consideration. The employees seek betterment and advancement of their careers, while they are in service. It is impracticable and unrealistic to artificially create a situation by a Court injunction when employees would first leave the employment and then look for better service conditions and job opportunities elsewhere.
(l) Most of the senior employees of the plaintiffs or the defendants were working with other multinationals or business organisations. They joined the plaintiffs or the defendants because attractive salaries and better service conditions were offered by them. The plaintiffs themselves have engaged a large number of employees who were working in other multi national or business organisations. They were appointed because they had work experience with other organisations. The same plaintiffs are not justified in seeking an injuncion so that their employees may not join the defendants. All that is to be seen is whether the defendants had adopted unfair means in advancing their business interests or not.
(m) In a free market economy, everyone concerned, must learn that the only way to retain their employees is to provide them attractive salaries and better service conditions. The employees cannot be retained in the employment perpetually or by a Court injunction.
(n) Free, fair and uninterrupted competition is the life of the ade and business. This freedom in free market economy has to be zealously protected in the larger interest of free trade and business. No injunction cane be granted which is likely to restrict or curtail this freedom.
(o) It is difficult to hold at this stage that the predominant object and paramount consideration behind the actions of the defendants was designed to injure the plaintiffs.
(p) At this stage, it is also difficult to hold that the defendnts resorted to business practices which are unethical, illegal and constitute tortious interference in the business of the plaintiffs.
151. On consideration of the totality of the facts and circumstances, the aintiffs have not made out a strong prima facie case for the grant of injunction at this stage. The balance of convenience is also not in favour of the plaintiffs. No irreparable injury is likely to be caused to the plaintiffs.
152. The plaintiffs application under Order 39 Rules 1 & 2 CPC at this stage being devoid of any merit is rejected. However, looking to the important questions of law of general public importance which are involved in the suit, I deem it appropriate that the hearing of the suit be expedited and accordingly, I direct that the suit be listed before the Court for framing of issues on 23.9.1999. The list of witnesses be furnished by the parties within four weeks. The suit shall be listed for recording of the evidence from 2nd to 5th November, 1999. The preliminary submissions ad- vanced by Mr. D.Dave, Sr. Advocate for the plaintiffs 9-16 shall be decided at the time of hearing of the suit.
153. Before parting with this case, I would like to place on record my deep appreciation for the extremely able assistance provided by the learned counsels appearing for the parties.
No comments:
Post a Comment