1

CASE 1
Jet Airways (I) Ltd. (plaintiff)
vs
Mr. Jan Peter Ravi Karnik (defendant)
This case is being discussed in the back drop of legality of object of a contract. Even though the
contract law proposes freedom of parties to enter into a contract, still it is subject to certain
rules especially with regards to the subject matter of the contract. The case describes the
different aspects of an employment contract, especially the validity and enforceability of a noncompete clause which is often used by companies.
Reference: The given concepts have been discussed from page 67 74 of the prescribed text.
(Certain irrelevant parts of the case have been deleted for ease of understanding)

The Plaintiffs prayer before the court

The plaintiff seeks an order of permanent injunction 1 restraining the defendant from taking;
up or continuing any employment until 11th October, 2005 with any other Airline, including
Sahara Airlines for the purpose of operating aircraft on the basis of the endorsement of the
licence obtained as a result of the training provided by the plaintiff, that is to say, for
operating B 737 Series 300/400/500.

The plaintiff also seeks money, decree against the defendants for the return of the training
cost incurred together with interest at the rate of 24 per cent per annum.

Facts of the case

The plaintiff carries on the business of Air transport carrier within India and operates a fleet of
modern Aircraft. The plaintiff commenced operation in May, 1993. It decided to operate and
expand its fleet based on the latest series of Boeing 737 aircraft in India only the Aircraft 737200 was operated. The plaintiff, however, introduced the series B 737-300/400. The plaintiff was
the first Airline to induct these two series of aircrafts in India. When the plaintiff commenced
1 A final order of a court that a person or entity refrain from certain activities
permanently or take certain action (usually to correct a nuisance). A permanent
injunction is distinguished from a "preliminary" injunction which the court issues
pending the outcome of a lawsuit or petition asking for the "permanent" injunction.

operations, there were no pilots in India who were rated for this type of aircraft i.e. who were
valid licences endorsed by the Director General of Civil Aviation (DGCA) to fly this type of
aircraft. The plaintiff, therefore, embarked on a manpower plan of recruiting Indian pilots and
training in the First Officers and Commanders. In the initial year of the Airlines operation, the
Aircraft were commanded by foreign instructors who were training the plaintiff Indian Pilots.
The defendant was employed by the Plaintiff after an interview on 30th April, 1998. Prior to
joining the plaintiff, the defendant was employed by the Indian Navy and thereafter by Span Air.
When the defendant joined the plaintiff, he had been flying Super King Air 8 200". In order to
equip the pilots for operating B-737/300/400 series an intensive training has to be undertaken.
The plaintiff organised the necessary training for the defendant and the other pilots. In the letter
of appointment dated 30th April, 1998 the defendant was offered the post of Trainee First Officer
on certain terms and conditions. In consideration of the plaintiff making the arrangement for the
training of the defendant, the defendant agreed and undertook that during a period of 7 years
from the date of completion of training in India and abroad and on resuming actual services with
the plaintiff as First Officer, he would not accept employment, similar in nature, either in full
time or part time with any other employer. In the event of the defendant resigning from the
services, he would make good to the plaintiff entire cost in respect of training and/or damage, if
any.
The defendant joined the services of the plaintiff w.e.f. 4th May, 1998. The total cost of training
is approximately Rs. 15 lakhs. All the conditions were satisfied by the defendant and he was sent
for training to Malaysia between 11th May, 1998 and 11th June, 1998 and between 15th August,
1998 and 5th September, 1998. The plaintiff incurred an amount of Rs. 11,31,400 on the training
of the defendant. On the basis of the training, the defendant obtained B-737-300/400/500, P2
endorsement with effect from 12th October, 1998. The defendant was confirmed in service of the
plaintiff on 6th February, 1999. By letter dated 4th December, 1999, the defendant resigned from
the services of the plaintiff with immediate effect. The reason stated for resignation was the
adverse changes to the rule of seniority. On 27th December, 1999 the defendant was informed
that he had wrongfully abandoned the services of the plaintiff in breach of the terms of
employment and, therefore, necessary legal steps will be instituted against him.
The relevant terms and conditions of the appointment as given in the letter dated 30th April,
1998 are as under.
Clause 1. You shall be in possession of valid Indian ALTP/IR/FRTQ/RTR/Licence.

Clause 3. You will be initially on training for which the company will make necessary
arrangements. You will have to pass the company's technical/performance examination
and the DGCA Technical Examination for B-737-300/400 endorsement within two
attempts, failing which your training will stand automatically terminated.
You will have to complete successfully simulator and flying training and obtain B- 737300/400 endorsement, should you fail to obtain the same within company's stipulated
time, your training shall stand terminated.
Details of the training will be intimated to-you separately. On successful completion of
your training including Simulator and Flying training and on obtaining B-737-300/400
endorsement you shall be on probation.
Clause 6.

The total cost of your training is estimated at approximately Rs. 15.0 lakhs

(Rupees Fifteen Lakhs only) which you are required to pay back to the company.

Refundable Demand Draft- to be retained for 7 years without interest 2.5 Lakhs

EMI of minimum of 33,000/- to be payable at Rs. 1,500/- per day to be recovered

from salary over 24 months (This amount will not be refunded in the event of
failure to complete simulator/ground classes and the company finds performance
during the training to be below acceptable standards). 33,000/- is based on 22
days of minimum flying and on and additional flying done Company will adjust a
further sum @ Rs. 1,500/- per flight day

Indemnity bond with 2 sureties for Rs 7.5 lakhs for a period of 7 years during
which he shall not leave or terminate his services

Clause 21. You will be required to serve the company for a minimum period of 7 years
from the date of your obtaining B-737-300/400 endorsement on your flying licence. In the
event of your resigning/leaving the service before the completion of the period aforesaid
for any reason whatsoever, you shall make good and pay to the company the entire cost
in respect of training and/or damages, if any.
Clause 22. During this period of seven years, you shall be exclusively employed by Jet
Airways and perform your duties towards Jet Airways. You shall agree that during the
said period of seven years you shall not take up employment with any other

persons/organisations/companies requiring you to perform similar duties as required to

be performed by Jet Airways and shall not engage in any similar business or vocation
requiring you to fly any other Aircraft.
Clause 23. After confirmation, the company would be entitled to terminate your services
without assigning any reason, by giving you three months notice in writing or by payment
of three months salary in lieu of such notice. In the event of your desiring to leave the
services of the company at any time after confirmation, you shall give to the company
three months notice in writing provided that the company may, at its sole discretion,
waive such notice. This is subject to provisions of para No. 20."
During this period of 7 years you shall not accept employment, similar in nature, either
full time or part time with any other employer. This period of 7 years shall be computed
from the period of the completion of the above said training in India and abroad and on
resuming actual services with the employer company as a First Officer."
Arguments on behalf of the Plaintiff
Mr. Vahanavati, learned Counsel for the plaintiff, submits that on reading of Clause 6 it clearly
show that the defendant had agreed to serve the company for a period of 7 years and not to leave
or terminate his services till the expiration of the period of 7 years. The defendant had also
agreed not to accept employment similar in nature either full time or part time with any other
employer during the period of 7 years. This negative covenant is reiterated by the defendant on
23rd September, 1998 whilst executing the bond. Apart from this, there is a complete negative
covenant contained in Clause 22. There is no option given to the defendant to cut short the period
of 7 years. It is submitted that the plaintiff has spent large amounts of money on training the
defendant. He cannot now be permitted to facilitate the competitor in getting unfair and
dishonest advantage against the plaintiff. It is, therefore, absolutely necessary that the injunction
be granted. Learned Counsel submitted that grave and irreparable loss and damage will be
caused to the plaintiff and the breach cannot be compensated in terms of money. He submitted
since 8 pilots have left the services of the plaintiff one after the other and joined Sahara Airlines,
it has led to disruption of the plaintiffs schedule. The difficulties experienced by the plaintiff
cannot be compensated in terms of money.
Learned Counsel has relied on two judgments of the Supreme Court to submit that in the
case of a clear negative covenant the relief of injunction can be granted, restricted of course to

the period of contract. Indeed all the learned Counsel on both the sides have relied on the same
judgments. These are (i) M/s. Gujarat Bottling Co. Ltd. v. Coca Cola Company and others, ,
hereinafter referred to as "the Coca Cola case" and (II) Niranjan Shankar Golikari v. Century
Spinning and Mfq. Com. Ltd., , hereinafter referred to as "the Golikari" case.

Mr. Chagla, learned Counsel also appearing for the Plaintiff has submitted that the negative
covenant contained in Clauses 6 and 22 are not in restraint of trade. The breach of the contract is
clear. In terms of Clause 6, an enormous amount of money has been spent on the training of the
defendant. The covenant contained in Clauses 6, 21 and 22 are affirmative as well as negative in
nature. He submits that the excuse given for leaving the company is an afterthought. This is a
clear case of illegal inducement being offered by Sahara Airlines. The plaintiffs are perfectly
within their right in accordance with the contract to rationalise the criteria for fixation of
seniority. The excuse put forward by the defendant is baseless and misconceived and has been
made only as a prelude to justify the breach of the contract. The seniority list was in fact duly
published in July, 1999. The objections were invited and they have been dealt with. He submitted
that if in a matter of this nature, the defendants are successful in resisting an injunction, it would
mean that there is no sanctity of contract. Learned Counsel submits that the sanctity of contract
must be enforced by the courts on the principles of equity and good conscience. Otherwise it
would lead to inducements being offered by the competitors. This has happened quite blatantly in
the present case. Eight pilots of the plaintiff have left and joined the competitor giving only lame
excuses for the breach of the contract.
Learned Counsel submits that it will be in the public interest to enforce the contract by way of
injunction. If this is not done, it would send a totally wrong signal in the Airline industry. The
Airlines will cut corners in training the pilots. This may lead the Airlines to curtailing the extent
of training as the Airlines would not know as to how long the pilot that has been trained by them
is likely to serve them.
Learned Counsel readily agrees that so far as law in India is concerned, there can be no
injunction on the basis of a negative covenant in the post contract period. This would be void
under section 27 of the Contract Act. However, during the period of contract injunction can and
should be granted. He submits that balance of convenience is clearly in favour of the plaintiff. If
these pilots are permitted to join Sahara Airlines it would cause irreparable loss. On the other
hand, if the injunction is issued, the defendant would not remain idle. He would still be entitled

to fly other kinds of planes. It may be that he would get a lesser salary but this would not be
sufficient to prevent the Court from granting the injunction sought. The learned Counsel had very
fairly stated that there is a judgment of this Court given by Lodha, J., in the case of Harjit Singh
Kang v. Jet Airways (India) Put. Ltd., decided on 24th July, 1996 which would need to be
distinguished. In that case the plaintiffs had filed a suit in the City Civil Court seeking an
injunction on the basis of an implied negative covenant. There was no express negative covenant
like in the present case. The City Civil Court had granted an injunction. According to the learned
Counsel, in the present case the injunction is restricted only to B-737-300/400 series. Therefore,
the observation made by Lodha, J., would not be applicable to the facts and circumstances of this
case. Furthermore, Lodha, J., has refused to grant the injunction on the basis of the finding that
there is no implied negative covenant. The negative covenant has been specifically provided in
all the letters of appointment and in the indemnity bonds in view of the judgment of Lodha, J.
The defendant in this case has agreed to exclusively work for the plaintiff for a period of 7 years.
Thus he cannot now be permitted to work with any other Airline in India on B-737-300/400
series Aeroplanes.
Mr. Dwarkadas, learned Counsel appearing in Notice of Motion Nos. 633 and 634 of 2000 has
made some additional submissions. In Suit No. 712 of 2000 the defendant had been appointed on
9th May, 1996; According to the learned Counsel, after the judgment of Lodha, J., the defendant
executed a bond sometime in the year 1997 which contain an express negative covenant. This,
according to the learned Counsel, was a complete negative covenant and there is no option left
with the employee. The resignation of the defendant was given on 6th December, 1999, only one
day before joining the Sahara Airlines. Distinguishing the judgment of Lodha, J., the learned
Counsel submitted that a perusal of the judgment would show that if the Court had come to the
conclusion that there was an implied negative covenant then the injunction would have followed.
It is only because the Court came to the conclusion that no negative covenant can be implied that
the injunction was refused.
Furthermore, the learned Counsel submitted that injunction in similar circumstances had been
given by the Supreme Court in Golikari's case (supra). In that case there was a similar
affirmative covenant as well as the negative covenant. In that case negative covenant had
provided for an obligation to serve the company. Liquidated damages were provided in case of
breach of contract and the negative covenant not to engage or carry on the business being carried
on by the company. He was also not to serve in any capacity for any other company carrying on

similar business. Learned Counsel has reiterated that the plaintiffs are not seeking any restraint
against the defendant in the post contract period.
The plaintiff is only seeking an injunction during the period of the contract. Learned Counsel has
also relied on the observations of the Supreme Court in para 34 of the Coca Cola case. In this it
is reiterated that except in cases where the contract is wholly one sided, normally the doctrine of
restraint of trade is not attracted in cases where the restriction is to operate during the period the
contract is subsisting and it applies in respect of a restriction which operates after the termination
of the contract.

Arguments on behalf of the Defendant

Mr. Tulzapurkar, learned Counsel appearing for the defendant has argued that the negative
covenant is too wide. It is not restricted in any manner. The Supreme Court in Golikari's case has
clearly held that merely because there is a negative covenant does not necessarily mean that the
Court has to grant the injunction.
Independently of this, Mr. Tulzapurkar submits that in view of the parties having themselves
contemplated either the plaintiff dismissing the defendant or the defendant leaving the services of
the plaintiff, under section 41(h) of the Specific Relief Act 2, no injunction should be granted. The
plaintiffs have themselves provided an equally efficacious remedy by way of liquidated damages.
He further submits that the negative covenant cannot be enforced after the contract has been
terminated. He further submits that no public interest whatsoever is involved for granting the
injunction to the plaintiff. In fact, it would be positively against the public interest to compel a
disgruntled pilot to work for an employer for whom he does not wish to work. The defendant has
left the plaintiff because of the change in the conditions of service of the defendant. Promotions
have been denied to the defendant. His seniority has been adversely affected. He submitted that
in para 12 of the affidavit in reply, detailed reasons as to why the defendant was compelled to
leave the services of the plaintiff has been' set out. One of the reasons was that the defendant was
entitled to Rs. 1,500/- per day as flight duty allowance. This was unceremoniously reduced by
the plaintiff to Rs. 500/- per day. Thus the defendant was caused a loss of Rs. 2,20,000/-. On the
2 Section 41: Injunction when refused.An injunction cannot be granted(h) when equally
efficacious relief can certainly be obtained by any other usual mode of proceeding except in
case of breach of trust;

representation of the defendant, the V.P. operations has ruled for the payment of the allowance to
the defendant and had directed the personal section to pay the arrears at the rate of Rs. 1,500/per day. According to the learned Counsel, this point is deliberately not dealt with by the
plaintiff. This itself is sufficient to reject the claim of the plaintiff for any discretionary relief.
The plaintiffs themselves having committed wrongs cannot rely on the same to seek an
injunction.
Learned Counsel further submitted that granting of injunction in these circumstances would
render the defendant wholly idle. He is specially trained to fly the B-737/300/400 series
Aeroplane. There is only one other scheduled Airline in India viz. Sahara Airlines in which these
planes are available. Thus if the defendant is not permitted to work with Sahara Airlines, the
injunction would amount to forcing the defendant to work again with the plaintiff. This would be
specific performance of a contract of personal service which relief cannot be granted by virtue of
section 14 of the Specific Relief Act.
Mr. Naphade, learned Counsel has adopted the argument of Mr. Tulzapurkar. He has, however,
made certain additional points which may be noticed. Learned Counsel submits that a perusal of
Clause 6 of the letter of appointment shows that the training is only financed by the defendant as
a loan transaction. Therefore, the training has been received by the defendant at his own expense.
Thus the plaintiff has no proprietary rights in the intellectual property rights which flow from the
training. These intellectual property rights are vested in the defendant. Therefore no injunction
can be granted which would prevent the defendant from exercising his proprietary rights. The
plaintiff has only advanced a loan. To secure the repayment of the loan the plaintiff has taken a
guarantee in the amount of Rs. 7.5 lakhs for 7 years. Rest of the amount was being deducted
from the salary of the defendant as provided in Clause 7. Learned Counsel further submits that
Clause 6 if read in conjunction with Clauses 21 and 22 would show that there is no negative
covenant. Clause 21 is equivalent to Clauses 1 and 13 which had been construed by Lodha, J.
Therefore, the plaintiff has now added Clause 22. Clause 22 is clearly in conflict with Clauses 6
and 21. The whole document has to be construed harmoniously. Clause 22 cannot be construed in
isolation to cull out a negative covenant. Learned Counsel further submits that 7 years mentioned
in Clauses 6, 21 and 22 would mean 7 years during the employment of the defendant with the
plaintiff. This Clause cannot mean that even if there is a breach of contract by the plaintiff which
compels the defendant to leave the services of the plaintiff, the defendant would be bound not to
accept any other assignment till the expiry of 7 years. The plaintiffs cannot be permitted to take
advantage of their own wrong. Once the employment is terminated either by the plaintiff or by

the defendant, then any further restriction would be violative of section 27 of the Contract Act.
Learned Counsel submits that Clause 22 has to be read down to mean that there would be no
restriction of 7 years if the contract comes to an end before the period of 7 years. Learned
Counsel also relies on sections 73 and 74 of the Contract Act to submit that liquidated damages
having been stipulated in Clause 6 would disentitle the plaintiff from the relief of injunction.
Learned Counsel further submits that there is no public interest involved. In fact pleadings
categorically show that the suit is filed merely for recovery of damages. Learned Counsel has
referred to page 26 of the plaint wherein it is categorically stated as follows:
"..... The whole purpose of the said negative covenant is to ensure that such pilots in whom the
plaintiff made such tremendous investment are not lured away by a competitor in breach of their
contracts. The plaintiff was the first airline in the country to conceive and implement the policy
of modernising its fleet inducted the latest version of the 737 Boeing aircraft in the country.
Sahara Airlines followed suit much later and is now trying to take dishonest advantage with the
plaintiffs trained pilots. The effect of the pilots leaving the plaintiff not only disrupts the
plaintiffs programming but also represents a considerable set back to the plaintiff in its
operation."
A perusal of the above, according to the learned Counsel shows that the plaintiff is only
interested in protecting the tremendous investment made by the plaintiff in the training of the
defendant. This, according to the learned Counsel, can be sufficiently compensated by damages.
Thus, there is no public interest but only commercial interest. Learned Counsel further submits
that injunction cannot be granted in view of section 41(e) and section 42 of the Specific Relief
Act. Section 41(e) provides that there can be no injunction in cases where specific performance
of the contract cannot be ordered- Section 42 provides that in order to get the relief of injunction
the plaintiff must perform the obligations under the contract. In the present case, if the injunction
is granted it would be in violation of section 41(e) of the Specific Relief Act. Learned Counsel
submits that if an injunction is granted not only the defendant will be left idle but his career
would be ruined. After six months of no flying the licence of the defendant is liable to be
cancelled. Thereafter the fresh training would have to be undergone. Therefore, this is a pressure
tactic to compel the defendant to specifically perform the contract of personal service.
As far as balance of convenience is concerned, learned Counsel submits that the defendant will
lose his job in Sahara. He will sit idle and he will lose his licence. The object of the injunction is
to protect the plaintiff against any possible injury which cannot be compensated by way of
damages. Thus the balance of convenience clearly lies in favour of the defendant. The question

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as to how the discretion is to be used has been clearly laid down by Lodha, J. If the injunction is
granted it would amount to granting an order of mandatory injunction3. This kind of an order can
only be made after the trial of the suit. In Golikari's case (supra) the injunction was granted after
the trial.
Learned Counsel further submits that the plaintiff has not come to Court with clean hands. There
is a unilateral change in the service conditions of the defendant. Furthermore, the conditions of
repayment of the loan amount given by the plaintiff to the defendant for the training have been
altered without the consent of the defendant. There was a change in the seniority rules. The
defendants increments were not paid. Promotion has not been given. Thus the plaintiffs literally
compelled the defendants to leave the services. These are circumstances of their own making.
Therefore, it cannot be said that defendant has acted in breach of contract. Even otherwise, the
negative covenant conditions are onerous, unreasonable and unconscionable.
The contract has been signed under coercion and undue influence of the plaintiff as the plaintiff
had a dominant bargaining power. A perusal of Clause 23 shows that it gives the power to the
plaintiff to change all conditions of service without consent of the defendant or other employees.
It is submitted that the restraint of 7 years in any event is far too long. Last but not the last, it is
submitted that pilots are "workman" under Clause 9-A of the Industrial Disputes Act. Therefore,
the changes in seniority could only be made after giving a notice of change as required under the
Industrial Disputes Act.
Judgement
I (the Judge) have considered the arguments put forward by the learned Counsel. A perusal of the
submissions noted above would show that the learned Counsel have reiterated the arguments one
after the other, on both the sides. A perusal of Clauses 6 and 22 would clearly show that there is
an affirmative covenant followed by the negative covenant. On the basis of these covenants, the
defendants have agreed to serve the plaintiffs for a period of 7 years exclusively. They have
3 Mandatory injunction is an injunction which orders a party or requires them to do an
affirmative act or mandates a specified course of conduct. It is an extraordinary remedial
process which is granted not as a matter of right, but in the exercise of sound judicial
discretion. The court will normally grant a mandatory injunction in the following
circumstances; 1.The applicant will suffer serious harm if the same is not granted,
2. The applicant will most likely succeed at trial;
3.The respondent will not incur expenditure which would be disproportionate to the
applicants harm.

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agreed that during the period of 7 years they will not take up employment with any other person,
organisation, company requiring them to perform similar duties as required to be performed by
the plaintiffs. They have also agreed not to engage in any similar business or vocation requiring
them to fly any other Airlines. In Golikari's case (supra) the Supreme Court was considering a
similar negative covenant. Therein the Clauses were as follows :
Clause 6 of the agreement provided :- "The employee shall, during the period of his employment
and any renewal thereof, honestly, faithfully, diligently and efficiently to the utmost of his power
and skill
(a) xxx xxx xxx
(b) devote the whole of his time and energy exclusively to the business and affairs of the
company and shall not engage directly or indirectly in any business or serve whether as principal,
agent, partner or employee or in any other capacity either full time or part time in any business
whatsoever other than that of the company."
Clause 9 provided that during the continuance of his employment as well as thereafter the
employee shall keep confidential and prevent divulgence of any and all information, instruments,
documents, etc. of the company that might come to his knowledge. Clause 14 provided that if the
company were to close its business or curtail its activities due to circumstances beyond its
control and if it found that it was no longer possible to employ the employee any further it should
have option to terminate his services by giving him three months notice or three months salary in
lieu thereof.
Clause 17 provided as follows :- "In the event of the employee leaving, abandoning or resigning
the service of the company in breach of the terms of the agreement before the expiry of the said
period of five years he shall not directly or indirectly engage in or carry on of his own accord or
in partnership with others the business at present being carried on by the company and he shall
not serve in any capacity, whatsoever or be associated with any person, firm or company
carrying on such business for the remainder of the said period and in addition pay to the
company as liquidated damages an amount equal to the salaries the employee would have
received during the period of six months thereafter and shall further reimburse to the company
any amount that the company may have spent on the employees training."

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Interpreting the aforesaid Clause, the Supreme Court has held that negative covenants during the
period of contract of employment when the employee is bound to serve his employer exclusively
are generally not regarded as in restraint of trade and, therefore, do not fall under section 27 of
the Contract Act. In that case the defendant had been trained by the plaintiffs on the post of Shift
Supervisor. In this training the defendant acquired knowledge of the technique, process and the
machinery involved and certain other confidential documents. This confidentiality was sought to,
be breached by the defendant by seeking employment with the rivals of the plaintiffs. Thus, the
injunction is granted to protect the interest of the plaintiff. It was held that the negative covenant
was not unconscionable, oppressive or unreasonable. It was also held to be not against the public
policy.
The main question to be decided in these cases is whether the negative covenant is in restraint of
trade. Section 27 reads as under:
Agreement in restraint of trade void: Every agreement by which anyone is restrained from
exercising a lawful profession, trade or business of any kind, is to that extent void."
Whether or not the contract is in restraint of trade would depend upon whether the contract was
unreasonable, unfair or unconscionable. A contract imposing a general restraint would, in all
probability, be void. Partial restraint would prima facie be valid and, therefore, enforceable. In
order for the negative covenant to be valid, even the partial restraint would have to be reasonable
in the interest of the parties and of the public. In the case of covenants of restraint between
master and servant two question necessarily arise.

First what are the interests of the employer that are to be protected.

Second what is the remedy available to the employer to protect the interest.

In Golikari's case the Supreme Court was dealing with the weaving process which the plaintiff
was obliged under an agreement with the foreign collaborator to keep secret. The German
Company had agreed to transfer the technical know how to the plaintiff company to be used
exclusively, for the plaintiff company's Tyre Cord Yarn Plant at Kalyan. Therefore, the plaintiff
was obliged to enter into secrecy agreements with its employees. It was in these circumstances
that the defendant in that case was required to give a negative covenant of secrecy. Clause 9 of
the agreement specifically provided that the defendant shall keep confidential and prevent
divulgence of any of the information and documents etc. which may have come to his

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knowledge. In such circumstances, the Supreme Court held that the plaintiff was entitled to be
protected in regard to their interest in the trade secret and secret process of manufacturing. This
protection was secured by restraining the defendant from divulging those trade secrets or by
putting into the use of the competitor.
In my view, the ratio of the judgment in Golikari's case is not applicable to the facts and
circumstances of the present case. It has been noticed above that all the defendants have been
sent on an advanced training course to enable them to fly new generation aeroplanes. It is
nobody's case that this training is a well guarded secret of the plaintiffs. In fact the training can
be obtained by any pilot by paying the requisite training charges. Even the pilots in Sahara
Airlines have to undergo the same training. The plaintiffs also cannot claim to have any interest
in the training acquired by the defendants as this is a skill which belongs exclusively to the
defendants. The defendants had received no special knowledge of any trade secret which
belonged exclusively to the plaintiffs. Thus the ratio in Golikari's case would not be applicable in
this case.
Mr. Chagla had submitted that breach of contract is clear. An enormous amount of money has
been spent on the training of the defendants. The Court would be failing in its duty if the
injunction is not granted as it would lead to inducements being offered by competitors to lure
away the employees of the plaintiffs. There would be no sanctity of contract. In fact, learned
Counsel submitted that this was a blatant case of poaching by the competitors. The same
arguments have been reiterated by Mr. Vahanvati and Mr. Dwarkadas. These arguments, in my
view, rather than helping the plaintiffs, are the very reasons for which the relief of injunction
ought not to be granted. In my view, the covenant is designed merely to prevent the defendants
from taking up employment with the competitors. This kind of a restraint, in my opinion, which
is in gross is not entitled to any protection. All the learned Counsel from the plaintiffs have
submitted that 8 pilots have left and joined Sahara Airlines. They have been offered higher
salary. Sahara Airlines would now reap the rewards of the training which has been made possible
by the plaintiffs. What has been submitted by the learned Counsel has in fact also been pleaded
in the plaint in paragraph 26, which has been reproduced in para 11 hereinabove. A perusal of the
same clearly shows that the plaintiff is only interested that the defendants should not accept
employment with Sahara Airlines. This becomes evident from the fact that there are only two
scheduled Airlines viz. Jet Airways and Sahara Airlines in which the Aircraft B-737-300/400/500
are being operated. It is also a matter of fact that there are large number of pilots who are
unemployed and would be ready and willing to take up employment with the plaintiffs in place

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of the defendants. Since the plaintiffs has no property/proprietary right in the skill acquired by
the defendants, no protection can be granted on the basis of the negative covenant. The
apprehension expressed by the learned Counsel for the plaintiffs that if an injunction is not
granted, then the pilots are likely to leave and join the competitor is no ground for granting the
drastic relief of injunction against the defendants. It is common ground between the parties that
earlier sixteen pilots had left Sahara Airlines and joined Jet Airways. The plaintiffs did not see
anything wrong in poaching the pilots from Sahara Airlines. It is settled law that the relief of
injunction can only be granted to protect the proprietary interest of the plaintiffs. To prevent the
pilots from leaving the plaintiffs and joining the competitor would not be protection of any
proprietary interest of the plaintiffs. Such a protection could have been provided by the plaintiffs
themselves by offering better condition of service than the competitor. It would clearly be against
public policy to compel the defendants to be forced to work with the plaintiffs merely because of
the covenant. It would amount to compelling disgruntled employees to work for an equally
disgruntled employer. This would not be in the interest of anyone. I am unable to agree with the
submissions of Mr. Chagla to the effect that if injunction is not granted, then there would be no
sanctity of contract. I am also unable to agree that public interest would be adversely affected as
the Airlines might cut corners in the training of the pilots if the negative covenant is not enforced
by way of injunction. Sanctity of contract has to be maintained by all parties to the contract. It
cannot be that the contract is sacrosanct for the defendants and not so for the plaintiffs. Thus the
conduct of the plaintiffs is also relevant. The conduct of the plaintiffs makes it abundantly clear
that it is following purely laissez-faire policy of business. Its primary aim is to capture the
maximum amount of domestic Air Traffic. It is not in business for any altruistic or philanthropic
reasons. It is, therefore, a little difficult to accept the submission of the learned Counsel that the
Airline would cut corners in the training which would directly affect its share of traffic which in
turn would affect its economic viability. I, therefore, hold that no public interest will be subserved by the grant of injunction. Further, this would be clearly against section 41(e) of the
Specific Relief Act which provides that no injunction ought to be granted to prevent the breach
of a contract the performance of which would not be specifically enforced. In my opinion, Mr.
Naphade is correct in his submission that the only anxiety of the plaintiffs is to protect
themselves from competition of Sahara Airlines. The negative covenant is not to protect any
proprietary interest of the plaintiffs, for they have none. It has already been narrated in the facts
above that the defendants have in fact financed their own training. The plaintiffs have merely
advanced a loan which was being recovered from the defendants in installments. Therefore, even
factually the position would not be the same as in Golikari's case. In that case the defendant had
been trained at the expense of the plaintiffs therein. I am of the considered opinion that the

15

negative covenant is unconscionable, one sided, unreasonable and not for the protection of any
proprietary interest of the plaintiff. Thus the negative covenant cannot be enforced by way of
injunction.
I am unable to agree with the submission of Mr. Dwarkadas that Lodha, J., would have granted
the injunction if the Court had come to the conclusion that there was an implied negative
covenant. There is no indication to this effect in the judgment of Lodha, J. On the contrary
Lodha, J., has come to the conclusion that even if it is assumed that there is an implied negative
covenant, still the relief of injunction cannot be granted to the plaintiffs. Even in the Coca Cola
case, the Supreme Court has categorically held that the Court is not bound to grant an
injunction in every case and an injunction to enforce a negative covenant would be refused if it
would indirectly compel the employees either to idleness or to serve the employer. Lodha, J., has
followed the law laid down by the Supreme Court and has also come to the conclusion that grant
of injunction would render the defendant, in that case, either idle or compel him to serve the
plaintiff. It is a settled principle of law that the relief of injunction should not be granted if it
would compel the employee to serve the employer or when the grant of injunction will lead to
the employee remaining idle. Grant of an injunction which would lead to either of these two
results would not be in public interest. The plaintiffs had relied on the observations of the
Supreme Court in Golikari's case that merely because the employees may be compelled to work
on a lesser remuneration is no consideration against enforcing the covenant. These observations
are of no avail to the plaintiffs in the present case. The defendants have at their own expense
acquired the training for flying new generation Aeroplanes. There are only two scheduled
Airlines, plaintiff and Sahara Airlines in which these Aeroplanes are operational. An injunction
restraining the defendants from flying B-737-300/400/500 is bound to render them idle. It would
clearly also amount to specific performance of the contract in that the defendants would either
have to remain idle or will be compelled to serve the plaintiff alone. Lodha, J., has refused to
grant the injunction even after assuming that a negative covenant can be implied from the
agreement. In paragraph 21 of the judgment, Lodha, J., has observed as follows;
"21. In view of the aforesaid ratio of the Supreme Court in M/s. Gujarat Bottling Co. Ltd.
(supra) it is clear that Court is not bound to grant an injunction in every case and an injunction
to enforce a negative covenant would be refused if it would indirectly compel the employee to
idleness or to serve the employer. In the present case, in my considered opinion, the negative
covenant cannot be implied and, therefore, question of grant of injunction to enforce the negative
covenant would not arise. Even if for the arguments sake it is assumed that the parties had

16

presumed intention that the defendant shall serve the plaintiff alone exclusively and shall not
serve anybody else during the period of the contract, grant of the injunction in the facts and
circumstances of the case would definitely lead either the defendant to remain idle or he shall be
compelled to serve the plaintiff and if that be the reason, in my view the plaintiff was not entitled
to injunction and the temporary injunction granted by the trial Court cannot be sustained. The
defendant is admittedly a Pilot having experience in flying aircrafts. There is no dispute that the
defendant has acquired the training for flying the sophisticated Boeings i.e. 737-400 and such
other aircrafts. The job of a pilot and that too of pilot in command for which the defendant has
been engaged by the plaintiff is not an ordinary job nor having acquired such training and spent
so many years in flying, he can be expected to serve as member of the ground staff in any other
airline as suggested by the learned Counsel for the plaintiff-respondent, a qualified and trained
pilot having acquired that skill can either do that job or no job at all and, therefore, if injunction
granted by the trial Court is allowed to sustain or the plaintiff is granted such injunction against
the defendant either the defendant would remain idle because he cannot work on any other job
or that he will be compelled to serve the plaintiff alone. It is not the matter of remuneration but it
is the matter of job for which man is equipped, trained and skilled and a person having acquired
training and still as pilot of flying sophisticated Boeings, he cannot be expected to do a job of
ground staff. Obviously therefore, injunction granted by the trial Court would either compel the
defendant to remain idle or would force him by circumstances to serve the plaintiff and I am
afraid if injunction granted to the plaintiff would result in such consequence, the injunction
cannot be justified. Therefore, in my view, the trial Court cannot be said to have exercised its
discretion while granting injunction in accordance with law and well settled principles."
I am in respectful agreement with the observations made by Lodha, J., and would decline the
claim for injunction. Another reason for refusing the relief of injunction is that prima facie I am
of the view that the plaintiffs have failed to perform the contract so far as it was binding on them
and cannot be permitted to take advantage of its own wrong. Proviso to section 42 of the Specific
Relief Act clearly requires the plaintiffs to perform its part of the obligations in order to seek the
relief of injunction which is otherwise prohibited by virtue of section 41(e) of the Specific Relief
Act.
Looking at the facts and circumstances of these cases it cannot be held that the restriction is
reasonable and fair and not one sided. Inspite of the fact that the defendants have not divulged
any trade secret or information which is not available to the general public, they are sought to be
restrained from exercising their profession. The defendants have undergone extensive specialised

17

training and spent huge sums of money. Now they are sought to be prevented from making any
use of this training merely because the training would be used whilst they are in the employment
of the competitor of the plaintiffs. A negative covenant, the sole purpose of which is to avoid
competition, cannot be treated to be a covenant by which the covenantee seeks to protect its
proprietary interest. Whether or not a contract is reasonable has to be seen by examining as to
what is the purpose of the restraint and as to whether it is justified. These principles have been
clearly stated in the case of (Shree Gopal Paper Mills Ltd. v. Surendra K. Ganeshdas Malhotro Y,
, Justice A.N. Ray has observed as follows:
"21. In contracts of service it is the proprietary interest owned by the master that requires
protection. As Lord Parkar said in 1961-1 AC 688.
"The reason, and the only reason for upholding such a restraint on the part of an employee is that
the employer has some proprietary right whether in the nature of trade connection or in the
nature of trade secrets, for the protection of which such a restraint is - having regard to the duties
of the employee - reasonably necessary. Such a restraint has, so far as I know, never been upheld
if directed only to the prevention of competition or against the use of a personal skill and
knowledge acquired by the employee in his employer's business."
In master and servant contracts restraint can be imposed upon a servant in respect of trade secrets
and business connection of the master. In the case of Forster and Sons Ltd. v. Suggett, the works
manager of the plaintiff who were chiefly engaged in making glass and glass bottles was
instructed in certain confidential methods concerning inter alia the correct mixture of gas and air
in the furnaces. He agreed that during the five years following the determination of his
employment he would not carry on in the United Kingdom or be interested in glass bottle
manufacture or in any other business connected with glass making as conducted by the plaintiffs.
The restraint for protection of trade secrets was held to be reasonable. It is indispensable that the
employer must prove definitely that the servant has acquired substantial knowledge of some
secret process or mode of manufacture used in the course of his business. In our country the
restriction beyond the period of employment would not however be valid. Similarly, an employer
is entitled to protect his trade connection. The nature of the business and the nature of the
employment are important considerations justifying a restraint. It may appear that the servant had
no access to the trade secrets of his master or to his customers. If that is so, the covenant is in
gross and unenforceable. As Farwell, J., said in Town End v. Jaran,

18

"Now, if one man apart from any business takes a covenant in gross from another man, that he
will not trade at all, that is simply oppressive. He does not require it to protect his own interest,
because he has no interest to protect."
In the Herbert Morris case, Lord Atkinson said that an oppressive agreement meant that it
would, if enforced, deprive a person for lengthened period of the power of employing that
mechanical and technical skill and knowledge which his own industry, observation and
intelligence have enabled him to acquire in the very specialised manufacturing business, thus
forcing him to begin life afresh as it were, depriving him of the means of supporting himself and
his family. Lord Atkinson further said that the general public suffer with him for it is in the
public interest that a man should be free to exercise his skill and experience to the best advantage
for the benefit of himself and of all those who desire to employ him.
In all cases of covenants of restraint between master and servant the two questions are first what
are the interest of the employer that are to be protected and secondly, against what is he entitled
to have them protected. The master is entitled to be protected in regard to his interests in trade
secrets and secret process of manufacture. That protection is secured by restraining the employee
from divulging those trade secrets or putting them to the use of the servant, the master is also
entitled to be protected against invasion of his customers or clientele but the master is not
entitled to be protected against competition...
The aforesaid observations in my view are sufficient to negative the submissions of the learned
Counsel for the plaintiffs to the effect that Jet Airways are entitled to be protected on the basis of
the negative covenant.
All the learned Counsel for the defendants had submitted that in view of Clauses 20, 21 and 23,
there is no negative covenant. I am unable to agree with the submission made by the learned
Counsel. Firstly merely providing for liquidated damages will not cut into the scope of the
negative covenant. In Golikaris case there was a provision for liquidated damages. Even then the
injunction was granted. Similarly the provision for probation or for termination of service prior
to the period of 7 years would not mean that there is no negative covenant. A bare perusal of
these provisions would show that Clause 21 is similar to Clause 17 in Golikaris case. In that
clause it is provided that in the event of the employee resigning or abandoning the services, the
employee would pay to the Company liquidated damages as stipulated therein. In Clause 21 it is
stipulated that in case of resignation or leaving the services, the employee shall make good and
pay to the company the pro rata cost in respect of training. This kind of a provision has been

19

held by the Supreme Court in Golikari's case not to be any hindrance for the grant of the relief of
injunction. In the present case Clause 21 provides for liquidated damages. Clause 23 gives an
option to the plaintiffs to terminate the services of the employee even after confirmation by
giving three months notice in writing or payment of three months salary in lieu of the notice. The
employee also has the option to leave the services of the plaintiffs by giving 3 months notice in
writing. The company can even waive the notice. All these clauses read together leave no manner
of doubt that the period of employment can be cut short either by the employer or by the
employee. This has no effect on the 7 year period for which the restrictive covenant is to run.
Even if the employee leaves the employer on the basis of exercise of his option under Clause 23
he would still be bound to perform the negative covenant provided the covenant is not in restraint
of trade, being unreasonable and unconscionable. I am unable to agree with the submission of
Mr. Tulzapurkar that merely because liquidated damages have been provided no order of
injunction can be issued in view of section 42(h) of the Specific Relief Act. This point has been
specifically negatived by the Supreme Court in Golikari's case. Therefore, it is not necessary to
give any further reasons for rejecting the submission. To avoid any confusion it is, however made
clear that the negative covenant in the present case does not satisfy the test to qualify for any
protection by way of injunction.
Mr. Tulzapurkar had rightly relied on the observations of the Supreme Court in paragraph 50 of
the Coca Cola case which are as under :
"50. In this context, it would be relevant to mention that in the instant case GBC had approached
the High Court for the injunction order, granted earlier, to be vacated. Under Order 39 of the
Code of Civil Procedure, jurisdiction of the Court to interfere with an order of interlocutory or
temporary injunction is purely equitable and, therefore, the Court, on being approached, will
apart from other considerations, also look to the conduct of the party invoking the jurisdiction of
the Court, and may refuse to interfere unless his conduct was free from blame. Since the relief is
wholly equitable in nature, the party invoking the jurisdiction of the Court has to show that he
himself was not at fault and that he himself was not responsible for bringing about the state of
things complained of and that he was not unfair or inequitable in his dealings with the party
against whom he was seeking relief. His conduct should be fair and honest. These considerations
will arise not only in respect of the person who seeks an order of injunction under Order 39,
Rule 1 or Rule 2 of the Code of Civil Procedure but also in respect of the party approaching the
Court for vacating the ad interim or temporary injunction order already granted in the pending
suit or proceedings."

20

In view of the above, it is not only the conduct of the defendants but also the conduct of the
plaintiffs which has to be scrutinised. It is an accepted fact that the terms and conditions of
service of the defendants have been unilaterally altered by the plaintiffs. It has been emphatically
argued by all the learned Counsel for the plaintiffs that the plaintiffs were entitled to do so. It has
been submitted that the grievances put forward by the plaintiffs were imaginary. I am unable to
accept the submissions. Firstly the defendants were made to pay for the training. Large sums of
money were being deduced from the salary of the defendants in order to repay the loan amount.
Seniority of the defendants have been affected in such a manner that their chances of promotion
have been adversely affected. The terms and conditions of the service as contained in the
appointment orders have been altered to the detriment of the defendants with retrospective effect.
The installments for repayment of the loan have been enhanced contrary to the provisions
contained in the initial letter of appointment dated 30th April, 1998. From this it becomes
obvious that the accrued rights of the defendants are sought to be taken away by amendments in
the policy decisions retrospectively.
Prima facie, I am of the view that this is sufficient breach of contract to disentitle the plaintiffs
from the relief of injunction which is to be granted on the basis of equity and good conscience. I
am also of the considered opinion that irreparable loss would be caused to the defendants, if they
are compelled to remain idle. All these defendants are experienced pilots having served in the
Navy and other organisations. They are all persons having family responsibilities. Thus
compelling them to remain idle would certainly tantamount to ruining their career as well as
family life. The Court cannot be oblivious to the human consequences which an order of
injunction would cause. On the other hand non-grant of injunction would not cause any
irreparable loss to the plaintiffs. Earlier the plaintiffs had quite merrily and successfully poached
16 pilots from Sahara Airlines. Now 8 pilots left Jet Airways and joined Sahara Airlines. Prima
facie, it appears that the conduct of the plaintiffs was such that the defendants had little choice
but to seek employment elsewhere. It is a hallowed principle of law, that those who seek equity
must do equity. Conduct of the plaintiffs can hardly be described as clean or commendable. I am
also of the considered opinion that any inconvenience which had been caused by the resignation
of the defendants was merely temporary. Thus the balance of convenience also lies in favour of
the defendants. Furthermore, the plaintiffs can be suitably compensated by award of damages in
the event the suit is finally decreed against the defendants and in favour of the plaintiffs. In my
view, the plaintiffs have failed to show prima facie any legal or equitable right for the grant of
injunction.

21

The case dismissed with costs.

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