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PETITIONER: SUPERINTENDENCE COMPANY OF INDIA (P) LTD.

       Vs.

RESPONDENT: KRISHAN MURGAI

DATE OF JUDGMENT09/05/1980

BENCH: TULZAPURKAR, V.D. BENCH: TULZAPURKAR, V.D. UNTWALIA, N.L. SEN, A.P. (J)

CITATION:  1980 AIR 1717            1980 SCR  (3)1278  1981 SCC  (2) 246

ACT:      Convenant in  restraint of  trade-Contract  Act,  1872, Section 27,  scope  of-Whether  a  post-service  restrictive covenant in  restraint of trade in service agreement between the parties is void-Even if it be valid, whether it could be enforceable, as  enjoined by  illustrations (c)  and (d)  to Section 57 of the Specific Relief Act, 1963.

HEADNOTE:      The appellant  company carries  on business  as valuers and surveyors  undertaking inspection  of quality, weighment analysis, sampling  of merchandise and commodities, cargoes, industrial  products,   machinery,  textiles   etc.  It  has established a  reputation and  goodwill in  its business  by developing  its  own  techniques  for  quality  testing  and control and  possess trade  secrets in  the  form  of  these techniques and clientele. It has its head office at Calcutta and a  branch at  New Delhi  and employs  various persons as managers and  in other capacities in Calcutta; New Delhi and other places.      On March  27, 1971,  the respondent was employed by the appellant company  as the  Branch Manager  of its  New Delhi office on  terms and  conditions contained  in the letter of appointment issued  to him  on the same date. Clause (10) of the terms and conditions of employment placed the respondent under a  post service  restraint that he shall not serve any other competitive  firm nor  carry on business on his own in similar line  as that of the appellant company for two years at the  place of his last posting. On November 24, 1978, the appellant company  terminated the respondent’s services with effect  from   December  27,  1978.  Thereafter,  respondent started his  own  business  under  the  name  and  style  of "Superintendence and  Surveillance Inspectorate of India" at E-22 South  Extension New  Delhi on  lines identical with or substantially similar  to that  of the appellant company. On April 19,  1979 the  appellant company brought a suit in the Delhi High Court on its original side, claiming Rs. 55,000/- as damages  on account  of the  breach of  negative covenant contained in  clause  (10);  and  for  permanent  injunction restraining the  respondent by himself, his servants, agents or otherwise,  from carrying  on the  said business  or  any

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other business  on lines  similar to  that of  the appellant company or  associating or  representing any  competitors of the appellant  company before  the expiry  of two years from December 27,  1978. After  filing  the  suit  the  appellant company sought  an ad interim injunction by way of enforcing the aforesaid  negative covenant  and a  Single Judge of the Delhi High  Court initially granted an ad interim injunction on April 29, 1979 which was confirmed by him on May 25, 1979 after hearing  the respondent.  On appeal by the respondent, the Division  Bench of  the High  Court reversed the interim order and hence the appeal by certificate.      Dismissing the appeal, the Court 1279 ^      HELD: (Per  Tulzapurkar J.,  on behalf  of Untwalia, J. and himself).      1. Assuming  that the  negative covenant  contained  in clause (10) of the service agreement is valid and not hit by section 27 of the Indian Contract Act, it is not enforceable against the  respondent at  the instance  of  the  appellant company. The appellant company should have taken care to use appropriate language,  while incorporating  such restrictive covenant so  as  to  include  every  case  of  cessation  of employment arising  from any  reason whatsoever and not used the expression  "leave", which normally is synonymous to the expression "quit" and indicates voluntary act on the part of the employee. [1285 F, 1287 A, B-C]      (2) The  word "leave"  has various  shades  of  meaning depending upon  the context or intent with which it is used. According to  the plain  grammatical meaning  that  word  in relation to  an employee  would  normally  be  construed  as meaning voluntary  leaving of  the service  by him and would not include  a case  where he  is discharged or dismissed or his services are terminated by his employer. Ordinarily, the word connotes voluntary action. [1286-D]      (3) In  the instant  case, having regard to the context in which  the expression  leave occurs in clause (10) of the service agreement  and reading  it alongwith  all the  other terms of  agreement, it  is clear  that the word "leave" was intended by  the parties  to  refer  to  a  case  where  the employee voluntarily  left the services of his own. [1286 G- H, 1287 A]      Murray v.  Close, 32  Law Times  Old series p. 89; held inapplicable to Indian Law.      Muesling v. International Rly. Co., 147 N.Y.S. 177, 178 85 Misc 309; quoted with approval.      Per Sen J.:      1.  Agreements   of  service,   containing  a  negative covenant preventing  the employee from working elsewhere are not void under section 27 of the Contract Act, on the ground that they  are in  restraint of  trade. Such  agreements are enforceable, the reason being that the doctrine of restraint of trade  never applies during the continuance of a contract of employment and applies only when the contract comes to an end. While  during  the  period  of  employment  the  Courts undoubtedly would  not grant  any specific  performance of a contract of personal service, nevertheless Section 57 of the Specific Relief  Act clearly  provides for  the grant  of an injunction to  restrain the breach of such a covenant, as it is not in restraint of, but in furtherance of trade. [1289 C-E]      2. There  is a  clear distinction between a restriction in a  contract of  employment which  is operative during the period of  employment and  one which is to operate after the

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termination  of   employment.  Mere  existence  of  negative covenant in a service agreement does not make it void on the ground that it was in restraint of trade and contrary to the Contract Act.  The restriction contained in clause 10 of the agreement in  this case is clearly in restraint of trade and therefore illegal  under section  27 of the Contract Act. It is not  seeking to  enforce the negative covenant during the term  of   employment  of   the  respondent  but  after  the termination of his services. [1289 F-G, 1290 F-G, 1291 C-D] 1280      Niranjan  Shankar  Golikari  v.  Century  Spinning  and Manufacturing Co., Ltd., [1967] 2 SCR 378, distinguished.      3. When  a  rule  of  English  law  receives  statutory recognition by the Indian Legislature, it is the language of the Act  which determines  the scope,  uninfluenced  by  the manner  in   which  the  anologous  provision  comes  to  be construed narrowly  or otherwise  modified in order to bring the construction  within the  scope and  limitations of  the rule governing  the English doctrine of trade. [1291 H, 1292 A]      Satyavrata Ghosh  v. Kurmee Ram Bangor, [1954] SCR 310, followed.      4. A  contract which  has for its object a restraint of trade  is,   prima  facie  void.  The  question  whether  an agreement is  void under section 27 must be decided upon the wording of  that section. There is nothing in the wording of section 27 to suggest that the principle stated therein does not apply when the restraint is for a limited period only or is confined  to a  particular area.  Such matters of partial restriction have  effect only  when the fact fall within the exception to the section. Section 27 of the Contracts Act is general in  terms, and  declares all agreements in restraint void  pro  tanto,  except  in  the  case  specified  in  the application  and   unless  a   particular  contract  can  be distinctly brought  within Exception  I there  is no  escape from the  prohibition. Here the agreement in question is not a "good  will of business", type of contract, and, therefore does not  fall within the exception. If the agreement on the part of the respondent puts a restraint even though partial, it was void, and, therefore, the contract must be treated as one which cannot be enforced. [1292 E-H, 1293 A, F-G]      Madhub Chander v. Raj Coomar Dass, (1874) Bom.L.R. 76 @ 85-86; approved.      5. A  contract in  restraint of trade is one by which a party restricts  his future  liberty to  carry on his trade, business or  profession in such manner and with such persons as he chooses. A contract of this class is prima facie void, but it  becomes binding  upon proof  that the restriction is justifiable in  the circumstances  as being  reasonable from the point  of view of the parties themselves and also of the community. Under  Section 27 of the Contract Act the onus is upon the covenanter. [1292 H, 1293 A, & 1294 D-E]      6. A  law does  not cease to be operative because it is an anachronism  or because  it is  antiquated or because the reason why  it originally  became the law could be no reason for the  introduction of  such a  law at  the present times. Neither the test of reasonableness nor the principle of that the restraint being partial was reasonable are applicable to a case governed by Section 27 of the Contract Act, unless it falls within  Exception I.  Under Section 27 of the Contract Act, a  service covenant  extended beyond the termination of the service is void. [1299 A-C]      Nordenfelt v. Maxim. Nordenfelt Guns and Ammunition Co. Ltd. L.R.  [1894] A.C.  535; Mason v. Provident Clothing and Supply Co.  Ltd., L.R.  [1930] A.C. 724; Herbert Morris Ltd.

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v. Saxelby; discussed.      7. On a true construction of clause 10 of the agreement the negative  convenant not  serve elsewhere or enter into a competitive business does not, arise 1281 when the  employee  does  not  leave  the  services  but  is dismissed from  service. Wrongful dismissal is a repudiation of contract  of service  which relieves  the employee of the restrictive covenant. [1299 E-F]      General Billposting  Co. v.  Atkinson, L.  R. [1909] AC 118; referred to.      8. The  word ’leave’  has  various  shades  of  meaning depending upon  the context of intent with which it is used. According to the plain meaning, the word ’leave’ in relation to an  employee,  should  be  construed  to  mean  where  he "voluntarily" leaves  i.e. of  his own volition and does not include a  case of  dismissal. The  word ’leave’  appears to connote voluntary  action, and  is synonymous  with the word ’quit’. It does not refer to the expulsion of an employee by the act  of his employer without his consent and against his remonstrance. That  is a  meaning in consonance with justice and fair play. [1299 H, 1300 A-B]      9. Restrictions  on competitions  during the  period of service are  normally valid and indeed may be implied by law by virtue  of the  servant’s duty of fidelity. In such cases the restriction  is generally  reasonable, having  regard to the interest  of the  employer and  does not cause any undue hardship to  the employee, who will receive a wage or salary for the  period in  question. But  if  the  covenant  is  to operate after  the termination of services, or is too widely worded, the Court may refuse to enforce it. [1300 C-D]      10. It  is well  established that  employee’s covenants should be  carefully scrutinised because there is inequality of  bargaining   power  between   the  parties;   indeed  no bargaining power may occur because the employee is presented with a standard form of contract to accept or reject. At the time of  the agreement,  the employee  may have given little thought to  the restriction  because of  his eagerness for a job; such contracts "tempt improvident persons, for the sake of present  gain, to deprive themselves of the power to make future  acquisitions  and  expose  them  to  imposition  and oppression". [1300 E-F]      11.  The  Courts  view  with  disfavour  a  restrictive covenant by  an employee not to engage in a business similar to or  competitive with  that  of  the  employer  after  the termination  of   his  contract   of  employment   since   a restrictive covenant  ancillary to  a contract of employment is likely  to affect  the employee’s  means or  procuring  a livelihood for himself and his family. [1301 B-C]      12. The  true rule  of  construction  is  that  when  a covenant or  agreement is impeached on the ground that it is in restraint  of trade,  the duty  of the Court is, first to interpret the covenant or agreement itself, and to ascertain according to  the ordinary rules of construction what is the fair meaning  of the  parties. If  there is  an ambiguity it must receive  a narrower  construction than  the wider.  The restraint may  not be  greater than necessary to protect the employer, nor  unduly harsh  and oppressive to the employee. Even if  the word  ’leave’ contained  in clause  10  of  the agreement is  susceptible of  another construction  as being operative  on  termination,  however,  accomplished  of  the service e.g.  by  dismissal  without  notice,  would  having regard to  the provisions of section 27 of the Contract Act, 1972, try  to preserve the Government in clause 10 by giving

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to it a restrictive meaning, as implying volition i.e. where the employee resigns or voluntarily leaves the services. The restriction being  too wide;  and violative of section 27 of the  Contract   Act,  must   be  subjected   to  a  narrower construction. [1301 C-G] 1282

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil Appeal No. 1933 of 1979.      Appeal by  Special Leave  from the  Judgment and  Order dated the  20th July, 1979 of the Delhi High Court in F.A.O. (OS) No. 86 of 1979.      A. K.  Sen, P. P. Rao, N. D. Garg, R. Venkataramani and S. K. Bisaria for the Appellant.      K. K.  Venugopal, H.  K. Puri  and S. C. Dhanda for the Respondent.      The following Judgments were delivered      TULZAPURKAR, J.  This appeal  at the  instance  of  the appellant company  (original plaintiff)  is directed against an interlocutory  order passed  by the  High Court in F.A.O. (O.S.) 86  of 1979 refusing to grant temporary injunction in a suit  which is  still pending.  Principally it  raises two substantial   questions:    (a)   whether   a   post-service restrictive covenant  in restraint  of trade as contained in cl. (10)  of the  service agreement  between the  parties is void under  s. 27  of the  Indian Contract  Act  ?  and  (b) whether the  said restrictive  covenant, assuming  it to  be valid, is  on its  terms enforceable  at the instance of the appellant company against the respondent ?      On March  21, 1980  we  dismissed  the  appeal  at  the conclusion of the hearing and it was stated that our reasons will follow.  We now  proceed to  give our  reasons for  the dismissal.      Briefly stated  the  facts  are  these.  The  appellant company  carries  on  business  as  valuers  and  surveyors, undertaking  inspection  of  quality,  weighment,  analysis, sampling of merchandise and commodities, cargoes, industrial products, machinery,  textiles, etc.  It has  estabilshed  a reputation and  goodwill in  its business  by developing its own techniques for quality testing and control and possesses trade secrets in the form of these techniques and clientele. It has its head office at Calcutta and a branch at New Delhi and  employs  various  persons  as  managers  and  in  other capacities in Calcutta, New Delhi and other places. On March 27, 1971  the  respondent  was  employed  by  the  appellant company as  the Branch  Manager of  its New  Delhi office on terms and  conditions contained in the letter of appointment issued to him on the same date. Clause (10) of the terms and conditions of employment placed the respondent under a post- service  restraint   that  he  shall  not  serve  any  other competitive firm nor carry on business on his own in similar line as  that of  the appellant company for two years at the place of  his last posting. Since it is vital we set out the said clause which ran thus:-           "10. That  you will  not be  permitted to join any      firm of  our competitors  or run a business of your own      in similar 1283      lines directly  and/or indirectly,  for a period of two      years at the place of your last posting after you leave      the company."      On November  24, 1978  the appellant company terminated

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the respondent’s  services with  effect  from  December  27, 1978. Thereafter  the respondent  started his  own  business under  the   name  and   style   of   "Superintendence   and Surveillance  Inspectorate   of  India"   at   B-22,   South Extension,  New   Delhi   on   lines   identical   with   or substantially similar  to that  of the appellant company. On April 19,  1979 the  appellant company brought a suit in the Delhi High  Court on its Original Side claiming Rs. 55,000/- as damages  on  account  of  the  breach  of  the  aforesaid negative covenant  contained in  cl. (10)  and for permanent injunction  restraining   the  respondent  by  himself,  his servants, agents  or otherwise,  from carrying  on the  said business or  any other  business on lines similar to that of the appellant  company or  associating or  representing  any competitors of  the appellant  company before  the expiry of two years  from December 27, 1978. After filing the suit the appellant company  sought an  interim injunction  by way  of enforcing the aforesaid negative covenant and a Single Judge of the  Delhi High  Court initially  granted an  ad  interim injunction on  April 29,  1979 which was confirmed by him on May 25,  1979 after  hearing  the  respondent.  The  learned Single Judge took the view that the negative covenant, being in partial restraint of trade, was reasonable inasmuch as it was limited both in point of time (two years) as well as the area of  operation (New  Delhi which  was his  last posting) and, therefore, was not hit by s. 27 of the Contract Act. He also  took   the  view   that  the   negative  covenant  was enforceable as  the expression  "leave" in  cl. (10) was not confined to  voluntarily  leaving  of  the  service  by  the respondent but was wide enough to include termination of his services  by   the  appellant  company.  On  appeal  by  the respondent, a  Division Bench of the High Court reversed the order of  the learned  Single Judge  on both  the points and that is  how the two questions indicated at the commencement of this judgment arise for our determination in this appeal.      Since in  our view  the  appeal  is  capable  of  being disposed of  on the  second point we think it unnecessary to decide or  express our  opinion on  the first question which was hotly  and ably  debated at the bar by counsel on either side but  we will  indicate briefly the rival lines on which the arguments  proceeded. On  the one  hand counsel  for the respondent tried  to support  the view of the Division Bench by pointing  out that  in India  the law  on the subject was codified by statute which was exhaustive and on the topic of agreements in  restraint of  trade and  exceptions  in  that behalf the Indian Courts cannot invoke or derive 1284 assistance from  the English  Common Law  and the exceptions developed thereto  by English  decisions from  time to time, that s.  27 of the Indian Contract Act was absolute in terms in that  it did  not make any distinction between partial or general restraints and that unless a case was covered by the Exception provided  thereunder  every  restraint  of  trade, whether partial or general would be void under that section. In this  behalf reliance was placed on a number of decisions of  various  High  Courts  commencing  from  the  celebrated decision of  Sir Richard  Couch, C.J.  in Madhub  Chunder v. Rajcoomar  Doss(1)  where  s.  27  was  interpreted  in  the aforesaid manner. Counsel urged that a distinction between a negative covenant  operative during the period of employment and one  that is  operative during  post-service period  has been well  recognised and  that all post-service restrictive covenants were  prima facie  void, that  the only exceptions were those  given in  the statute  and that  the  exceptions developed by the English case law could not be invoked here.

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According to him the test of reasonableness had been wrongly adopted by  the learned  Single Judge.  He pointed  out that accepting the  interpretation placed on s. 27 by High Courts even the  Law Commission has recommended a change in that by suitable  legislation.  He  further  pointed  out  that  the Division Bench has gone a step further and after considering whether the  instant case would fall within those exceptions developed by  English  case  Law  has  come  to  a  negative conclusion against the appellant company.      On the  other hand  counsel for  the appellant  company contended that  the interpretation  of s.  27  as  given  by various High  Courts including  Sir Richard Couch’s decision in Madhub  Chunder’s  case  (supra)  has  not  been  so  far considered by  this Court and it requires to be examined and considered by  this Court  especially  in  view  of  certain observations  made   by  this   Court  in  Niranjan  Shankar Golikari’s (2)  case  which  warrant  such  reconsideration. Though it was a case dealing with negative covenant that was operative during  the employment  period counsel pointed out that entire case law Indian as well as English was discussed and this Court at page 389 of the report observed thus:           "The  result  of  the  above  discussion  is  that      considerations  against   restrictive   covenants   are      different in  cases where  the restriction  is to apply      during the period after the termination of the contract      than those  in cases  where it is to operate during the      period of the contract." 1285                       Tulzapurkar, J.) According to  counsel the  very fact  that  this  Court  has observed that  considerations qua  post-service restrictions are different  from those that are to be considered in cases of restrictions  during the employment suggests that perhaps a rigorous  test of reasonableness may have to be adopted in the former cases but there would be cases where post-service restrictions,  if   reasonable,  even   after  applying  the rigorous tests  may be  valid as  not falling under s. 27 of the Act,  it was,  therefore, not  correct to  say that  all post-service restrictions  were void. His precise contention was that even a post-service restrictive covenant, if it was reasonable, qualified  or limited in operation both in point of time  and area,  as was the case here, does not amount to any restraint  of trade  at all  within the meaning of s. 27 and such  restrictive covenant  could be  justified as being necessary and essential to protect the employer’s interests, his trade  secrets and his trade connections and, therefore, valid. As  regards the argument based on codified exception, counsel pointed  out, that  even the  case of  a restrictive covenant operative  during the  period of employment between master and servant had not been provided for as an exception below s.  27 but even so such restrictive covenant was never regarded as  amounting to  restraint of  trade under  s.  27 mainly because  it was  always regarded  as  reasonable  and necessary to  protect the  employer’s interests, which shows that the  statutory exceptions  were not exhaustive. Lastly, counsel urged  that the  Law Commission’s  recommendation on which reliance  was placed  by respondent’s counsel would be inconsequential because it proceeds on the acceptance of the interpretation placed on s. 27 by various High Courts and he is  seeking   to  get   that  interpretation   examined  and considered by this Court.      However, as  we have  said above,  we do not propose to discuss or  decide the  aforesaid question  inasmuch as this appeal can  be disposed  of by  deciding the second question that has been raised before us and for that purpose we shall

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proceed  on   the  assumption  that  the  negative  covenant contained in  cl. (10) of the service agreement is valid and not hit  by s.  27 of  the Contract  Act.  The  question  is whether the  said  restrictive  covenant  is  on  its  terms enforceable against  the respondent  at the  instance of the appellant company.      We  have   already  quoted   the  restrictive  covenant contained in cl. (10). In terms the clause provides that the restriction  contained  therein  will  come  into  operation "after you  (respondent) leave  the company".  Admittedly in the instant  case the respondent had not on his own left the company but  his services  were terminated  by the appellant company by a notice dated November 24, 1978 with effect from December 27, 1978. The question is whether the phrase "after you 1286 leave the  company" means  the leaving  of  service  by  the respondent voluntarily  or would  include even  the case  of termination of  his services  by the  appellant company. The Division Bench of the High Court has taken the view that the word "leave"  does not include termination of service by the employer. Counsel  for the  appellant company contended that the word  "leave" occurring  in the  phrase "after you leave the company"  would be  wide enough  to include all cases of cessation of  service whether  brought  about  by  voluntary quitting on  the part  of the employee or termination of his services by  the employer  and in  that behalf  reliance was placed upon  an English decision in Murray v. Clese where it was held  that an  agreement restricting competition with an employer "after  leaving his  service" would be operative on the termination,  however accomplished, of the service, e.g. by a  dismissal without  notice.  (vide:  Stroud’s  Judicial Dictionary, 4th  Edn., Vol. 3, page 1508, Item 13, under the word ’leaving’).      In our  view, the  word "leave"  has various  shades of meaning depending  upon the  context or intent with which it is used.  According to  the plain  grammatical meaning  that word in  relation to an employee would normally be construed as meaning voluntary leaving of the service by him and would not include  a case  where he  is discharged or dismissed or his services  are terminated by his employer. Ordinarily the word "leave" appears to connote voluntary action. In Words & Phrases Permanent  Edition Vol. 24 at page 499 the following statement of law based on an American decision occurs:           "An application for the employment of a street car      conductor provided that in the event of his leaving the      services for  any reasons  whatever within  six months,      the money  paid to him for work under instruction while      on trial  should be deducted from such moneys as should      be due  from the  company on the date of his "leaving".      Held, that  the word "leaving" meant to quit or depart,      implying volition  on the  part of  the person leaving,      and limited  the forfeiture of the instruction wages to      a case  where plaintiff  left defendant’s employ of his      own volition,  nor was such instruction effected by the      words,  "for   any  reason   whatsoever."  Muesling  v.      International Ry.  Co., 147  N.Y.S. 177,  178, 85 Misc.      309. In our  view having  regard to  the  context  in  which  the expression  "leave"  occurs  in  cl.  (10)  of  the  service agreement and  reading it  alongwith all  the other terms of employment it seems to us clear that in the instant case the word "leave"  was intended by the parties to refer only to a case where the employee has voluntarily left the services 1287

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of the  appellant company  of his  own, and  since here  the respondent’s  services  were  terminated  by  the  appellant company the restrictive covenant contained in cl. (10) would be inapplicable  and, therefore, not enforceable against the respondent at the instance of the appellant company. Counsel for the  appellant company urged that our construction would lead to  putting a premium upon an dishonest employee who by his own misdemeanour and misbehaviour may invite termination of his  services. All  that we can say is that the appellant company should  have taken  care to use appropriate language while incorporating  such  restrictive  covenant  so  as  to include every  case of  cessation of employment arising from any reason  whatsoever and  not used the expression "leave," which normally  is synonymous  to the  expression "quit" and indicates voluntary act on the part of the employee.      In the  result the appeal is dismissed with no order as to costs.      SEN, J.  I regret  that my  learned brethren propose to express no opinion on the question on which, in my view, the appeal turns.  The question  is whether  a negative covenant which  restricts  the  right  of  the  employee,  after  the conclusion of the term of service, or the termination of the employment for  other reasons,  to engage  in  any  business similar to  or competitive  with that of the employer, is in restraint of  trade and, therefore, void under section 27 of the Contract  Act, 1972. I have no doubt in my mind that the appeal cannot be decided without deciding this question.      This appeal on certificate from a judgment of the Delhi High court,  relates to  a covenant  in restraint  of  trade contained in  an agreement between the appellant company and the respondent  in circumstances  which we will explain. The appellant  company   carries  on  the  business  of  valuer, surveyor,  inspection   of  quality,   weighment,  analysis, sampling of merchandise and commodities, cargoes, industrial products, machinery,  textiles, etc.  It has its head office at Calcutta  with a  branch at  New Delhi. On or about March 27,1971, the  respondent who  is a  surveyor and  valuer was employed by  the appellant  as the Branch Manager of its New Delhi office.  One  of  the  terms  and  conditions  of  the employment was that the respondent would not serve elsewhere or enter  into any  business for  a period  of 2 years after leaving the  service. The  term is contained in clause 10 of the agreement which reads:           10. That  you will  not be  permitted to  join any      firm of  our competitors  or run a business of your own      in similarity  as directly  and/or  indirectly,  for  a      period of two years at the 1288      place of your last posting after you leave the Company.      The appellant terminated the services of the respondent by its  letter  dated  December  27,  1978.  Thereafter  the respondent started  a business of his own under the name and style of  "Superintendence and  Surveillance Inspectorate of India"  at   E-22,  South  Extension,  New  Delhi  on  lines identical with  and substantially  similar to  that  of  the appellant. On April 19, 1979, the appellant commenced a suit in the  Delhi High  Court in  its original side claiming Rs. 55,000/- as damages on account of breach of the covenant and for permanent  injunction  to  restrain  the  respondent  by himself, his  servants or  agents or otherwise from carrying on the  said business or any other business on lines similar to that  of the appellant or associating or representing any Competitors of  the appellant before the expiry of two years from December 27, 1978.      A Single  Judge of  the Delhi  High Court  adopting the

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test of  reasonableness, held  that under  section 27 of the Contract Act to determine whether the agreement is void, one has to  see whether  the restraint  is reasonable; and if so the  negative  covenant  can  be  enforced  as  enjoined  by illustrations (c)  and (d)  to section  57 of  the  specific Relief Act, 1963. He held that Clause 10 of the agreement is not  unreasonable,   because  the   area  of   restraint  is restricted to  New Delhi,  the place  of last posting of the respondent and  is not  unlimited, being limited to a period of two  years from  the date he left the service. He went on to say  that negative  covenant in  a contract of employment has always  been enforced, if it is in the protection of the employer, and  referred  to  Niranjan  Shankar  Golikari  v. Century Spinning  and Mfg.  Co. Ltd. [1967] 2 S.C.R. p. 378. He further  held that the negative covenant was operative as the word  "leave" in  clause 10  was wide  enough to include termination of  service. He, accordingly, by his order dated May  25,   1979,  made  the  earlier  ex  parte  ad  interim injunction granted  by him  on April  24, 1979  absolute but restricted its  operation to  New Delhi  and for  the period ending 27th  December, 1980  or till  the decision  of suit, whichever is earlier.      On appeal  by the  respondent, a  Division Bench of the High Court  reversed the  order of  the learned Single Judge holding that  negative covenant  operating beyond the period of employment was in restraint of trade and, therefore, void under section 27 of the Contract Act. 1289      Four questions  arise in this appeal: 1. Whether Clause 10 of  the agreement  was in  restraint of trade; and if so, being partial  was valid  and enforceable being reasonable?; 2. Whether according to the test of reasonableness laid down by Lord  Macnaghten in Nordenfelt v. Hakim Nordenfelt Guns & Ammunition  Co.   Ltd.,(1)  an  injunction  to  enforce  the negative covenent can be granted under illustrations (c) and (d) to  section 57 of the Specific Relief Act, 1963, despite section 27  of the  Contract Act,  1872 ? 3. Whether, and to what extent,  the provisions  of Section  27 of the Contract Act are  subject to  the common law doctrine of restraint of trade ?  4. Whether  the word  "leave" in  Clause 10  of the agreement between  the parties  makes the  negative covenant operative  only   when  a  servant  voluntarily  leaves  his employment, or, applies even in a case of termination of his services by  an order  of dismissal  or termination  of  his services?      Agreements of  service, containing  a negative covenant preventing the  employee from  working elsewhere  during the term covered by the agreement, are not void under section 27 of the  Contract  Act,  on  the  ground  that  they  are  in restraint of  trade. Such  agreements are  enforceable.  The reason is  obvious. The doctrine of restraint of trade never applies during  the continuance of a contract of employment; it applies  only when  the contract  comes to  an end. While during the  period of  employment,  the  Courts  undoubtedly would not  grant any  specific performance  of a contract of personal service,  nevertheless; Section  57 of the Specific Relief Act  clearly provides  for the grant of an injunction to restrain  the breach  of such  a covenant as it is not in restraint of, but in furtherance of trade.      In Niranjan  Shankar Golikari’s case, supra, this Court drew a  distinction between  a restriction  in a contract of employment  which   is  operative   during  the   period  of employment and one which is to operate after the termination of employment.  After referring  to  certain  English  cases where such distinction had been drawn, the Court observed:

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         "A similar  distinction has also been drawn by the      Courts in India and a restraint by which a person binds      himself during  the term  of his  agreement directly or      indirectly not  to take service with any other employer      or be  engaged by a third party has been held not to be      void and not against section 27 of the Contract Act." 1290      It referred  to  with  approval  the  decision  in  The Brahmaputra Tea  Co. Ltd.  v. Scarth,  I.L.R. (1885) 11 Cal, 545, where  the condition  under which  the  covenantee  was partially restrained  from competing  after the  term of his engagement with  his former employer, was held to be bad but the condition  by which  he bound himself during the term of his agreement,  not, directly or indirectly, to compete with his employer was held good, and observed:           "At page 550 of the report the Court observed that      an agreement of service by which a person binds himself      during the  term of  the agreement  not to take service      with any one else, or directly, or indirectly take part      in, promote  or did  any business in direct competition      with that of his employer was not hit by section 27." The Court further observed:           "An agreement  to serve a person exclusively for a      definite  term   is  a  lawful  agreement,  and  it  is      difficult to  see how  that can  be unlawful  which  is      essential to its fulfillment, and to the due protection      of the  interests of  the employer, while the agreement      is in force."      The Court also approved of the several Indian decisions where an  agreement of  service contained  both  a  positive covenant viz.  that the employee shall devote his whole-time attention to  the  service  of  the  employers  and  also  a negative  covenant  preventing  the  employee  from  working elsewhere during  the term  of the  agreement, and  the High Courts have  enforced such  a negative  covenant during  the term of  employment having  regard to  illustrations (c) and (d) to  section 57  of the  Specific Relief  Act  which,  in terms,  recognised  such  contracts  and  the  existence  of negative covenants  therein, and  stated that the contention that the  existence of such a negative covenant in a service agreement made  the agreement void on the ground that it was in restraint  of trade  and contrary  to section  27 of  the Contract Act had no validity.      In conclusion, the Court observed:           "The  result  of  the  above  discussion  is  that      considerations  against   restrictive   covenants   are      different in  cases where  the restriction  is to apply      during the period after the termination of the contract      than those  in cases  where it is to operate during the      period of the contract. Negative 1291      covenants operative  during the  period of the contract      of employment  when the  employee is bound to serve his      employer exclusively  are  generally  not  regarded  as      restraint of  trade and  therefore do  not  fall  under      section 27  of the  Contract Act.  A negative  covenant      that the  employee would  not engage himself in a trade      or business  or would  not get  himself employed by any      other master  for whom  he  would  perform  similar  or      substantially  similar   duties  is   not  therefore  a      restraint of  trade unless the contract as aforesaid is      unconscionable or  excessively harsh or unreasonable or      one sided."                                          (Emphasis supplied)      The decision  in Niranjan Shankar Golikari’s case supra

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is therefore  of little  assistance to  the appellant. It is not seeking to enforce the negative covenant during the term of employment of the respondent but after the termination of his services.  The restriction contained in Clause 10 of the agreement is obviously in restraint of trade and, therefore, illegal and  unenforceable under  section 27 of the Contract Act.      In support  of the  appeal,  learned  counsel  for  the appellant has, in substance, advanced a two-fold contention. It is  submitted, firstly,  upon the  common law doctrine of restraint of  trade that though the covenant is in restraint of trade, it satisfies the ’test of reasonableness’, as laid down by  Lord Macnaghten  in Nordenfelt  v. Maxim Nordenfelt Guns &  Ammunition  Co.  Ltd.,  supra,  and  is,  therefore, enforceable despite  section 27  of the  Contract Act, 1872, and, secondly,  that the  word "leave"  in Clause  10 of the agreement is wide enough to make the covenant operative even on the  termination of  employment i.e. it includes the case of dismissal. I am afraid, the contentions are wholly devoid of substance.      While the  Contract Act, 1872, does not profess to be a complete code dealing with the law relating to contracts, we emphasise that to the extent the Act deals with a particular subject, it  is exhaustive  upon the  same  and  it  is  not permissible to  import the principles of English Law de hors the statutory  provision, unless the statute is such that it cannot be understood without the aid of the English Law. The provisions of  Section 27  of the  Act were lifted from Hom. David D.  Field’s Draft Code for New York based upon the old English doctrine  of restraint  of trade,  as prevailing  in ancient times. When a rule of English law receives statutory recognition by the Indian Legislature, it is the language of the Act  which determines  the scope,  uninfluenced  by  the manner  in   which  the  anologous  provision  comes  to  be construed narrowly,  or, otherwise  modified,  in  order  to bring the construction 1292 within the  scope and  limitations of the rule governing the English doctrine of restraint of trade.      It has  often been pointed out by the Privy Council and this Court  that where there is positive enactment of Indian Legislature the  proper course is to examine the language of the statute and to ascertain its proper meaning uninfluenced by any  consideration derived from the previous state of the law or  the English  law upon  which it  may be  founded. In Satyavrata Ghosh  v. Kurmee  Ram Bangor,  [1954] S.C.R. 310, Mukherjee J.  while dealing with the doctrine of frustration of contract  observed that  the Courts  in India  are to  be strictly governed  by the  provisions of  Section 56  of the Contract Act  and not  to be  influenced by  the  prevailing concepts of  the English  Law,  as  it  has  passed  through various stages  of development  since the  enactment of  the Contract Act  and the  principles enunciated  in the various decided cases are not easy to reconcile. What he says of the doctrine of  frustration under  s. 56 of the Contract Act is equally true  of the  doctrine of  restraint of  trade under section 27 of the Act.      Now, so  far as  the present case is concerned, the law is to be found in section 27 of the Contract Act 1872, which reads:           "27. Agreement  in restraint  of trade  void-Every      agreement  by   which  any   one  is   restrained  from      exercising a  lawful profession,  trade or  business of      any kind is to that extent void.           Exception:  One   who  sells  the  goodwill  of  a

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    business may  agree with  the  buyer  to  refrain  from      carrying on  a similar business, within specified local      limits, so  long as  the  buyer  or  any  other  person      deriving title  to the  goodwill from him, carries on a      like business therein, provided that such limits appear      to the Court reasonable, regard being had to the nature      of the business." The section is general in terms, and declares all agreements in restraint void pro tanto, except in the case specified in the exception.      The question whether an agreement is void under section 27 must  be decided  upon the wording of that section. There is nothing  in the wording of section 27 to suggest that the principle stated  therein does  not apply when the restraint is for  a limited period only or is confined to a particular area. Such  matters of  partial restriction have effect only when the fact fall within the exception to the section.      A contract,  which has  for its  object a  restraint of trade, is  prima facie, void. Section 27 of the Contract Act is general in terms and 1293 unless a  particular  contract  can  be  distinctly  brought within Exception  1 there is no escape from the prohibition. We have  nothing to do with the policy of such a law. All we have to  do is to take the words of the Contract Act and put upon the  meaning which  they appear  plainly to  bear. This view of  the section was expressed by Sir Richard Couch C.J. in celebrated  judgment in  Madhub Chunder v. Rajcoomar Doss [1874] Beng  L. R.  76 at pp. 85-86 laying down that whether the  restraint   was  general  or  partial,  unqualified  or qualified, if  it was in the nature of a restraint of trade, it was void.      The observations  of Sir Richard Couch, C.J., in Madhub Chunder v.  Rajcoomar Doss,  supra, which  have  become  the locus classicus were these:           "The words  ’restraint from  exercising  a  lawful      profession, trade  or business’ do not mean an absolute      restriction, and  are intended  to apply  to a  partial      restriction, a  restriction limited  to some particular      place, otherwise  the first  exception would  have been      unnecessary." Moreover,  "in the  following section (s.      28) the  legislative authority when it intends to speak      of an  absolute restraint  and not  a partial  one, has      introduced the  word ’absolutely’....  The use  of this      word in  s. 28  supports the  view that in s. 27 it was      intended to  prevent not  merely a total restraint from      carrying on  trade or  business but  a partial  one. We      have nothing  to do  with the policy of such a law. All      we have to do is to take the words of the Contract Act,      and put upon them the meaning which they appear plainly      to bear."      The test laid down by Sir Richard Couch, C.J. in Madhub Chunder v. Rajcoomar Doss, supra, has stood the test of time and has  invariably been  followed by all the High Courts in India.      The  agreement  in  question  is  not  a  ’goodwill  of business’ type  of contract  and, therefore,  does not  fall within the  exception. If  the agreement  on the part of the respondent puts  a restraint  even though  partial,  it  was void, and,  therefore, the  contract must  be treated as one which cannot be enforced.      It is, however, argued that the test of the validity of a restraint, whether general or partial, is dependent on its reasonableness. It is pointed out that the distinction drawn by Lord  Macclesfield in  Mitchel v.  Reynolds (1711) 1 PMas

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161 between  general and  partial restraint,  was removed by the House  of Lords  in Nordenfelt  v. Maxim Nordenfelt Guns and Ammunition Co. (supra). According to the judgment of 1294 Lord Macnaghten in Nordenfelt’s case, the validity in either case  was   reasonableness  with   reference  to  particular circumstances. It  is urged  that all covenants in restraint of trade partial as well as general are prima facie void and they cannot  be enforced, according to the test laid down by Lord Macnaghten  in Nordenfelt’s  case and  accepted by  the House of Lords in Mason v. Provident Clothing and Supply Co. Ltd.,  L.R.   [1930]  A.C.   724,   unless   the   test   of reasonableness is  testified. It is also urged that while an employer  is   not  entitled   to  protect  himself  against competition per  se on  the part  of an  employee after  the employment has  ceased, he  is entitled to protection of his proprietory interest  viz. his  trade secrets, if any, and a business connection.      The test of reasonableness which now governs the common law doctrine of restraint of trade has been stated in Chitty on Contracts, 23rd Edn., Vol. I. p. 867:           "While  all   restraint  of  trade  to  which  the      doctrine applied  are prima  facie unenforceable,  all,      whether  partial   or  total,   are   enforceable,   if      reasonable."      A contract  in restraint  of trade  is one  by which  a party restricts  his future  liberty to  carry on his trade, business or  profession in such manner and with such persons as he chooses. A contract of this class is prima facie void, but is  becomes binding  upon proof  that the restriction is justifiable in  the circumstances  as being  reasonable from the point  of view of the parties themselves and also of the community.      In Elizabethan  days, all  agreements in  restraint  of trade, whether  general or restrictive to a particular area, were held  to be  bad; but  a distinction  came to  be taken between covenant  in general  restraint of  trade, and those where the restraints were only partial.      According to  the test laid down by Parker, C.J. (later Earl of  Macclesfield) in  Mitchel v.  Reynolds, supra,  the general restraint  was one which covered an indefinite area, and was,  as a  rule held  bad while a partial restraint was valid if  reasonable, the  onus being upon the covenanter to show it to be unreasonable.      There is  no higher  authority upon  this subject  than Tindal, C.J., who had to do much with moulding of the law on this subject  and bringing it into harmony with the needs of the changing  times. In Mornen v. Graves [1831] 7 Bing. 735, Tindal, C.J. said:           "The law  upon this  subject  (i.e.  restraint  of      trade) has  been laid  down with  so much authority and      precision by  Parker, C.J.,  in giving  the judgment of      the Court of B.R. (King’s Bench) in the case of Mitchel      v. Reynolds  which has  been the  leading case  on  the      subject from that time to 1295      the present, that little more remains than to apply the      principle of  that case  to the  present. Now  the rule      laid down  by the court in that case is ’that voluntary      restraints, by  agreement between  the parties, if they      amount to  a general  restraint of  trading  by  either      party, are void, whether with or without consideration,      but particular  restraints of  trading, if  made upon a      good and  adequate consideration,  so as to be a proper      and useful  contract, that is, so as it is a reasonable

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    restraint only, are good." Later on he goes on to observe:           "Parker, C.J.,  says,: a  restraint to  carry on a      trade throughout  the kingdom must be void; a restraint      to carry it on within a particular place is good, which      are rather  instances and  examples than  limits of the      application of  the rule,  which can  only be  at least      what is  a reasonable  restraint with  reference to the      particular cases." By decrees,  the common  law doctrine of restraint of trade, has been  progressively expanded  and the  legal  principles applied and  developed so  as to  suit the exigencies of the times,  with   the  growth  of  trade  and  commerce,  rapid industrialisation and improved means of communication.      In Nordenfelt v. Maxim Nordenfelt Guns & Ammunition Co. Ltd., (supra),  Lord Macnaghton held that the only true test in all  cases, whether  of partial or general restraint, was the test  proposed by  Tindal, C.J.:  What is  a  reasonable restraint with  reference to  a particular case ? Thereby he denied  that   general  and  partial  restraints  fall  into distinct categories.  A partial restraint in his opinion was not prima  facie valid.  It was  on the  same footing  as  a general restraint  i.e. prima  facie  void,  but  valid,  if reasonable.      In Mason  v. Provident  Clothing and  Supply Co.  Ltd., supra, the  House  of  Lords  held  that  Lord  Macnaghton’s proposition was  a correct  statement of the modern law. The House of  Lords in  this  case  developed  the  law  in  two respects: First,  it held that all covenants in restraint of trade, partial as well as general, prima facie void and that they cannot be enforced unless the test of reasonableness as propounded by  Lord Macnaghton  is satisfied.  Secondly,  it made a  sharp distinction,  stressed as  long ago as 1869 by James, L.J.,  in Leather  Cloth Co. v. Lorsont [1869] L.R. 9 Eq. 345,  between contracts of service and contracts for the sale of a business.      In Herbert  Morris Ltd. v. Saxelby, supra, the House of Lords  held  that  a  master  cannot  protect  himself  from competition by an ex-servant 1296 or his  new  employer.  He  cannot  stipulate  freedom  from competition. But  he can  protect his  trade secrets  or his confidential information.      The ’test  of reasonableness’  evolved  in  common  law after the decision of Lord Macnaghton, in Nordenfelt’s case, supra, and  re-affirmed by  the two  decisions in  Mason  v. Provident Clothing & Supply Co. Ltd. and Herbert Morris Ltd. v. Sexelby,  supra, is  that such covenants are prima facie, void and the onus rests upon the covenante to prove that the restraint  is   reasonable.  In   Nordenfelt’s  case,   Lord Macnaghton also adverted to the distinction between covenant entered by  the seller  of the  business on the one hand and the covenant by the employee on the other.      Framers of  section 833  of Field’s  Draft Code for New York  designed  some  hundred  and  twenty-five  years  ago, expressed the  intention to  replace the  common law stating that "contracts  in restraint  of trade have been allowed by modern decisions  to a  very  dangerous  extent",  and  they proceeded  to   draft  the  provision  with  the  deliberate intention of  narrowing the  law. The  provision  was  never applied to  New York,  but found  its way  into the Contract Act, 1872  as section  27. Several  sections of  the Field’s Code were  enacted in  the Act. The Code was anathema to Sir Frederick Pollock  who in his preface to Pollock and Mulla’s Indian Contract  Act, p.  5, described  the Code as the evil

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genius of the Act, the worst principles of codification ever produced, and  advocated that  ’whenever the Act was revised every thing taken from the Code should be struck out’.      It must  be remembered  that the test of reasonableness comes from  the judgment  of Lord Macnaghten in Nordenfelt’s case in  the House  of Lords in 1894. In 1862, however, when the Field  provision was drafted, it was not easy to foresee that the  common law  would shortly  discard the distinction drawn by  Lord Macclesfield  in Mitchel v. Reynolds in 1711, between general  and partial restraints. A general restraint was one  which covered  an indefinite  area, and  was, as  a rule, held  bad, while  a partial  restraint was  valid,  if reasonable. the onus being upon the covenantor to show it to be unreasonable.  This was  a mere  rule of  thumb, but  was stubbornly adhered  to by as great a common lawyer as Bowen, L.J., as late as 1893, when the Nordenfelt’s case was in the Court of Appeals: L.R. [1893] 1 Ch. D. 630.      Be that  as it may, in Field’s draft, as early as 1862, are clearly  expressed two principles that govern the modern common law  today, but were unknown to it at that stage, and were  not   unequivocally  stated  until  1916,  first  that restrictive covenants  are prima facie invalid, and secondly between master  and servant  covenants on  the one  hand and vendor and  purchaser covenants  on the  other, there  is  a great gulf 1297 fixed. The onus of proving reasonableness under Exception 1, was placed  on the  covenantee, while  the common law at the time placed it upon the covenanter to show unreasonableness.      Sir Frederick  Pollock’s criticism  of the  substantive part of section 27 was that it laid down too rigid a rule of invalidity, not  merely for  general but  also  for  partial restraints, and of the exceptions that they were too narrow, being based  upon an  idea of  the common law, now outmoded, that a  restraint must  be confined within local limits. His views on  the main body of the section may be illustrated by two quotations:           "The law  of India....is tied down by the language      of the  section  to  the  principle,  now  exploded  in      England, of  a hard and fast rule qualified by strictly      limited exceptions..."           "To escape  the prohibition,  it is  not enough to      show that  the restraint  created by  an  agreement  is      partial, and general."      Two passages  from his comments on Exception 1 may also be cited:           "The extension  of modern  commerce and  means  of      communication has  displaced the  old doctrine that the      operation of  agreements of  this kind must be confined      within a  definite neighbourhood.  But the Anglo Indian      law has  stereotyped that  doctrine in  a narrower form      than even the old authorities would justify."           "Meanwhile the  common law  has, on  the contrary,      been widening the old fixed rules as to limits of space      have been  broken down,  and  the  court  has  only  to      consider in  every  case  of  a  restrictive  agreement      whether the  restriction is ’reasonable in reference to      the interests  of the  parties concerned  reasonable in      reference to the interests of the public."      Reverting to  the judgment  of  Sir  Richard  Couch  in Madhub Chunder  v. Rajcoomar  Doss, supra, we find that that eminent Judge  held that section 27 of the Contract Act does away  with   the  distinction   observed  in  English  cases following upon  Mitchel v.  Reynolds, supra, between partial and total  restraints of  trade,  and  makes  all  contracts

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falling within  the terms  of section void, unless they fall within the  exceptions. As already stated, that decision has always been followed.      In Shaikh  Kalu v.  Ram Saran  Bhagat, [1908] 13 C.W.N. 388 Mukherjee  and Carnduff,  JJ, referred to the history of the legislation 1298 on the  subject and  observed that  the framers  of the  Act deliberately reproduced Section 833 of Field’s Code with the full knowledge  that the  effect would be to lay down a rule much narrower  than what  was recognised  at the time by the common law,  while the rules of the common law, on the other hand, had  since been considerably widened and developed, on entirely new  lines. They  held that  the wider construction put upon  section 27  by Sir Richard Couch in Madhub Chundur v. Raj  Coomar Doss,  supra, is  plainly  justified  by  the language used,  and that  the selection  had  abolished  the distinction between  partial and  total restraints  of trade and said:           "The result  is that  the rule as embodied in sec.      27 of  the  Indian  Contract  Act  presents  an  almost      startling dissimilarity to the most modern phase of the      English rule on the subject. They went on to observe:           "As observed, however, by Sir Richard Couch in the      case to  which we  have referred, we have nothing to do      with  the   policy  of   the  law,   specially  as  the      Legislature has deliberately left the provision in sec.      27, in  its original  form, though  other provisions of      the Contract  Act have  from time to time been amended.      The interference  would be  almost  irresistible  under      these  circumstances,  that  the  Courts  have  rightly      ascertained  the  intention  of  the  legislature.  The      silence  of   the  Legislature   in  a   case  of  this      description  is   almost  as  emphatic  as  an  express      recognition  of   the  construction   which  has   been      judicially put upon the statute during many years past.      In  this   view  of   the  matter,   if  we  adopt  the      construction of  sec. 27  of the Indian Contract Act as      first suggested  by Sir  Richard Couch and subsequently      affirmed in  the cases  to which  we have  referred,  a      construction  which   is  consistent   with  the  plain      language of  the section,  the agreement  in this  case      must be pronounced to be void."                     (Emphasis supplied)      The Law  Commission,  in  its  Thirteenth  Report,  has recommended that  Section 27  of the  Act should be suitably amended to  allow such  restrictions and  all  contracts  in restraint of  trade, general or partial, as were reasonable, in the  interest of  the parties  as well  as of the public. That, however  involves a  question of  policy and that is a matter for Parliament to decide. The duty of the Court is to interpret the section according to its plain language.      The question  for consideration  is  whether,  assuming that the  wider construction  placed by Sir Richard Couch in Madhub Chundur v. 1299 Raj Coomar Doss, supra, to have been the law, at the time of enactment, it  has since  become obsolete.  A law  does  not cease to  be operative  because  it  is  an  anachronism  or because it  is antiquated  or  because  the  reason  why  it originally became  the law,  would  be  no  reason  for  the introduction of such a law at the present time.      Neither the test of reasonableness nor the principle of that  the   restraint  being   partial  was  reasonable  are

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applicable to  a case governed by Section 27 of the Contract Act, unless it falls within Exception 1. We, therefore, feel that no  useful purpose  will be  served in  discussing  the several English Decisions cited at the Bar.      Under  Section  27  of  the  Contract  Act,  a  service covenant extended  beyond the  termination of the service is void. Not  a single  Indian Decision has been brought to our notice where  an injunction  has  been  granted  against  an employee after the termination of his employment.      There remains  the question whether the word ’leave’ in clause 10  of the  agreement is  wide  enough  to  make  the negative  covenant   operative   on   the   termination   of employment. We  may for  convenience of reference, reproduce that covenant below:-           "10. that  you shall  not be permitted to join any      firm of  our competitors or run business of your own in      similarity as  directly and/or  indirectly for a period      of 2  years at the place of your last posting after you      leave the Company."      On a  true construction  of clause 10 of the agreement, the negative covenant not to serve elsewhere or enter into a competitive business  does not,  in my  view, arise when the employee does  not leave  the services but is dismissed from service. Wrongful  dismissal is  repudiation of  contract of service which  relieved  the  employee  of  the  restrictive covenant General  Billposting v.  Atkinson L.R.  [1909] A.C. 116.      It is,  however, urged  that the  word ’leave’ must, in the context  in which  it appears,  be construed  to mean as operative on the termination of employment. Our attention is drawn to  Stroud’s Judicial  Dictionary, 4th  Edn., Vol. II, Pr. 13  p. 1503.  There is  reference to  Mars v.  Close, 32 L.T.O.S. 89.  An agreement  restricting competition  with an employer  "after   leaving  his  service"  was  held  to  be operative on  the termination, however, accomplished, of the service, e.g. by a dismissal without notice.      The  word   ’leave’  has   various  shades  of  meaning depending upon  the context or intent with which it is used. According to the plain meaning, the word ’leave’ in relation to an employee, should be 1300 construed to  mean where he "voluntarily" leaves i.e. of his own volition  and does  not include a case of dismissal. The word ’leave’  appears to  connect voluntary  action, and  is synonymous with  the word  ’quit’. It  does not refer to the expulsion of  an employee by the act of his employer without his consent  and against his remonstrance. That is a meaning in consonance  with justice  and fair  play. It  is also the ordinary plain  meaning of  the  word  ’leave’.  In  shorter Oxford English  Dictionary, 3rd  Ed. Vol.  X, page 1192, the following meaning is given-           "to depart  from; quit;  relinquish, to  quit  the      service of a person."      The drafting  of a  negative covenant  in a contract of employment is  often a  matter of  great difficulty.  In the employment cases  so far discussed, the issue has been as to the validity  of the covenant operating after the end of the period of  service. Restrictions  on competition during that period are  normally valid, and indeed may be implied by law by virtue  of the  servant’s duty of fidelity. In such cases the restriction  is generally  reasonable, having  regard to the interest  of the  employer, and does not cause any undue hardship to  the employee, who will receive a wage or salary for the  period in  question. But  if  the  covenant  is  to operate after  the termination of services, or is too widely

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worded, the Court may refuse to enforce it.      It is  well settled  that employees covenants should be carefully  scrutinised   because  there   is  inequality  of bargaining power  between the  parties; indeed no bargaining power may  occur because  the employee  is presented  with a standard form  of contract  to accept or reject. At the time of the agreement, the employee may have given little thought to the  restriction because of his eagerness for a job; such contracts  "tempt  improvident  persons,  for  the  sake  of present gain,  to deprive  themselves of  the power  to make future acquisitions,  and  expose  them  to  imposition  and oppression."      There exists a difference in the nature of the interest sought to  be protected  in the case of an employee and of a purchaser and,  therefore, as  a positive  rule of  law, the extent of  restraint permissible in the two types of case is different. The  essential line  of distinction  is that  the purchaser is entitled to protect himself against competition on the  part of  his  vendor,  while  the  employer  is  not entitled to  protection against mere competition on the part of his  servant. In addition thereto, a restrictive covenant ancillary to  a contract  of employment  is likely to affect the employee’s  means or  procuring a livelihood for himself and his  family to  a greater  degree than that of a seller, who usually  receive ample consideration for the sale of the goodwill of his business. 1301      The distinction  rests upon a substantial basis, since, in the  former class  of contracts  we deal with the sale of commodities, and in the latter class with the performance of personal service-altogether  different in substance; and the social and economic implications are vastly different.      The  Courts,   therefore,   view   with   disfavour   a restrictive covenant  by an  employee not  to  engage  in  a business similar to or competitive with that of the employer after the termination of his contract of employment.      The true  rule of  construction is that when a covenant or agreement  is impeached  on the  ground  that  it  is  in restraint of  trade, the  duty of  the Court  is,  first  to interpret the covenant or agreement itself, and to ascertain according to  the ordinary rules of construction what is the fair meaning  of the  parties. If  there is  an ambiguity it must receive  a narrower  construction than  the  wider.  In Mills v. Dunham, L.R. [1891] 1 Ch. 576, Kay, LJ. observed:           "If  there  is  any  ambiguity  in  a  stipulation      between employer and employee imposing a restriction on      the  latter,   it  ought   to  receive   the   narrower      construction rather  than the  wider-the employed ought      to have  the benefit  of the  doubt. It  would  not  be      following out  that principle  correctly  to  give  the      stipulation a  wide  construction  so  as  to  make  it      illegal  and  thus  set  the  employed  free  from  all      restraint. It  is also  a settled canon of construction      that where  a clause  is ambiguous a construction which      will make it valid is to be preferred to one which will      make it void."      The restraint  may not  be greater  than  necessary  to protect the employer, nor unduly harsh and oppressive to the employee. I  would, therefore, for my part, even if the word ’leave’  contained   in  clause   10  of  the  agreement  is susceptible of  another construction  as being  operative on termination, however,  accomplished of  the service  e.g. by dismissal  without  notice,  would,  having  regard  to  the provisions of  Section 27  of the Contract Act, 1872, try to preserve the  covenant in  clause  10  by  giving  to  it  a

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restrictive meaning,  as implying  volition i.e.  where  the employee resigns  or voluntarily  leaves the  services.  The restriction being  too wide,  and violative of section 27 of the  Contract   Act,  must   be  subjected   to  a  narrower construction.      In the  result, the  appeal must  fail and is dismissed but there shall be no order as to costs. S.R.                                       Appeal dismissed. 1302