Case Note & Summary
The dispute arose from an employment agreement between Bombay Dyeing and Manufacturing Co. Ltd. and Mehar Karan Singh, who served as whole-time director from 24 July 2004 to 23 July 2009. The agreement contained a strict confidentiality clause (Clause 10) preventing divulgence of any confidential information obtained during employment and declared all such information as company property. Additionally, the company’s code of ethics (Clause 19) required prior board approval for any concurrent employment. The defendant allegedly forwarded a manual of customised software, which the plaintiff had procured from Oracle for its real estate business, to Dawnay Day India Land Private Limited, a competitor. He also accepted directorships in various DD Group companies—first as director in May 2006 and later as executive director in September 2007—while still employed by the plaintiff, without seeking approval. The defendant’s income tax returns for 2007–08 showed salary income from both companies. In September 2006, he sent an email to a director of the plaintiff revealing an approach from a UK-based financial services company and sought permission for a non-executive director role, but later took up the DD positions without proper consent. The plaintiff filed a suit seeking permanent injunction against divulgence of confidential information, damages, and refund of excess salary, along with a notice of motion for interim injunction and deposit of excess remuneration. The court identified two distinct causes of action: one relating to confidentiality breach and the other to refund of salary. It held that these could not be combined in a single suit upon payment of consolidated court fee and refused to consider the deposit relief on merits. Focusing on the injunction, the court examined the twin requirements: whether the information was confidential and whether the defendant acted contrary to the confidentiality clause. It found the software manual to be protectable confidential information and the forwarding to a competitor, combined with the defendant’s concurrent employment in a rival firm, demonstrated a clear threat of future breach and divided loyalty. The email exchange was seen as evidence of lack of integrity. Consequently, the court granted the interim injunction restraining the defendant from divulging or disclosing any confidential information of the plaintiff.
Headnote
A) Contract Law - Breach of Confidentiality - Scope of Confidential Information - Indian Contract Act, 1872 - The employment agreement contained clause 10 prohibiting divulgence of confidential information obtained during employment. The defendant forwarded a customised software manual to a competitor while still employed, indicating a breach. The court held that such action threatened the plaintiff's confidential information and granted injunction. (Paras 1, 3, 7-11) B) Civil Procedure - Misjoinder of Causes of Action - Separate Causes of Action - Code of Civil Procedure, 1908, Order 2 Rule 2 - The plaintiff combined two distinct claims: one for injunction against divulgence of confidential information and another for refund of excess salary. The court held that they arose from entirely different causes of action and could not be tried in a single suit upon payment of consolidated court fee. Consequently, the relief for deposit was not considered on merits. (Para 6) C) Employment Law - Fiduciary Duty and Concurrent Employment - Breach of Code of Ethics - Companies Act, 1956 - As a whole-time director, the defendant was bound by the code of ethics requiring prior board approval for any concurrent employment. The defendant took up directorship and later executive directorship in a competitor company without such approval, both during his employment with the plaintiff. The court considered this a clear breach of fiduciary duty and evidence of divided loyalty, warranting injunction. (Paras 2, 8-10)
Issue of Consideration
Whether the defendant breached the confidentiality clause of the employment agreement and whether the plaintiff is entitled to an interim injunction against divulgence of confidential information; also whether the suit suffered from misjoinder of causes of action.
Final Decision
The court held that the suit suffered from misjoinder of causes of action and declined to consider the relief for deposit of excess remuneration on merits. On the issue of confidentiality, the court found that the defendant’s concurrent employment with a competitor and the forwarding of a confidential software manual demonstrated a threat of breach of the confidentiality clause. Consequently, the court granted an interim injunction restraining the defendant from divulging or disclosing any confidential information of the plaintiff.
Law Points
- Confidential information under employment contract is protected
- concurrent employment with competitor without prior approval is breach of fiduciary duty
- misjoinder of separate causes of action not permitted in one suit
- forwarding confidential software manual to competitor constitutes threat of breach
- interim injunction may be granted on evidence of divided loyalty and potential breach of confidentiality clause
