IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 22ND DAY OF OCTOBER 2019 BEFORE THE HON’BLE MRS JUSTICE K.S.MUDAGAL MISCELLANEOUS FIRST APPEAL NO.7791/2019 BETWEEN:
SRI AIYAPPA SWAMY CHINNAIAH S/O CHINNAIAH AGED ABOUT 46 YEARS SENIOR MANAGER (OPERATIONS) M/S AMICORP MANAGEMENT INDIA PVT LTD., NO.701 AND 702, CAMPUS 6-B 7TH FLOOR, RMZ ECO WORLD SARJAPURA OUTER RING ROAD BENGALURU – 560 103 ` … APPELLANT (BY SRI P.S.RAJAGOPAL, SENIOR COUNSEL FOR SRI KRISHNAMURTHY M.R., ADVOCATE) AND:
1. M/S.AMICORP MANAGEMENT INDIA PVT LTD., NO.701 AND 702, CAMPUS 6-B 7TH FLOOR, RMZ ECO WORLD SARJAPURA OUTER RING ROAD BENGALURU – 560 103 REPRESENTED BY ITS CHIEF EXECUTIVE OFFICER 2. THE CHIEF OPERATING OFFICER M/S AMICORP MANAGEMENT INDIA PVT LTD. (DELETED AS PER COURT ORDER DATED 22.10.2019) 3. THE HUMAN RESOURCES MANAGER M/S AMICORP MANAGEMENT INDIA PVT LTD. NO.701 AND 702, CAMPUS 6-B 7TH FLOOR, RMZ ECO WORLD SARJAPURA OUTER RING ROAD BENGALURU – 560 103 … RESPONDENTS (BY SRI SUNIL S., ADVOCATE FOR C/R1 AND R3) THIS MFA IS FILED UNDER SECTION 37(1)(B) OF THE ARBITRATION AND CONCILIATION ACT, 1996 PRAYING TO SET ASIDE THE ORDER DATED 04.09.2019 PASSED BY THE VI ADDITIONAL CITY CIVIL AND SESSIONS JUDGE, BENGALURU (CCH-11), ON AA NO.138/2019.
THIS MFA COMING ON FOR FINAL DISPOSAL THIS DAY, THE COURT DELIVERED THE FOLLOWING:
J U D G M E N T “Whether grant of interim measure for protection of employment of the appellant by order of injunction against termination of his employment is just and convenient in terms of Section 9(ii)(e) of the Arbitration and Conciliation Act, 1996?” is the question involved in this case.
2. Respondent No.1 is a Private Limited Company which provides Information Technology Services to the Banking Institutions. Respondent No.3 is the employee of respondent No.1 organisation. (Respondent No.2 stood deleted from array of parties).
3. Appellant was appointed in respondent No.1 organization as Manager-Information Technology Operation vide appointment letter dated 02.01.2013. In addition to that, appellant and respondent No.1 entered into agreement called terms and conditions as per Annexure-B to the appointment letter and employee invention assignment and confidentiality agreement as per Annexure- D to the appointment letter. On 01.03.2013 respondent No.1 promoted the appellant as Senior Manager- Operations.
4. On 27.04.2019, the appellant filed complaint before the Inspector of Police, Marathahalli Police Station alleging that on 26.04.2019, respondent No.1 secured him in the Honesty room of the company, pressurized him to quit the job and sensing that he is protesting, they have snatched his laptop and other belongings and prevented him for attending to work.
5. Then on 29.04.2019, the appellant filed A.A.No.138/2019 before the VI Additional City Civil & Sessions Judge, Bengaluru City against the respondents alleging that the dispute has arisen between him and the respondents, the employment agreement contains arbitration clause and he has contemplated to invoke the arbitration clause. He further contended that to defeat the dispute he may raise, respondents are trying to terminate him from service illegally and obstructing him to perform his functions. Therefore, he sought interim protection by way of injunction restraining the respondents from preventing him from working in the office and against his termination till disposal of the arbitration proceedings.
6. Learned VI Additional City Civil & Sessions Judge, Bengaluru on hearing the parties, by impugned order, partly allowed the application and issued injunction restraining the respondents from preventing the appellant from working as Senior Manager Operations in respondent No.1’s company.
7. But, the trial Court rejected the relief of injunction against termination of his employment on the following grounds:
(i) As per Clause 18 of Employment Agreement Annexure-B and Clause 16 of Agreement Annexure-D, respondents have right of termination of services of the appellant for misconduct;
(ii) Clause 16 of Agreement Annexure-D provides for termination of services with reasons or without any reasons; & (iii) Applicant cannot seek injunction restraining the respondents from terminating the appellant 8. The respondents have not questioned the grant of 1st part of the prayer. In the above appeal, the appellant challenges rejection of relief of injunction against termination of his services.
9. After filing of the arbitration proceedings, there were two developments. Appellant issued notice on 31.05.2019 to respondent No.1 invoking Arbitration Clause of the agreement and nominating one Sri B.S.Harish Kumar, Advocate as Arbitrator. As could be found from the postal acknowledgement, the said notice was served on respondent No.1’s Chief Executing Officer on 07.06.2019. Respondent No.1 has issued notice of termination dated 26.09.2019 giving one month time to quit. The appellant has received the said notice on 03.10.2019.
10. Sri P.S.Rajagopal, learned Senior Counsel appearing for Sri Krishnamurthy M.R., learned Counsel for appellant on record seeks to assail the impugned order on the following grounds:
(i) Admittedly, employment contract involves arbitration clause and despite appellant invoking that clause, the respondents have not nominated their arbitrator;
(ii) Without sorting out the dispute through arbitral Tribunal, respondents have hurriedly attempted to terminate the services of the appellant which is unfair;
(iii) Clause 16 of agreement Annexure-D relied upon by the trial Court is not employment agreement, that is only confidentiality agreement. Under the said clause, employment can be terminated through termination notice only on the allegations of violation of conditions of that agreement, that cannot be invoked to terminate the employment under the garb of employment contract;
(iv) Clause 18 of Annexure-B employment contract contemplates termination of services on the ground of indiscipline, misconduct, insubordination etc. and in such case, without holding an enquiry, referring the dispute to the Arbitration, the employment cannot be terminated;
(v) The trial Court misread Clause 18 of Annexure- B and Clause 16 of Annexure-D;
(vi) Though, the trial Court does not refer to any legal bar for granting injunction against termination of employment, the same is referable to Section 41(e) of the Specific Relief Act, 1963 (‘the Act’ for short);
(vii) The amendment to the Act in 2018 has taken away the clause of volition which was there earlier in Section 14(b) of the Act which is couched presently in Section 14(c) of the Act; & (viii) Even contract which is determinable could be specifically enforced.
11. In support of his arguments, he relies upon the following judgments:
1. Adhunik Steels Ltd. v. Orissa Manganese and Minerals (P) Ltd. [(2007) 7 SCC 125] 2. Pankaj Mohan Associates v South Western Railway [2011 (4) Kar.L.J.234] 3. Marwari Balika Vidyalaya v. Asha Srivastava and others [2019 SCC OnLine SC 408] 12. Per contra, Sri Sunil.S., learned Counsel for respondents seeks to justify the impugned order on the following grounds:
(i) Basically contract of employment is between the private parties. Therefore, parties are fully governed by the contract of employment and the administrative law and public law are not applicable;
(ii) Contract in question falls under Section 14 Clause (b) to (d) of the Act. Therefore Section 41(e) of the Act bars enforcement of such agreement; & (iii) Prima facie the main relief sought itself is untenable. When the main relief itself is barred by law, there is no question of granting interim relief under Section 9 of the Arbitration and Conciliation Act, 1996.
13. In support of his arguments, he relied upon the following judgments:
1. Kailash Singh vs. The Managing Committee, Mayo College, Ajmer & Ors. [(2018) 8 SCC 216] 2. Pearlite Liners Pvt. Ltd. Vs. Manorama Sirsi [AIR 1976 SC 888] 3. Indian Oil Corporation Ltd. Vs. Amritsar Gas Service and Ors. [(1991) 1 SCC 533] 4. Wander ltd. And Ors. Vs. Antox India P. Ltd. [1990 Supp(1) SCC 727] 5. Karnataka Bank vs. T.Gopalakrishna Rao [ILR 1994 KAR 230] 14. There is no dispute that Clause 23 of contract of employment Annexure-B provides for Arbitration which reads as follows:
“23. You agree that the interpretation and enforcement of this Agreement shall be governed by the laws of India and all dispute under this Agreement shall be governed by the provisions of the Indian Arbitration and Conciliation Act, 1996. The venue for arbitration will be Bangalore.”
(Emphasis supplied) In the said clause, parties have agreed that they shall be governed by the laws of India and the provisions of the Indian Arbitration and Conciliation Act, 1996.
15. As could be seen from Annexure-B to the appointment letter and Clause 5 of the appointment letter, Annexure-D was only employee invention assignment and confidentiality agreement of the Company to protect the proprietary rights of the Company.
16. Clause 16 of Annexure-D which deals with termination of the employment reads as follows:
“16. Terms of Employment. I understand that this Agreement, in itself, does not constitute a contract of employment or obligate the Company to employ me for any stated period of time beyond the time as provided for in my Employment/Appointment Letter. I understand that my employment can be terminated at any time, for any reason or for no reason, by the Company and by me by providing written notice of 30’ days to the company. Unless the Company and I have entered into another written document that expressly supersedes this Section 16, this is the complete agreement between the Company and me on this term of my employment. This Agreement shall be effective as of the first day of my employment by the Company, namely 2 January 2013.”
(Emphasis supplied) 17. In the above clause, it is specifically stated that unless the company and the appellant have entered into any written document which expressly supersedes clause 16, Annexure-D is complete agreement between respondent No.1 and the appellant. Before Clause (5) of the appointment letter appears Clause 2 which says that employment between the appellant and the respondent is governed by specific terms and conditions referred to in Annexure-B. Thus, it is clear that Annexure-B takes precedence over the other agreement. Therefore, Clause 16 cannot be said to be in supersession of Clauses in Annexure-B.
18. Admittedly now the dispute has arisen between the appellant and respondent No.1. Though the termination notice dated 26.09.2019 purports to be termination simplictor, in the statement of objections filed before the trial Court, non performance, indiscipline, insubordination and misconduct are imputed to the appellant and in that event, Clause 18 of Annexure-B applies. Once Clause 18 of Annexure-B is invoked, the appellant cannot be terminated without substantiating those allegations by referring the dispute to the Arbitrator in terms of Clause 23 of the agreement.
19. Learned Counsel for the appellant relying on the judgment in Marwari Balika Vidyalaya’s case referred to supra submits that even though termination notice is non- committal it cannot stand alone, having regard to the statement of objections filed in the arbitration proceedings. In the said judgment relying on earlier judgment in Anoop Jaiswal v. Government of India [(1984) 2 SCC 369] it was held that even though the order of discharge may be non- committal it cannot stand alone, the cause for the order cannot be ignored and the basic foundation of the order must be read.
20. Similarly, in this case also, though termination notice dated 26.09.2019 is non-committal, the police complaint filed, allegations made in statement of objections before the trial Court make it clear that the notice was the outcome of the allegations made against the appellant.
21. So far as non enforceability of the contract of employment, Section 41(e) of the Act was relied. Section 41(e) of the Act deals with when injunction cannot be granted to prevent the breach of a contract the performance of which would not be specifically enforced.
22. Section 14 of the Act speaks of contracts not specifically enforceable. Section 14(b) of the Act speaks of the contract the performance of which involves the performance of a continuous duty which the Court cannot supervise.
23. In this case, Court need not supervise the performance of the appellant. If interim protection is granted, it is up to respondent No.1 to supervise and in case there is any misconduct during that period, to take appropriate steps.
24. Section 14(c) of the Act speaks of the contract which is so dependent on the personal qualifications of the parties that the Court cannot enforce specific performance of its material terms.
25. Respondent No.1 does not specify what was the qualification required by the appellant. He was appointed as long back as in 2013, accepting whatever qualification he had. Therefore, that clause also cannot be invoked.
26. Next Clause is Section 14(d) of the Act which speaks of the contract which in its nature is determinable. It was argued that Clause 16 of Annexure-D is covered under Section 14(d), therefore, employer could not be directed to continue the services of employee till disposal of the arbitration proceedings.
27. As already discussed, Annexure-D itself was not contract of employment. It was only a condition of employment. That can be made out from the preamble of the said agreement itself which reads as follows:
“In consideration of , and as a condition of my employment with Amicorp Management India a company duly incorporated under the Companies Act,1956 (the “Company”), I, Aiyappaswamy Chinnaiah hereby represent to, and agree with the Company as follow:
1. Purpose of Agreement: I understand that the Company is engaged in a ‘continuous program of research, development, production and marketing in connection with its business and that it is critical for the Company to preserve and protect its Proprietary Information (as defined below), its rights in Inventions (as defined below) and Intellectual Property (as defined below) and in all related intellectual property rights. Accordingly, I am entering into this Agreement as a condition of my employment with the Company, whether or not I am expected to create inventions and Intellectual Property of value for the Company.”
(Emphasis supplied) 28. The reading of the above clause makes it clear that Annexure-D was not contract of employment. Clause 16 of the said agreement itself makes it clear that unless parties entered into any other contract superseding the said contract, Annexure-D becomes the complete agreement between the respondents and the appellant.
29. As already pointed out, Clause 2 of the appointment letter dated 02.01.2013 itself states that employment is governed by the specific terms and conditions referred to in Annexure-B. Therefore Annexure-B takes precedence over Annexure-D. Annexure-B contains an arbitration clause. The appellant has commenced the arbitration proceedings issuing notice nominating his arbitrator. For the reasons best known to the respondents, they are sitting over the matter since five months without nominating their arbitrator, if nomination made by the appellant is not acceptable to them.
30. In Clause 23 of Annexure-B employment agreement, the respondents have agreed that they are governed by the laws of India. Though, learned Counsel for the respondents relied on several judgments to contend that the contract of employment between the private employer and the appellant cannot be specifically enforced, all those judgments were rendered based on the Act as that stood prior to 2018. By 2018 amendment, drastic change is brought in Section 14 of the Act. Unamended Section 14(b) of the Act prohibits enforcement of contract which was dependant on the personal qualifications or volition of the parties. That volition clause is taken away by Amendment Act, 2018.
31. The term ‘determinable’ is defined in the Law Lexicon as a contract which are by nature revocable. Having regard to the arbitration clause in the agreement to adjudicate the dispute, it cannot be said that the agreement was determinable in nature or it was automatically revocable. Therefore, the judgments relied upon by the learned Counsel for the respondents on this point are not applicable.
32. For the aforesaid reasons, the trial Court was at error in rejecting the relief based on Clause 16 of Annexure-D and Clause 18 of Annexure-B and holding that injunction restraining the respondents from terminating the appellant from services cannot be granted.
33. As an employer, if the respondents succeeds before the arbitrator, they have every right of terminating the employment of the appellant. But they cannot sit over the matter without nominating the arbitrator and launch the weapon of termination deviating from Clause 23 of their own agreement Annexure-B. Under the circumstances this Court finds it just and convenient to grant interim protection against termination of the employment of the appellant till the respondents nominate their arbitrator or arbitrator is appointed at the instance of the appellant by following the provisions of the Arbitration and Conciliation Act, 1996 whichever is earlier. Therefore, the appeal is allowed.
Respondents are hereby restrained from terminating the services of the appellant till appointment of the arbitrator as aforesaid.
In view of disposal of the appeal, IA.No.1/2019 does not survive for consideration and stand disposed of accordingly.
KSR Sd/- JUDGE