: 1 : USJ IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION NOTICE OF MOTION NO.3472 OF 2009 IN SUIT NO.2501 OF 2009 Ciba Inc. & Anr. .. Plaintiffs V/s. Sequent Scientific Ltd. & Ors. .. Defendants ..... Mr. Janak Dwarkadas, Sr. Counsel i/by Malvi Ranchoddas & Co. for the plaintiffs Mr. D.D. Madon, Sr. Counsel a/w. Amit Jamsandekar, Chirag Mody i/by DSK legal for defendant No.1 Mr. Sanjay Sinha for defendant No.3. Mr. Arif Bookwala, Sr. Counsel a/w. Sunil Gangal i/by Ring Law Associates for defendant No.4. Mr. Gaurav Joshi a/w. Ashok Purohit for defendant No.5. ..... CORAM : S.C. DHARMADHIKARI, J. DATE : 29th SEPTEMBER, 2009. P.C. : 1. Heard Mr. Dwarkadas, learned Senior Counsel appearing for the plaintiffs, Mr. Madon, learned Senior Counsel appearing for the defendant No.1 and Mr. Bookwala, learned Senior Counsel for defendant No.4 so also the advocates appearing for other defendants. The respective advocates waive service. : 2 : 2. Mr. Dwarkadas, learned Senior Counsel sumbits that there is an urgency in as much as the plaintiffs were protected by an order of Division Bench of this Court in Appeal No.310 of 2009 in Company Petition No.99 of 2009. The Division Bench order dated 17 th August, 2009 has been extended but the extension would expire and thereafter the request is made for urgent ad-interim reliefs. 3. Based upon this request, the matter was heard for ad-interim reliefs. It needs to be clarified at the outset that Mr. Madon learned Senior Counsel appearing for defendant No.1 so also the other defendants made a grievance that the plaint and related papers were served on them a day prior and, therefore, they could not seek instructions and file any affidavit. They would like to file an affidavit but for that they require some time. However, Mr. Madon states that his clients are not agreeable to the continuation of the order of the Division Bench. 4. The plaintiffs have sued the defendants based upon their plea that the acts of the defendants amount to breach of the confidentiality Agreement so also that of a supply Agreement dated 18 th May, 2008 entered into between plaintiff No.2 and defendant No.1. : 3 : 5. It is stated in the plaint that plaintiff No.1 is a Company existing under the laws of Switzerland and is engaged, inter alia, in the business of manufacture and sale of specialty chemicals. The plaintiff No.2 is a company registered under the Indian Companies Act, 1956 engaged, inter alia, in the business of manufacture and sale of specialty chemicals. 6. Both plaintiffs were earlier known by distinct and different names but later on, it is stated that their names have been changed. They are now known by names set out in the cause title and necessary certificates have been obtained. 7. It is stated that 1 st defendant is a Company incorporated under the Companies Act, 1956 and carries on business of manufacturing chemicals as commissioned by and under licence from the plaintiffs. The defendant Nos.2 and 3 are ex-employees of Ciba Group and are currently employed with defendant No.4 and Reliance Industries Ltd. respectively. The 4 th defendant is a private limited Company incorporated under the Companies Act, 1956 carries on business, inter alia, of dealing in Polymer Additives. The 5 th defendant is a proposed transferee company of defendant No.1 and an assignee of : 4 : defendant No.1 pursuant to scheme of Amalgamation / Merger sanctioned by this Court by order dated 16 th June, 2009 in Company Petition No.99 of 2009 in connection with Company Application No.1552 of 2009. 8. In para 4 of the plaint it is stated that this suit is filed to prevent the acts of breach of confidentiality committed by the defendants and to prevent the acts of breach of the Supply Agreement dated 18 th May,2006 and for a declaration that the Supply Agreement has been validly terminated. The suit is also filed to prevent the defendant Nos.2 and 3 from committing the acts of breach of confidentiality generally as also in terms of the contract dated 10 th June, 2003 and the contract dated 26 th August/1 st September,2008 executed by and between defendant No.2 and plaintiff No.1 and breach by defendant No.3 of his employment contract dated 17 th February,2000 executed by and between defendant No.3 and plaintiff No.2. In para 4 of the plaint, it is also stated that the suit is filed to prevent defendant No.4 from inducing a breach of contract and / or confidentiality by defendant Nos.2 and 3 as also to prevent defendant No.5 from manufacturing, marketing and / or selling PEPQ with the help of the confidential information of the plaintiffs. : 5 : 9. It is stated that in or about 1998 the plaintiffs have developed through extensive in-house research and development, a process to manufacture a compound having its chemical name as Tetrakis, commonly known as PEPQ . 10. Mr. Dwarkadas, learned Senior Counsel invited my attention to the plaint averments and submitted that process of manufacturing PEPQ is not and has never been available in the public domain except to the limited extent as explained in the plaint. The entire process was developed by the plaintiff after extensive research and development by incurring huge expenditure in terms of both money and time. He then contended that the entire confidential information is set out in para 16 of the plaint. Mr. Dwarkadas submitted that the plaintiffs are ready and willing to hand over complete set of this confidential information in a sealed cover to the Court. He submits that the plaintiffs are selling their PEPQ manufactured with the help of the said confidential information under their trade name Irgafos . He submits that the process is peculiar and unique to the plaintiffs and that is certified by an expert as set out in para 19 of the plaint. He submits that there are only two manufacturers of PEPQ in the world. One of the manufaturer is the plaintiff and another is Clariant group. : 6 : 11. Mr. Dwarkadas submits that there is a secrecy agreement dated 15 th June, 1998 with one Plama Laboratories Ltd. He submits that the predecessor entity of defendant Nos.1 is this Plama Laboratories Ltd. and there was a secrecy and non compete agreement executed by and between the plaintiff No.1 and said Plama Laboratories Ltd. He submits that the plaintiffs have already helped and imparted the said confidential information to the said Plama Laboratories Ltd. who wanted to convert / modify their existing plant at Mangalore. However, 1 st defendant was unable to manufacture PEPQ as per the specifications of plaintiff No.2 at their plant at Panoli, Bharuch in the state Gujarat. Hence, the plaintiff again helped defendant No.1 to set up a new plant suitable for the manufacture of PEPQ in July, 2007. Inviting my attention to the relevant recitals of the Supply Agreement, Mr. Dwarkadas submits that the transfer of information between the plaintiff and defendant No.1 is evidenced by correspondence and minutes of the meetings. This information was meant to be treated as confidential and it could not have been used otherwise by the 1 st defendant. The defendants attention was invited to this letter. 12. Mr. Dwarkadas submits that in or about March, 2009, : 7 : plaintiffs learnt that defendant No.1 has instituted proceedings in this Court by filing a Company Petition whereby defendant No.1 was seeking to transfer its entire undertaking including contracts and benefits of all agreements to defendant No.5. This was being done without the prior consent of the plaintiffs. Although the 1 st defendant stated in their application that no one would be prejudiced by the scheme, yet, what they were sanction to is a scheme which will be in the interest of the Transferee company. The same was in clear breach of the terms and conditions of the Supply Agreement. Therefore, plaintiff No.2 filed an affidavit dated 13 th March, 2009 opposing the sanction of the scheme of amalgamation, inter alia, stating therein that the transfer being a voluntary act is in violation of the Supply Agreement. A Rejoinder affidavit was also came to be filed by the 1 st defendant. The plaintiffs had specifically urged that there is breach of the Agreement to Sell the product PEPQ. The 1 st defendant could not have committed a breach by not obtaining consent of the plaintiffs to the assignment and transfer and, therefore, the plaintiff No.2 was not willing to consent to the transfer. 13. Mr. Dwarkadas submits that in para 20 of the 1 st defendant s affidavit in rejoinder, it made categorical : 8 : statement that it has not approached two upstream customers of Ciba in India and offered to sell the said product PEPQ either directly or through a Company called Qualichem Specialities Pvt. Ltd. nor the 1 st defendant in this regard has or is likely to commit a breach of the Supply Agreement. 14. Mr. Dwarkadas submits that this statement is false to the knowledge of the 1 st defendant in as much as copies of two invoices enclosed as Annexure O and P to the plaint would demonstrate that the plaintiffs product PEPQ itself has been supplied by the 1 st defendant to defendant No.4. In these circumstances, this Court should proceed on the basis that there is a valid and binding agreement so far as plaintiffs and defendant No.1. The defendant No.1 was bound and liable to comply with the terms and conditions thereof and in particular not to divulge the confidential information, data or know-how to 3 rd party nor manufacture or sell the said PEPQ for the benefit of any third party. They were to manufacture or sell the same only for the plaintiffs exclusively. That there is an express / implied negative covenant in the Supply Agreement which restrains the 1 st defendant from divulging the confidential information and, therefore, Mr. Dwarkadas submits that having prima facie substantiated the plaint : 9 : averments and by producing relevant documents, the plaintiffs are entitled to the ad-interim reliefs as prayed for. He submits that the Division Bench order having come to an end and the plaintiffs instituting their substantive proceedings, the ad-interim reliefs as prayed be granted. 15. On the other hand, Mr. Madon, learned Senior Counsel appearing for the 1 st defendant submits that the entire plaint is vague and ambiguous. More particularly, the averments in para 16 thereof. He submits that what is confidential information and what was the implied agreement and between whom and to what extent has not been specified at all. He submits that the plaint does not set out the confidential information. The plaintiffs are now stating that they are willing to handover sealed envelops containing the confidential information for perusal of this Court. However, neither these envelops are handed over nor any inspection of the contents given to the 1 st defendant. Therefore, the Court cannot presume that the confidential information is disclosed and that the plaint averments constitute a true and complete disclosure of the same. Mr. Madon submits that he is proceeding on the basis of denials of the plaint averments. However, from the plaint averments itself it is apparent that the plaintiffs do not have any : 10 : customers save and except two in number for their product PEPQ. On the own showing of the plaintiffs, one of them has not been placing any orders with the plaintiffs. He sumbits that the plaint averments from paras 38 to 40 would indicate that the plaintiffs were aware allegedly of the breach and, therefore, had written to M/s. Haldia Petrochemicals Ltd. that they may be approached for supply of PEPQ by the 1 st defendant. This was some time in January and February, 2009. Mr. Madon submits that if there are two manufacturers and two customers, then, on what basis the plaintifs place reliance upon the Annexures to the plaint and more particularly the invoices is not clear at all. He submits that what has been sold according to the own showing of plaintiffs is Quent 19 . However, the plaintiffs have not established even prima facie as to how their product and Quent 19 which is subject matter of the invoices are one and the same or connected or related. He submits that the averments in para 14 would not be enough to establish the identity of the product under the subject invoices. Further, these are xerox copies and the defendant No.1 does not admit that the product set out therein is PEPQ manufactured with the help of confidential information supplied by plaintiff No.2 to defendant No.1. In these circumstances, no ad- interim reliefs be granted in plaintiffs favour as they : 11 : have failed to make out a prima facie case. 16. Mr. Bookwala had adopted the arguments of Mr. Madon. 17. At the outset it must be stated that Mr. Dwarkadas relied upon the judgment of the Hon ble Supreme Court reported in (1986) 2 SCC 656 M/s. General Radio and Appliances Co. Ltd. and Ors. Vs. M.A. Khader (Dead) by LRs. and (2004) 7 SCC 1 Singer India Ltd. Vs. Chander Mohan Chadha & Ors. These judgments are on the point as to whether a scheme under Section 391 and 394 of the Companies Act is voluntary or not. The observations in that behalf and relied upon by Mr. Dwarkadas cannot have any bearing straightaway on the issue as to whether the plaintiffs have made out a case of their being an Agreement of confidentiality and secrecy. For them to allege breach of this agreement by the 1 st defendant by presenting the scheme under Section 391 and 394 of the Companies Act, 1956, the plaintiffs will have to first point out as to what is the basis for their claim and apprehension. In this behalf if para 4 of the plaint is produced, it is apparent to me that the suit is filed not only to prevent the breach of the Supply Agreement dated 18 th May, 2006 which is stated to be terminated but to prevent defendant Nos.2 and 3 from committing the acts of breach of confidentiality generally as also in : 12 : terms of the contract dated 10 th June, 2003 and the contract dated 26 th August / 1 st September, 2008 executed by and between defendant No.2 and plaintiff No.1 and breach by defendant No.3 of his employment contract dated 17 th February, 2000. To say the least the averments are confusing. Further, the plaintiffs do not dispute that when they undertook the research and development to manufacture PEPQ, there was information available in the public domain in relation to this product. That is the pleading in para 6 and 7. However, it is stated that the patent already available did not explain in details the manner in which certain new compounds were to be manufactured / produced. The plaintiffs have stated that they have thereafter developed a process of successfully manufacturing PEPQ as a commercial and vendible product. However, at the same time, they have stated that one Clariant International Ltd. had filed patent application in respect of the PEPQ for the territories of Japan and Turkey. They have given details with regard to Clariant s Patent in para 11 to 13 of the plaint and stated that they are not manufacturing and / or selling PEPQ with the improved properties as claimed in the Clariant patent so as to be infringing the said patent. However, in para 13, they state that there is certain material available in the public domain with regard to : 13 : PEPQ. 18. Thus, the Sandoz patent on the own showing is available since 1974. The Clariant patent is also made in 1995. Although, it is alleged that the plaintiffs PEPQ is a distinct and further improved version, yet, when two patent s are already in public Domain, then, one cannot assume only on the plaintiffs version that their product is distinct and unique. More so, considering the contents of para 14. It is thereafter, in para 16 plaintiffs state that they have identified information falling under several heads discussed in the said paragraph and referred the same as confidential information. Till about para 21, there is no mention of how the information is parted with or disclosed. In para 22, it is stated that a secrecy agreement was entered into with one Plama Laboratory Ltd. The said Plama Laboratory Ltd. merged into Strides Arcolabs Ltd. in or around 1999. Strides Arcolab Ltd. subsequently, demerged the undertaking manufacturing PEPQ to Strides Research and specialty Chemicals Ltd. and that Strides Research and Specialty Chemicals Ltd. changed its name to 1 st defendant i.e. Sequent Scientific Ltd. in the year 2006. Thus, the Secrecy Agreement is similar to that of the so called arrangement between plaintiffs and one Plama Laboratory Ltd. It is stated that Plama Laboratory Ltd. : 14 : has agreed to exclusively manufacture certain products including PEPQ by utilizing certain facilities available with Plama in return whereof plaintiff No.2 was to provide the necessary data and information being either financial and / or technical, technology and process know-how and other services necessary to ensure arrangement was made workable with an explicit understanding that the information disclosed by plaintiff No.2 is valuable, confidential and proprietary and Plama Laboratory Ltd. agrees to protect and keep confidential all such information. Thereafter, it is stated that the secrecy and non-compete Agreement was executed by the plaintiff No.1 and Plama Laboratory Ltd. A contract manufacturing Agreement dated 8 th September, 1998 was entered into between plaintiff No.2 and Plama Laboratory Ltd. and this agreement was commissioned to manufacture the PEPQ. Even this agreement is according to plaintiffs recording the understanding that the information disclosed is proprietary and confidential. Paras 29, 30 and 31 of the plaint read as under;- 29.Therefore, in light of the above, the plaintiffs say that they had entered into several secrecy and confidentiality agreements with the predecessor entities of defendant No.1 and all throughout i.e. from the year 1998 onwards the proprietary and confidential inforation of the plaintiffs was disclosed to predecessor entities of defendant No.1 under strict conditions of confidentiality. : 15 : 30. Further, plaintiff No.2 has entered into a similar Supply Agreement dated 18 th May, 2006 with defendant No.1. Hereto annexed hereto and marked as EXH. H is a copy of the said Supply Agreement dated 18 th May, 2006. 31. The plaintiffs say that despite them having already helped and imparted the said confidential information to the predecessor entity of defendant No.1 viz. Plama for the purposes of converting / modifying Plama s existent plant to a plant suitable for the manufacture of PEPQ at Manglore, defendant No.1 was unable to manufacture PEPQ as per the specifications of plaintiff No.2, at its new plant at Panoli, Bharuch. Hence, the plaintiffs again helped defendant No.1 to set up a new plant at Panoli, Bharuch suitable for the manufacture of PEPQ in July, 2007. The plaintiffs crave leave to refer to and reply upon the correspondence and minutes of meetings held in this regard as and when produced except to the extent that the same does not contain any confidential information / data of the plaintiffs. As regards the correspondence and minutes of meetings which contain confidential information / data of the plaintiffs, the plaintiffs undertake to produce the same in a sealed envelop under strict conditions of confidentiality as and when directed by this Hon ble Court. 19. From these averments, it is apparent to me that the plaintiffs have themselves disclosed the Arrangement with several entities stated to be predecessors of the 1 st defendant. By indirect and oblique process and by linking the secrecy arrangement to that of the Supply Agreement dated 18 th May, 2006. The plaintiffs are alleging that implicit in the Supply Agreement is an obligation to maintain confidentiality and secrecy. That agreement which contains clause 17 and which is relied : 16 : upon reads thus:- 17.CONFIDENTIALITY a) All information communicated to CIBA to STRIDES or, which has come to the knowledge of STRIDES pursuant to its association with CIBA (hereinafter referred to as Confidential Information ) shall be kept confidential and shall be used only in connection with the performance of this Agreement. No Confidential Information shall be disclosed or used by STRIDES without the prior written consent of CIBA. b) The obligation of confidentiality does not apply to. i) Confidential Information that has become generally available to the public other than through a breach of this Agreement. ii) Disclosure of Confidential Information as required by law or in response to request from regulatory authorities (provided that STRIDES shall promptly notify CIBA of any such request and both parties shall use their reasonable endavours to ensure that the third party is question respects the confidential nature of the information concerned); or iii) If disclosure is to its professional advisers, auditors and bankers under terms of confidentiality. c) STRIDES shall ensure that its employees and agents are bound by obligations of confidentiality no less onerous than those set out herein. d) The obligation of confidentiality contained in this Agreement shall survive the termination of this Agreement but shall cease on the expiry of a period of 5 (five) years from the date of termiantion of this Agreement. 20. In my view, when the reliefs of such nature are claimed, the plaint averments have to be precise, specific and clear. On the basis of vague averments and wild allegations so also by stating that the confidential information will be disclosed to the Court, : 17 : if it so desires, the plaintiffs cannot seek any discretionary and equitable reliefs. The plaintiffs must plead necessary particulars about the confidential information disclosed, to whom and the period during which the same was disclosed. By relying upon prior Agreements and alleging that the obligation there under continues to bind the successors such as defendant No.1, the plaintiffs cannot seek drastic and far reaching Ad- interim orders. More so, by Annexing and referring to the Agreement with Strides Research and Specialities Ltd. Thus, it would be in the interest of justice if further materials are allowed to be produced. Further, the plaintiffs have to clearly spell out the agreement in that behalf so also its breach and violation. Unless and until such allegations and averments are made with requisite clarity and particulars, the plaintiffs cannot seek any Ad-interim reliefs. It is well settled that the cases of the present nature should not be used to create any monopoly. If citizens have been guaranteed a Fundamental Rights under Article 19(1)(g) of the Constitution of India to carry on business, occupation, trade and profession of their choice and such freedom is only subjected to reasonable restrictions, then, in all cases of the present nature, the plaintiffs must point out that the restrictions are reasonable for their protection and do not violate this fundamental freedom. : 18 : In the plaint, when the allegations are not clear and rather vague and all that is stated is that there is an application made before the Company Court by the 1 st defendant which amounts to breach of the confidentiality agreement so also the agreement to maintain secrecy, then, I am afraid that by itself this is no ground to grant any Ad-interim relief. More so, when the plaintiffs themselves value the breach in terms of money and claim damages quantified at Annexure Z to the plaint. Further, reliance is placed upon copies of some invoices, that by itself also does not enable the plaintiffs to seek any discretionary or Equitable relief much less in relation in terms claimed and prayed by them. Something more would be required, even at this prima facie stage, to establish the connection and nexus between the products and the technology so