REPORTED * IN THE HIGH COURT OF DELHI AT NEW DELHI + OMP 241/2008 DATE OF RESERVE: August 25, 2008 DATE OF DECISION: September 22, 2008 M/S. BLB INSTITUTE OF FINANCIAL MARKETS LTD. ..... Petitioner Through: Mr.Neeraj Kishan Kaul, Sr. Advocate with Mr.P.Nagesh and Mr.Anand Mishra, Advocates. versus MR.RAMAKAR JHA ..... Respondent Through: Mr.Atul Bandhu, Advocate. CORAM: HON'BLE MS. JUSTICE REVA KHETRAPAL 1. Whether reporters of local papers may be allowed to see the judgment? 2. To be referred to the Reporter or not? 3. Whether judgment should be reported in Digest? JUDGMENT : REVA KHETRAPAL, J. 1. This petition, under Section 9 of the Arbitration and Conciliation Act, 1996 has been filed by the petitioner seeking interim relief against the respondent, an employee of the petitioner. 2. The facts in a nutshell are as follows: The petitioner is a company OMP 241/2008 Page 1 of 32 incorporated under the provisions of the Companies Act, 1956 and is one of the leading institutes in imparting education and knowledge in the field of financial services. The objective of the petitioner is to educate and develop professionals for the securities industry in India, to disseminate information about Indian capital markets by creating a comprehensive body of knowledge and to contribute to the healthy development of securities market by bringing expertise to bear on structural and policy issues concerning the securities industry. The petitioner is also an authorized education provider of the Financial Planner Standards Board, India (FPSB) for the Certified Financial Planner (CFP) professional education programme in India. Details of the courses/materials developed by the petitioner and the advertisements of the courses offered by the petitioner since 2005 are annexed with the petition as Annexure P-2. 3. In the course of its business, the petitioner appointed the respondent as a faculty member. The respondent was to be responsible for the development of the petitioner's study material and teaching methodology so as to ensure that it remained most suitable, relevant and always ahead of others. The respondent accordingly executed an employment agreement dated 08.09.2006 (Annexure P-3), thereby agreeing to the following among other terms and conditions: “(i) He shall be responsible for imparting 'Total Quality Teaching', the objective of the company by employing OMP 241/2008 Page 2 of 32 sandardized methods of teaching in the financial markets. He shall be devoting full time without any constraint and attention to all specified functions with day-to-day teaching and support keeping the students' need in mind from all perspectives and will also impart practical training at its best. He shall be required to be at his work till regular office hours or till the completion of day's work, without any time constraint and may also be required to come on Sunday for disposal of his duties as per the need of the organization. (ii) He shall also design and upgrade the courses and teaching and other course contents and also management courses as per the main objectives of the company. The services promised to the students shall be delivered at its best. He shall also be contributing towards general administration and executive help, as required. Besides, management can assign other incidental works from time to time, as per the need, to fulfil the objectives of BIFM. (iii) He shall exhibit his high quality of competency, commitment and initiation while performing his job and will maintain a cordial environment, without which the objective of BIFM would suffer irreparable loss. Hence the employee assures BIFM for his best of the best efforts in the said regard. (iv) Since the mission of BIFM is a long term process where the commitment for a longer period is required, hence the employee commits to serve the BIFM for a period of 5 years, taken as employment period wherein there is no exit for a minimum period of 3 (three) years. During the course of his stay and thereafter, the employee further undertakes to maintain complete integrity, confidentiality, not to leak, divulge, share or misuse any of the business secrets, secrecy related to software & tampering or hacking strategies, plans etc. with any third party or for himself for any oblique motive. (v) He shall maintain high standards of decorum and OMP 241/2008 Page 3 of 32 sense of discipline among the students befitting the image of a good financial education body. Further he shall not indulge himself in any alliance or front or politics among the staff members/students, including subordination. (vi) That at any stage if it is observed by BIFM that the employee is not performing his duties as per the terms and conditions of his agreement, then BIFM reserves its right to take appropriate disciplinary/official action against the employee. If the company wishes to terminate his services, it can do so by serving one month notice or salary in lieu thereof. (vii) The salary revision/increment will be done on yearly basis. It shall be done depending upon the competence, performance, achievements, behavior, discipline, etc. and upon the sole contribution towards the growth of the company. Decision relating to increment shall be taken by compensation committee, headed by the Chairman of BIFM. (viii) He shall work with the company for 5 years with 3 years as minimum compulsory period, but in case of some extra ordinary situation, if he decides to quit his job after the completion of the compulsory period, then he can do so by serving a prior notice of at least 6 months in writing to the company. (ix) Both the parties shall endeavour to resolve all the disputes amicably and in good faith, through mutual dialogue. However, all disputes which fail to resolve in that manner shall be subject to arbitration by a sole arbitrator appointed by the Chairman of the company, and to be conducted as per the Arbitration and Conciliation Act, 1996 at Delhi only.” 4. It is averred in the petition that the respondent was initially involved in redesigning and restructuring the course content of Stock Market and Trading Operation, a 4 month diploma programme, for which he had OMP 241/2008 Page 4 of 32 prepared the handouts and study materials, with the help and suggestion of the petitioner, for the students. With the growing competition in the financial sector, however, the respondent approached the petitioner with the suggestion of launching a few more specialized courses in order to counter the competition faced by the petitioner. Relying solely upon the assurances and recommendations of the respondent, the petitioner agreed to launch new course curricula after spending considerable amount on infrastructure to the tune more than 100 lakhs. The statement of expenses is attached with the petition as Annexure P-4. The specialized courses upon which the respondent began his exercise were: “Security Analysis and Portfolio Management”, “Post Graduate Diploma in Wealth Management and Planning” and “Derivative Content and Investment Technique”. 5. The petitioner alleges that the respondent, knowing fully well that he was holding one of the key positions in the Institute, steadily used it as a weapon to extort money from the petitioner. He approached the petitioner in the month of April, 2007 and asked for a salary hike along with other non- monetary benefits, otherwise he would resign. This, despite the agreement dated 08.09.2006, wherein it was agreed between the parties that the salary revision of the respondent would become due upon completion of one year of service. Such was the pressure put by the respondent on the petitioner that the OMP 241/2008 Page 5 of 32 petitioner was left with no other option than to accept his unfair demand and by letter dated 14.04.2007, the respondent's salary was increased from Rs.30,000/- per month to Rs.47,000/- per month, besides other benefits, effective from April, 2007. The respondent was also given the liberty of flexible working hours, as demanded by him. It was, however, agreed that the next salary revision would be on the annual basis during the defined employment period with an incremental bracket of 7.5% - 15%. A copy of the letter dated 14.04.2007 is enclosed with the petition as Annexure P-5. 6. In consideration of the aforesaid, the respondent agreed vide letter of the same date, i.e., 14.04.2007, that during the period of his stay with the petitioner, he will not engage directly or indirectly in any business or associate himself in any capacity with any organization dealing in stock market/capital market/financial market education institute or serve whether as principal, agent, partner or employee or in any other capacity, either full time or part time, in any business whatsoever other than that of the company. 7. On 03.10.2007, however, the respondent in gross violation of the agreement dated 08.09.2006 , wherein he agreed to serve the company for a period of 5 years with 3 years of minimum compulsory period, tendered his resignation vide e-mail dated 3.10.2007 (Annexure P-6). In response to the OMP 241/2008 Page 6 of 32 aforesaid e-mail of the respondent dated 3.10.2007, the petitioner sent an e- mail dated 4.10.2007, that his resignation could not be accepted and called him to discuss the cause of his resignation with an assurance that all the concerns of the respondent would be resolved once for all (Annexure P-7). 8. On 13.10.2007, the respondent was called for a meeting to discuss the issues with regard to his resignation and to the utter shock and surprise of the petitioner, the respondent informed the petitioner that he would call back his resignation if he was given an increment of another Rs.50,000/- per month. He also demanded that he be upgraded and designated as Head-Academics. The petitioner tried its level best to explain to the respondent that the next revision of his salary as per the terms and conditions of the agreement dated 08.09.2006 was due only in April, 2008 and not before that, but the respondent stuck to his demand, and as such the petitioner had no option but to accede to the same. Accordingly, the respondent's salary was revised vide letter dated 18.10.2007 (Annexure P-8) from Rs.6,37,000/- annually (Rupees Six Lacs Thirty Seven Thousand only) to Rs.8,77,000/- annually (Rupees Eight Lacs Seventy Seven Thousand only), and the respondent was also designated as Head-Academics. 9. Still dissatisfied, the respondent on 27.11.2007 wrote to the petitioner by an e-mail (Annexure P-9), once again demanding salary revision. A few days later, the respondent vide e-mail dated 29.11.2007 (Annexure P-10) wrote OMP 241/2008 Page 7 of 32 to the petitioner as follows: “Sir, I am sorry to say that BIFM does not deserve a talent like me. It's not me who wants BIFM, but it's BIFM who wants me. What I have delivered in 1 year to BIFM, it will take 10 years for others to deliver that. The only problem has been that I have begged for even getting my rights from you and I realize that was a mistake. Whatever you have given to me I have given many more times than that to BIFM. Only time will make u realize that. Thank you for giving me the platform to show my worth to the finance fraternity. Today I get more than 10 calls a day to establish an institution like BIFM. (emphasis supplied). 10. On 28.11.2007, the respondent suddenly stopped attending to work without any kind of intimation to the petitioner and tendered his resignation once again vide letter dated 01.12.2007, which was returned unaccepted by the petitioner on 13.12.2007, informing the respondent that his unauthorized absence was in breach of the terms and conditions of the employment agreement dated 08.09.2006 (Annexure P-11 Colly). 11. The respondent not only did not resume work, but on 14.12.2007 addressed an e-mail to all the key employees of the petitioner, wherein he instigated and called upon the employees to act against the interest of the petitioner, advising them not to work hard for the petitioner. The respondent vide his reply dated 20.12.2007 to the letter of the petitioner dated 13.12.2007 also made various false and baseless allegations and claimed an amount of Rs.1 crore from the petitioner (Annexure P-12 Colly). The petitioner wrote OMP 241/2008 Page 8 of 32 back to the respondent vide letter dated 29.12.2007, denying the alleged liability of Rs.1 crore and claiming that it was the respondent who should compensate the petitioner for the losses suffered by it due to breach of agreement by the respondent (Annexure P-13). 12. Since the respondent neither resumed work nor compensated the petitioner company, and continued to be unauthorizedly absent from work in breach of the agreement dated 08.09.2006, the petitioner invoked the arbitration clause contained in the said agreement and requested its Chairman vide letter dated 17.12.2006 for the appointment of a sole arbitrator. Acting on the said letter, the Chairman of the petitioner company appointed Mr.Anil Kumar Chauhan, Advocate to act as the sole arbitrator vide letter dated 24.03.2008. The appointment of the arbitrator was intimated to the respondent vide letter dated 25.03.2008. 13. On 10.04.2008, it came to the knowledge of the petitioner; when a letter dated 30.03.2008 was received by the petitioner, that the respondent was about to join the employment of another Financial Educational Institute of a similar nature as that of the petitioner (Annexure P-14), contrary to the agreement dated 08.09.2006 wherein the respondent had agreed to serve the petitioner for a period of 5 years with a minimum compulsory period of 3 years and in breach of the undertaking given by him in his letter dated 14.04.2007 OMP 241/2008 Page 9 of 32 that he will not engage directly or indirectly in any business or associate himself in any capacity with any organization dealing in stock market/capital market/financial market education institute or serve whether as principal, agent, partner or employee or in any other capacity, either full time or part time, in any business whatsoever, and also contrary to the oral assurances given by the respondent to the petitioner from time to time. 14. Apprehending that the respondent, unless restrained from doing so, would divulge all the proprietary confidential information and business strategies of the petitioner to the competitors of the petitioner, as the respondent was holding a key position with the petitioner and had access to all the copyrighted study materials and handouts of different specialized courses developed by him during the course of his employment with the petitioner, and thereby cause irreparable loss and prejudice to the petitioner, the petitioner has filed the present petition. 15. The petitioner alleges in the petition that by attempting to join another institute of similar nature as that of the petitioner during the course of his employment with the petitioner and enticing/soliciting the employees of the petitioner, in gross breach of the terms of employment, the respondent has committed breach of the agreement dated 08.09.2006 and letter dated 14.04.2007 issued by the petitioner to the respondent, and prays for the passing OMP 241/2008 Page 10 of 32 of orders restraining the respondent from joining any other employment, and from divulging to any other business/firm or company any of the secrets processes or information relating to the courses, course material and business of the petitioner. 16. By an order dated 2 nd May, 2008, notice of the filing of the petition was issued to the respondent and the respondent was restrained by an ex parte injunction from divulging to any business/firm or company any of the secrets, processes or information relating to the courses, course material and business of the petitioner as per the proprietary confidential systems developed and used by the petitioner. 17. On 08.07.2008, while seeking extension of time for filing the reply, the counsel for the respondent made a statement in Court that the respondent had not joined any other employment and that he would not be joining any other employment till the next date, that is, 5.8.2008. However, on 23.07.2008, an application, being I.A.No.8696/2008 under Section 151 of the Code of Civil Procedure, was filed by the respondent, which was ultimately listed before this Court on 28 th July, 2008. Through this application the respondent prayed for vacation of the interim order dated 8 th July, 2008 and that the consent given by the respondent on the said date be deemed to be withdrawn w.e.f. 5.8.2008. The respondent also prayed for vacation of the interim orders passed by this OMP 241/2008 Page 11 of 32 Court on 2 nd May, 2008. On 5 th August, 2008, however, when the counsel for the respondent again sought time for removing the objections on his reply and re-filing the reply, the respondent was directed by the Court to abide by the undertaking given by him to the Court on 8 th July, 2008 till the next date fixed for hearing, i.e., 25 th August, 2008. Today, I have heard the learned counsel for the parties and while reserving orders, have extended the interim orders in the meanwhile. 18. The learned senior counsel for the petitioner Mr. Neeraj Kishan Kaul, relying upon clause-4 of the agreement dated 08.09.2006, vehemently contended that the respondent was bound by the agreement to serve the petitioner company for a period of 5 years, taken as employment period, wherein there is no exit for a minimum period of 3 years, and was further bound by his undertaking given in the said Clause to maintain complete integrity and confidentiality and not to mis-use any business secrets of the petitioner company. The said clause is, for the sake of ready reference, reproduced hereunder as follows: “4. Since the mission of BIFM is a long term process where the commitment for a longer period is required, hence the employee commits to serve the BIFM for a period of 5 years, taken as employment period wherein there is no exit for a minimum period of 3 (three) years. During the course of his stay and thereafter, the employee further undertakes to maintain complete integrity, confidentiality, not to leak, divulge, share or misuse any of the business OMP 241/2008 Page 12 of 32 secrets, secrecy related to software & tampering or hacking strategies, plans etc. with any third party or for himself for any oblique motive.” 19. Reliance was also placed by the learned senior counsel for the petitioner on the provision in the agreement relating to termination of agreement to contend that the respondent had contracted to work with the petitioner for an employment period of five years, with three years as minimum compulsory period in case of some extraordinary situation. Thus, if the respondent in the case of some extraordinary situation decided to quit his job after the completion of the compulsory period of three years, he could do so provided he served a prior notice of at least six months in writing to the company as stipulated in the contract. The relevant provision of the contract reads as follows:- “Termination of Agreement: As committed above, Mr. Ramakar Jha shall work with the company for 5 years with 3 years as minimum compulsory period, but in case of some extra ordinary situation, if Mr. Jha decides to quit his job after the completion of the compulsory period, then he can do so by serving a prior notice of atleast 6 months in writing to the company.” 20. The learned senior counsel for the petitioner also sought to emphasize the fundamental difference between an employee voluntarily leaving the service of an employer during the period of contract on the one hand, and the termination of the services of the employee by the employer on the other hand, OMP 241/2008 Page 13 of 32 during the aforesaid period. It was emphasized by him that in the instant case, it was the respondent, who had left the Institute. This was not a case where his services had been terminated by the petitioner. Emphasis was also laid on the fact that from time to time, the respondent had blackmailed the petitioner into increasing his salary and on such occasions, the stipulations contained in the agreement, including the stipulation contained in Clause 4 (supra), were reiterated by the respondent. Reference in particular was made by Mr. Kaul to the document dated April 14, 2007 titled as “Employment Agreement dated 8th September, 2008”, “Subject: Remuneration and Greater commitment”. The said document after setting out the revised pay package and other perks of the petitioner provided as follows:- “1. The above remuneration package shall be effective from April 2007 till March 2008. 2. As agreed and accepted vide Employment agreement dated 08/09/2006 and same also given as a precondition for the new remuneration package, it is reiterated that you shall work with a greater commitment and shall serve the company for a period 5 years with 3 years as minimum compulsory period including the period already served by you under the said agreement. 3. During the period your stay with the Institute the code of ethics, demands that you should not engage directly or indirectly in any business or associate yourself in any capacity with any organization dealing in stock market/capital market/financial market education institute or serve whether as principal, agent, partner or employee or in any other capacity either full time or part time in any business OMP 241/2008 Page 14 of 32 whatsoever other than that of the company. 4. That the institute shall own, in perpetuity, the copyright of all literary works and any other form of works ideas etc. All other contents of the agreement dated 08/09/2006 shall remain unaltered. Please sign duplicate copy of this letter as an acknowledgement of your acceptance. Thanking You Yours truly, For BLB Institute of Financial I Accept & Agree Markets Limited Sd/- Sd/- (Vikash Rawal) (Ramakar Jha) Director Sr. faculty” 21. Mr. Neeraj Kaul next referred to the e-mail dated October 03, 2007 sent by the respondent with the following request:- “1. As requested earlier, I would want you to review my working with BIFM, as I have finished 1 year of working on 11th September, 2007. If according to you I have performed as per your expectation, I would further request certain favors from you, they are: (i) I would want you to remove the non-leaving clause that was put in my joining bond, as I don't see myself continuing with BIFM in the present requirement or working. I have overworked and laterally burnt myself. If I continue working the way I have been asked or otherwise decided myself for the past year I am sure I won't survive. I am further sure that even you would not want that to happen. (ii) In the background of the above point I would request the management to accept my resignation and to consider the 6 months notice starting 1st October, 2007. 2. ..........................................................................Hence, I see myself serving my notice period of 6 months from 1st October, 2007 to 31st March, 2008. I thank the OMP 241/2008 Page 15 of 32 management for the kind of support given to me. Looking forward to your acceptance.” 22. This was, Mr. Kaul contends, by no means the end of the matter as is evidenced from document dated October 18, 2007 emanating from the petitioner to the respondent regarding revision of salary and profile enrichment with reference to the employment agreement dated 08.09.2006 and letter dated 14.04.2007 referred to hereinabove. A bare glance at the said document shows that the salary of the respondent was again revised from Rs.40,000/- to Rs.60,000/- with effect from 01.04.2008 and his designation upgraded as Head-Academics. The document bears the following endorsement at the foot thereof:- “I accept and agree Sd/- (Ramakar Jha) Head-Academics” 23. Subsequent to this, however, the learned counsel for the petitioner points out that the respondent by his letters dated November 27, 2007, November 29, 2007 and December 01, 2007 again expressed dissatisfaction with his job and its attendant responsibilities. In his last letter, that is, letter dated 1st December, 2007, he requested the management to accept his resignation and expressed an opinion that calling it a day would be good for both the parties. OMP 241/2008 Page 16 of