Bombay Dyeing And Manufacturing … vs Mehar Karan Singh on 24 August, 2010

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PGK
                IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                  ORDINARY ORIGINAL CIVIL JURISDICTION




                                                                                  
                    Notice of Motion No.4248 of 2008




                                                          
                                   IN
                          Suit No.3313 of 2008




                                                         
Bombay Dyeing and Manufacturing Co.Ltd.                        ... Plaintiff
             v/s.
Mehar Karan Singh             ...                              ... Defendant




                                               
Mr.A.S. Doctor with Mr.N.H.Seervai, Sr.Advocate with
Mr.P.A. Kabadi i/by M/s.Doijode & Associates for Plaintiff.
                               
Mr.S.H. Doctor, Sr.Advocate with Mr.Rajiv Kumar                                           with
Mr.Abhishek Khare i/by M/s.Khare & Legal for Deft.
                              
        -----

                              CORAM : SMT.ROSHAN DALVI, J.
              

Date of reserving the order : 20th                     July, 2010
Date of pronouncing the order :                   24th August, 2010
           



ORDER :

1. The Defendant was the whole time Director of the
Plaintiff-Company appointed under the Agreement of
employment dated 22.8.2005, Exhibit-A to the Plaint,

for the period 24.7.2004 to 23.7.2009. Under the said
agreement, he inter alia agreed not to divulge or
disclose confidential information of any nature to any
person. The parties agreed that such information shall
be the property of the Company. The relevant clauses of

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the agreement read thus:-

10.Mr.Singh shall not, except in the proper
course of his duties during the continuance of

his employment with the Company or any time
thereafter divulge or disclose to any persons
whomsoever or make use whatsoever for his own
purpose or for any purpose of any information

knowledge obtained by him during his
employment as to the business and/or affairs
of the Company and/or the know-how,
technology, methods, machines, compositions,
knowledge, information and other data, trade

secrets, formulate and process of
manufacturing of various products by the

Company and/or list of companies customers and
suppliers (and likewise in relation to the
Company s associated companies) all of which

information is or may be confidential with the
exception of any information generally made
available to the public or make or take copies
of the manuals, tracings, blueprints, drawing

books, papers containing such confidential
information without authority taken prior to

making or taking copies, such copies may
contain the whole information substantially
similar information from the original manual,
tracings, drawings, blueprints, papers, books

etc. Mr.Singh shall during the continuance of
his employment hereunder, also use his best
endeavours to prevent any person publishing
disclosing such confidential information
PROIVDED HOWEVER that any such divulgence or

disclosures by Mr.Singh to officers and
employees of the Company solely for the
purpose of business of the Company shall not
be deemed to be a contravention of his clause.

11. All notes, books, papers memoranda and
other documents or any trade secrets of

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confidential information concerning the
business of the Company (and the associated
companies) which shall be acquired, received

or made by Mr.Singh during the course of his
employment hereunder and/or incidental to his

employment, shall be the property of the
and shall be surrendered by Mr.Singh
to someone duly authorized on their behalf at
the termination of his employment or at the

request of the Board (or any other designated
persons) at any time during the course of his
employment.

(Emphasis supplied)

2. The Defendant was bound in principle by the Code of

Ethics and business of the Plaintiff. He certified
compliance thereof in the years following his

employment being 2006, 2007 and 2008. The relevant
clause of the code of ethics runs thus:-

19. CONCURRENT EMPLOYMENT

An employee of a WADIA Company shall
not, without the prior approval of the
Managing Director of the Company, accept

employment or a position of responsibility
(such as a consultant or a director) with
any other company, nor provide free-lance
service to anyone. In the case of an
Executive/Whole-time Director or the

Managing/Joint Managing/Deputy Directors
such prior approval must be obtained from
the Board of Directors of the Company.

                                                 (Emphasis supplied)




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3. The Defendant is stated to have divulged confidential
information to a competitor being Dawnay Day India Land

Private Limited (DD) by way of forwarding on e-mail a
manual of a customised software for real estate

business of the Plaintiff obtained by the Plaintiff
upon payment of consideration from the software

producer Oracle. The Defendant is shown to have taken
up initially employment by the directorship and later
by way of being an Executive Director on the Board of

various Companies being DD Group Companies which has
come to be discontinued or terminated by DD.

4. The Defendant s employment with the Plaintiff no

longer subsists. The Defendant claims to have resigned
and the Plaintiff claims to have terminated his

services as whole time Director.

5. The suit is essentially for injunction against
divulgence and disclosure of confidential information.

The suit is also for money claim for damages upon the
divulgence claimed by the Plaintiff as also for refund
of excess salary paid to the Defendant during his
tenure as whole time Director. The Notice of Motion is

for the aforesaid injunction as well as the order of
deposit of the excess remuneration paid with interest
at 18% per annum from the date of the payment made to
the Defendant until realisation.

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6. It may at once be mentioned that the two reliefs are

upon two entirely different causes of action which have
been sought to be merged in the suit and the ad voleram

Court fee required to be paid upon damages claimed by
the Plaintiff for divulgence of information as also for

refund of the excess salary suffers from mis-joinder of
causes of action and cannot be considered in a single
suit upon payment of consolidated Court fee once. Since

the suit as well as the Notice of Motion are
essentially in respect of confidential information and

the interim relief which is sought is essentially for
injunction in respect of the confidential information

of the Plaintiff, that relief alone shall be
considered. The relief of deposit prayed by the

Plaintiff cannot be granted in the same suit upon
payment of one Court fee and, therefore, shall not be

considered on merits. The Plaintiff may take such
proceedings as required in respect of the relief of

refund / deposit claimed.

7. The Plaintiff s case of divulgence of confidential
information and the reliefs that could be granted

to the Plaintiff must be seen from the twin
situations :

(i) If the information sought to be protected is

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confidential and would fall within the broad
and wide confidentiality clause being

Clause-10 in the aforesaid Agreement dated
22.8.2005.

(ii) If the Defendant is shown to have acted
contrary to the terms of the confidential

clause in the agreement and is susceptible to
such act in future.

8. During the subsistence of the period of contract
with the Plaintiff, the Defendant is shown to have

executed a Terms of Contract with DD on 2.3.2006. He
was later appointed Director of DD. The first such

appointment is shown to be on 12.5.2006 by the
statutory Form-32 submitted by DD under the digital

signature of his authorised signatory and which
appointment is not disputed. A year thereafter the

Defendant is shown to have been appointed as
Executive Director of DD under statutory Form 32

showing his appointment as such on 28.9.2007 which
is also not disputed.

9. The Defendant is shown to have filed his income

tax returns for the year 2007-08 in which the
computation of his taxable income is shown to
containing income from salary from DD as well as the
Plaintiff which is also not disputed.

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10. The Defendant is shown to have attended Board
meetings of the Plaintiff as per the statutory

requirements under the Companies Act from 26.10.2005
until 27.5.2008, which includes the period of the

Defendant s contract with the Plaintiff as well as
his service as Director and later as Executive
Director with DD.

11. The factum of the Defendant owing allegiance to

the Plaintiff as well as competitor is coupled with
the fact that the Defendant has shown division of

his loyalty and affinity to the Plaintiff which has
been demonstrated by certain e-mails admittedly sent

by the Defendant to one of the Directors of the
Plaintiff.

12. The first of such e-mails is dated 18.9.2006

which makes interesting reading and exhibits the
Defendant s trait of integrity . It would be apt to
cite the entire of it which runs thus:-

From
To : Ness Wadia, nesss@wadiagroup.com
Sent :Mon Sept 18 00:36:12 2006
Subject: Confidential: Visit by Chairman of
UK Financial Services Company

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Dear Ness

An old friend of mine is visiting from UK over
the next week or so.

He is the Chairman of a Financial Services /
Real Estate Property Finance Company with
Assets over US$ 10 billion.

He is keen that I join the Board of the
Holding Company in the UK as a non-executive
director and become the Vice Chairman of their

India venture.

I think he wants to see whether he should or
should not do so and I would like to take your
permission to see if this fructifies.

It can help our non-BDMC financing of some
projects in the WG, however, this is far away.

It may not happen at all, but I wanted to tell
you first.

Do keep this with your self since nothing may
come out of this.

I had mentioned this to the Chairman in
passing about an year ago (at the time the
Mills case was on), that something may happen,
said he generally encouraged non-executive
director positions of senior staff in the

Group.

The E-mail makes a reference to an old friend visiting from
the U.K. The friend is the Chairman of a Financial Services
/ real estate property finance Company (which is the

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Plaintiff s competitor with regard to the Plaintiff s real
estate business). The E-mail shows that that friend is

keen that the Defendant joined the Board of the holding
Company in the U.K. as an non-executive director and become

the Vice Chairman of their India venture. The Defendant
shows that that is merely a proposal and the Defendant

would see if this fructifies. The Defendant seeks
permission of the e-mailee on the grounds set out by him in
the e-mail which runs thus:

It can help our non
ig BDMC Financing of some
projects in the WG.

The Defendant passes off the proposal as a mere

possibility which may not happen but assures the
e-mailee that he wanted to tell you first .

He quoted the Chairman in that he generally
encouraged non-executive director positions of

senior staff in the group Companies of the
Plaintiff.

13. It may at once be mentioned that by the time
the Defendant e-mailed the said proposal marked
confidential by him he was already a director of

DD, whose Chairman was from the U.K.

14. This ambiguous, dilatory and mis-directed e-

        mail was replied by the Director                     O.K.         It would




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show that perhaps in future the Defendant s friend,
who was in real estate finance business, may offer

him a position as non-executive director in his U.K.
Company and to become the Vice Chairman of his India

Venture which might help to finance some projects of
the Plaintiff and which was told to the e-mailee

first, though it was mentioned to the Chairman in
the passing a year before, and which was expected to
be kept confidential until anything happened on that

score.

15. Soon after
ig this e-mail was sent, which was
during his directorship of DD, on 1.10.2006, the

Defendant was appointed Vice Chairman of DD, a fact
which the Plaintiff s officer came to learn from

DD s officer in an e-mail sent much later on
18.8.2008 when the Plaintiff investigated the

Defendant s conduct.

16. In a more direct request for permission under
another e-mail sent to the same director of the
Plaintiff on 8.2.2007, the Defendant requested
permission to join the Board of DD (U.K.) as an

external director and/or DD (India) as director and
to lead that Company as their Vice Chairman. The
Defendant stated that it was a governance
assignment. The Defendant followed the request with

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the reason

This lateral input will give insights to
apply to our business here .

He further assured that it would not be impinging

on his work and if it did then he would review
it or reduce it.

17. It may be mentioned that though the Defendant
became a director since 12.5.2006 on the Board of DD

and was also appointed Vice Chairman of DD on
1.10.2006, he e-mailed for permission to join the

Board and to be the Vice Chairman only on 8.2.2007
much after he had acted in those positions without

the requisite permission.

18. On 22.2.2007, he e-mailed various other officers
of the Plaintiff upon, it appears, certain eyebrows

being raised in his Organisation. He clarified that
he had taken specific permission of the Chairman and
the Director in that behalf and requested them not
to talk to outsiders on that subject.

19. During his contract period and after his
appointment with the competitor Company as
aforesaid, the Defendant, as before, sent his letter

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affirming and confirming his compliance with the
code of conduct of the Company.

20. It may at once be mentioned that the

Defendant s conduct was against the code he
confirmed last on 9.4.2007.

21. The Defendant signed the contract of being
Managing Director of DD (India) on 19.8.2007, which

fact also the Plaintiff came to learn, much later,
through the e-mail dated 18.8.2008 of the officer of

DD (India).

22. It appears that the Defendant would have been
sought to be replaced by another officer. On

1.10.2007, the Defendant e-mailed the Chairman of
the Plaintiff that he resigned from the Plaintiff

for personal reasons. He had communicated to the
Chairman the replacement. He claimed to be allowed

to look after his options. He informed the Chairman
that he would take up the role of Vice Chairman and
Managing Director of DD (India), which he had not
until then done, if that assignment was still open

for him. It may be mentioned that he had already
been appointed director as well as Vice Chairman as
well as the Managing Director of DD by then.

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23. The Chairman of the Plaintiff replied to the
e-mail on 2.10.2007. This was whilst he was unaware

of the Defendant s varied appointments diametrically
contrary to code of conduct he confirmed and

different from the various permissions he sought
earlier. The Chairman expressed surprise at the

Defendant s request to look at his options and his
commitment to any other Company which the Defendant
had confirmed as untrue upon the rumours in the

Company. Nevertheless, the Chairman apologised if
the Defendant was
ig hurt and hence, he resigned
because the Defendant was going through enormous
stress and strain due to the health problems of his

father. The Chairman called upon the Defendant to
meet him the next day after sleeping over it.

24. For whatever be the reason either appeasement

or guilt the Defendant by his e-mails dated
2.10.2007 and 20.10.2007, once again apologised to

the Plaintiff s Chairman and in a verbose e-mail set
out unclear options.

25. It is unmistakable that during the Defendant s

contract of employment as whole time Director of the
Plaintiff-Company and during the period he was
amenable to and confirmed the code of ethics of the
Plaintiff, the Defendant joined the Board of

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Directors of DD, became its Vice Chairman and later
his Managing Director without disclosing that fact

contractually required to be disclosed, filed
income-tax returns reflecting his two services and

received and appropriated salaries as well as other
perquisites from both the Companies unknown to one

another. Even after his employment with DD as
Director, Vice Chairman and Managing Director, he
attended Board meetings of the Plaintiff. Having

double played both the Companies and their
respective Chairmen,
ig the Defendant sought
permissions, beating around the bush, even after
his several contractual position was entered into,

confirmed and well on its way. It is the act of
such a dis-loyalist that the Plaintiff s case of the

Defendant having sought to part with confidential
information of the Plaintiff must be seen. The

parties were in e-culture. Their correspondence
through e-mail is an accepted mode of communication.

They are attuned to and would be exposed from such
technology.

26. The Plaintiff s suspicion being raised, the

Board of Directors of the Plaintiff in its Board
meeting dated 27.5.2008, inter alia resolved that
the employment of the Defendant as an employee as
well as Executive Director be terminated after

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giving him the requisite 30-day notice in terms of
his contract of employment. Thereafter on 7.6.2008,

a notice in that behalf came to be sent to the
Defendant and he was directed to hand over charge to

the Plaintiff s officer. The Defendant s laptop as
well as other movable properties given by way of

perquisites to him were taken back. From the laptop
further e-mails of the Defendant were retrieved.
Two of such e-mails are of direct importance for

adjudication of the reliefs sought by the Plaintiff
upon considering the Defendant s conduct. The e-mail

dated 15.12.2007 sent by the Defendant to three
officers of DD shows a process document for

tendering/PO/WO forwarded to them. The attachment
to the e-mail shows BDRED Tendering PO & WO

Processes.doc. The e-mail shows that the document
attached was encapsulated in the ERP oracle system

at BDMC (Plaintiff). That was the Enterprise
Resource Programme (ERP) customised by the Plaintiff

from the system provider, oracle. The manual showed
how the operation of customised software of the
Plaintiff could be effected. The Defendant e-mailed
that that system was the first in the world which is

NZN system solution for real estate business . He
also e-mailed that he thought that intellectual
property in the customised software was jointly
owned (by the Plaintiff and oracle). It is indeed

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stated to have been purchased by the Plaintiff at a
cost of Rs.93 Lakhs. He e-mailed that the e-mailees

would enjoy the document attached. He assured that
they could discuss it at the next EC meeting. He

further e-mailed that he would like our
system (DD) to be even more robust and to be

followed 100% . He further e-mailed that he would
critically evaluate the documents along with the
officers of DD and deploy it throughout the

organisation.

27.

The manual of the customised software of the
Plaintiff, which was indeed the Plaintiff s property

and more so an intellectual property, by way of the
Plaintiff having paid consideration for the same to

its author oracle, came to be verbatim forwarded to
a competitor which the Defendant was to evaluate and

explain the officers of that competitor and utilise
the same in their organisation. There cannot be a

more stark theft of such property and it s misuse
thereupon. In fact, the act of the Defendant would
tantamount to the tort of conversion of the
Plaintiff s property for the use of its competitor,

aided, assisted, explained and evaluated by the
Defendant. It may even amount to an infringement of
the Plaintiff s copyright, though that case is not
pleaded.

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    28.     The      Court     is        not     concerned                with          the




                                                                              

intricacies and the delicacies of the manual itself.
It is also not concerned with its worth. The e-mail

dated 15.12.2007 amply makes out a case of the
Plaintiff s property being in danger of being

damaged and alienated causing injury to the
Plaintiff in relation to its business by its
alienation. Of course, the actual damage suffered

by the Plaintiff would only surface much later.
That would be for the Plaintiff to prove as and when

the damage would occur or upon the damage having
already occurred. A case for injuncting the

Defendant who is habituated to double dealings ever
since his contract of service with the Plaintiff, is

made out.

29. Another e-mail, which was retrieved from his
computer, is dated 21.2.2008 sent by the Defendant

to the officers of DD. The subject of that e-mail
was the format of an MOU draft . It was attached
to the e-mail. The e-mail shows that the format was
used by the Plaintiff s officers for a project in

Goa. The Defendant e-mailed just for its format,
I am circulating the same . Though an MOU may not
constitute intellectual property, yet it would
certainly be the Plaintiff s property brazenly mis-

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utilised by the Defendant, exhibiting it to be so.

30. The instances need not be multiplied. The
Defendant is also alleged to have poached certain

employees of the Plaintiff. However, that aspect is
of lesser importance and need not be considered.

31. The Plaintiff s case that the Defendant
committed trespass of the Plaintiff s proprietary

rights is prima facie made out from the aforesaid e-
mails.

32. The Defendant s contract was terminated by the

Notice dated 9.6.2008, to which surprisingly, the
Defendant expressed surprise and as the last straw

alleged that he had resigned in October 2007. That
was the e-mail of 1.10.2007 cited above, which came

to be replied with the Chairman s apology on
2.10.2007 followed by the Defendant s e-mail also of

2.10.2007, showing no trace of resignation. The
Defendant s false case of resignation is made
forgetting the fact that he has attended several
Board meetings of the Plaintiff after his alleged

resignation of 1.10.2007, taken salary and other
perquisites from the Plaintiff after that day which
are reflected in his income-tax returns, along with
the salary received also from DD and the fact that

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he made allegations against the Plaintiff of his
laptop being seized only in July 2008 after the

termination of his contract in June 2008.

33. Upon the Defendant s contract being terminated, the
Plaintiff informed the Chairman of DD of that fact

on 9.6.2008. It appears that in a decent overture
the Chairman of DD has expressed his gratitude to
the Plaintiff to have brought that matter to his

attention and himself sought to terminate the
Defendant s contracts with DD.

                              ig                                   This has been set
      out   in     the     e-mail       of       the    Chairman             of     DD     to      the
      Chairman        of      the           Plaintiff               dated            11.8.2008.
                            
      Consequently,          his       contract             with        DD       came        to      be

terminated on 8.8.2008. Even a public notice in that

behalf came to be given by DD in two local
newspapers. Further, two e-mails dated 14.8.2008

and 18.8.2008 confirmed the ceasure of all
associations of DD with the Defendant. The Defendant

resigned from DD (U.K.). His nomination being
revoked from another sister concern in India and he
was sought to be removed as director of two other DD
Group Companies where he refused to resign.

34. The Plaintiff has also contended that the Defendant
has been privy to confidential information of the
Plaintiff which he may have gathered at the

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Plaintiff s Board meetings as well as through the
Plaintiff s strategic business plans which also the

Plaintiff seeks to injunct the Defendant from
disclosing to outsiders being the Plaintiff s

confidential information. The confidentiality term
in the Defendant s contract with the Plaintiff is

indeed wide. It encompasses the information and
knowledge obtained by the Defendant during the
course of his employment as to the Plaintiff s

affairs. It includes the knowhow technology, methods
and other data ig of the Plaintiff with regard to
information which is, as well as which may be,
confidential. The Plaintiff has contended in

paragraph 17 of the Plaint that aside from the
Plaintiff s software the Defendant has other

materials and documents as well as other
confidential information.

35. It has been argued on behalf of the Plaintiff by

Mr.A.S. Doctor that the matters dealt with at the
Board s meetings to which the Defendant was a privy
were not matters in the public domain, though they
may not be, stricto sensu, trade secrets. They must

not be, therefore, made available to any members of
the public.

    36.   This   information           is     claimed         to       be      Plaintiff s




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property and cannot be divulged or disclosed by the
Defendant to outsiders. The confidential

information set out by the Plaintiff is in respect
of business plans of real estate business, the

product mix of the Plaintiff in respect of
developing real estate, the decisions of the area in

square footage, the capital and revenue expenditure
and the budgets of the Plaintiff.

37. The kind of relationship between the Plaintiff and
the Defendant must be first seen to understand the

perspective in which they function. Is it a purely
business or contractual relationship ? OR does it go

further to a fiduciary character? Fiduciary
relationship is defined in Black s Law Dictionary,

Eighth Edition at page 658 thus:

A person who is required to act for the
benefit of another person on all matters
within the scope of their relationship;

one who owes to another the duties of good
faith, trust, confidence, and candor the
corporate officer is a fiduciary to the
corporation.

38. The position of the Defendant vis-a-vis the
Plaintiff in being privy to any information that he
receives by virtue of his position in the Company is
also in the capacity of a constructive trust. A

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constructive trust as defined in Black s Law
Dictionary, Eighth Edition, page 1547 reads thus:-

…. the formula through which the
conscience of equity finds expression. When
property has been acquired in such

circumstances that the holder of the legal
title may not in good conscience retain the
beneficial interest, equity converts him into
a trustee. Beatty vs. Guggenheim Exploration
Co., 122 N.E. 378, 380 (N.Y. 1919) (Cardozo,

J.)

A person, who is required to act for the

benefit of another person, on all matters
within the scope of their relationship and one
who owes to another the duties of good faith,

trust, confidence and candor is in a fiduciary

relationship with that other.

The case of a corporate officer in relation to his

Corporation is one such.

39. In Black s Law Dictionary Eight Edition at page 1533

trade secret is defined as a formula, process, device
or other business information that is kept confidential
to maintain an advantage over the competitors. It is
the information which includes formula, pattern,
compilation, programme, device, method, technique or

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process. That derives independent economic value from
not being generally known or readily ascertainable by

others who can obtain economic value from its
disclosure or use.

40. Pollock & Mulla Indian Contract Act, Thirteenth

Edition at page 838 sets out the concepts of Trade
Secrets and Confidential Information. The extent of
protection of Trade Secrets and Confidential

Information of an employer is seen from the fact that
an employer can protect
ig the trade secrets without
preventing the use of the employee s own knowledge,
skill and experience even if this is acquired during

the course of employment. Hence, the test, which has
been laid down, is that whatever information can be

carried by the employee in his head, it may be used by
him after his contract expires or in his business

thereafter but all the confidential information
including list of customers which cannot be verbatim

copied by the employee cannot be used by him to the
detriment of his employer. This is on the footing that
an employee owes a duty of fidelity to its employer not
to disclose to others or to use for his own profit the

trade secrets or confidential information which he
learns during the course of his employment.

41. The implied terms in the contract of employment of the

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employee resisting giving out any confidential
information despite there being no express mention of

it in the contract is based on the law of confidence.

42. In the case of Saltman Engineering Coy. Ld., Ferotec
Ltd. and Monarch Engineering Coy. (Mitcham), Ld. vs.

Campbell Engineering Coy., Ld., (1948) 65 R.P.C. 203,
this principle has been enunciated by Lord Justice
Greene M.R. at page 215 thus:-

The information, to be confidential, must, I

apprehend, apart from contract, have the necessary
quality of confidence about it, namely, it must
not be something which is public property and

public knowledge. On the other hand, it is
perfectly possible to have a confidential
document, be it a formula, a plan, a sketch, or
something of that kind, which is the result of

work done by the maker upon materials which may be
available for the use of anybody; but what makes

it confidential is the fact that the maker of the
document has used his brain and thus produced a
result which can only be produced by somebody who
goes through the same process.

In that case, the Plaintiffs were the owners of copyright
of certain drawings of tools for the manufacture of leather

punches. The design was delivered by the Plaintiffs to the
Defendants to manufacture tools. There was an implied
condition in the delivery of the drawings that the
Defendants would not use such drawings for others. The
Plaintiffs alleged that the Defendants converted the

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drawings to their own use and infringed the copyright by
reproducing the same for their manufacturing purposes. It

was held that there was an implied term in the contract
that drawings entrusted to the Defendants for the purpose

of such contract were confidential. The obligation of
confidence was transposed to the Defendants by delivery of

the drawings. The Defendants knew that the drawings were
the property of the Plaintiffs and they were given to the
Defendants only for the purpose of manufacturing of tools

for the Plaintiffs. Hence, it was held that the document
would be confidential, if it is the result of the work done

by its maker, even if matters on which he worked were
matters of public domain and if the Defendants used it for

any purpose other than what they were entrusted they had
broken the obligation of confidence. This was held to be a

matter of confidence, even if it was not so stated in the
contract because the law implies an obligation to treat

such confidential matters in a confidential way. Hence,
if the Defendants used that information directly or

indirectly without the express or implied consent of the
Plaintiffs, they would be guilty of an infringement of the
Plaintiffs rights.

43. In the case of Terrapin Ltd. vs. Builders Supply Co.

(Hayes) Ld., Taylor Woodrow Ld., And Swiftplan Ld.,
1960 R.P.D. 128, the law of confidence again came to be
considered. That was an action to restrain misuse of

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information given by the Plaintiffs to the Defendants
in construction of portable buildings for the

Plaintiffs. The Plaintiffs marketed portable buildings
initially called Mark 24 and later improved their

technique which was stressed skin technique which
provided a flat roof rendering the units much lighter

and thus easily transportable. The parties intended to
enter into a contract for 5 years which broke down.
The Defendants marketed a portable building called S ,

the brochure of which showed the same features as those
of the Plaintiffs. ig It was held following Saltman
Engineering s case (supra) by Lord Evershed M.R. (Per
Majority) that the Defendants could be restrained from

using the design of the portable building advertised by
them in that brochure. The Plaintiffs case that

information of the Plaintiffs design was used by the
Defendants in breach of confidence in the production of

the Defendants mobile building was considered from
the evidence relating to the information given by the

Plaintiffs representative to the Defendants
representative. The Court had to see whether the
information so given was, under the circumstances,
confidential and whether that information was used by

the Defendants. Having answered these questions in the
affirmative, the case for injunction against breach of
confidence of the information provided was held to have
been made out.

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44. In a later case of Seager vs. Copydex, Ltd., 1967(2)

All England Report 415 (CA), the use of information
obtained in confidence by committing breach of such

confidence came to be considered placing reliance upon
the cases of Saltman Engineering and Terrapin Ltd. both

(supra). It was held (Per Lord Denning M.R.) that when
the Defendant made use, albeit honestly of information
which had been received in confidence which was not

available to the public, he was liable for breach of
confidence, entitling the Plaintiff to damages.

In that case the Plaintiff invented a carpet grip patented

as Klent . The Defendant was to market it. The parties
negotiated. During the negotiations the Plaintiff disclosed

to the Defendant the features of the Klent grip as also
its idea for an alternative carpet grip with a V tang.

The Defendant had desired to only market Klent grip. The
negotiations broke down. The Defendant made a carpet grip

of its own but with spikes which would not infringe the
Plaintiff s patent embodying in it the idea of the
alternative grip of the V tang with the strong point and
named it Invisigrip . The Plaintiff contended that that

was the very name mentioned by the Plaintiff to the
Defendant during the course of negotiations. The Defendant
contended that the alternative grip was result of its own
idea and not derived from the information given by the

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Plaintiff. The co-incidences of making the grip led the
Court to conclude that though the Defendant may have

honestly believed that the alternative grip was his own
idea he must have unconsciously used the information given

by the Plaintiff. Relying upon the decision of Lord
Justice Greene M.R. in Saltman Engineering s case (supra)

that confidential information directly or indirectly
obtained from the Plaintiff without the consent, express or
implied of the Plaintiff would make the Defendant guilty of

infringement of the Plaintiff s rights, it was held that
the Defendant had breached the Plaintiff s confidence in

obtaining that information.

45. Relying upon the decision in the case of Cranleigh
Precision Engineering Co. Ltd. vs. Bryant, (1956) 3 All

England Report 301 holding that a person, who obtained
information in confidence, is not allowed to use it as

a springboard for activities detrimental to the
persons who made the confidential communication, it

was held that breach of confidential information
depended upon the broad principle of equity that he who
receives information in confidence shall not take
unfair advantage of it.

Such common law doctrine would, therefore, apply even to
the information which has been published or can be
ascertained by the public. Such information cannot be used

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to the prejudice of the person who gave it without the
consent of that person.

46. The case of Seager (supra) considered when such

information is in part public and in part private. In
that case the patent specification of the klent grip

was available to the public. The information with
regard to the alternative grip was private. When such
information is mixed the recipient, it is held, must

take special care to use only the material which is in
the public domain. ig He should go to the public source
and get it. He should not get a start over others by
using the information which he received in confidence

and without paying for it. It was observed in that case
that the Defendant should not have granted the

alternative type of grip as quickly as they did except
by what they had learnt in their discussion with the

Plaintiff. They learnt that it was possible to make an
alternative grip in the form of V tang and they were

told about the special shape required as well as its
strength. It was held, following upon Cranleigh s case
(supra) that it was the springboard which enabled the
Defendant to devise Invisigrip and to get it

patented. Hence, even though the Defendants did not
infringe the Plaintiffs patent, they were held to have
infringed the confidential information they received
under common law and that infringed the Plaintiffs

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rights. The Defendants were held liable in damages for
infringing the duty of confidence even though held not

to be dishonest and had only subconsciously reproduced
the Plaintiffs grip infringing the Plaintiffs common

law rights.

47. In the further case of Coco v. A.N. Clark (Engineers)
Ltd., (1969) 2 R.P.C. 41, the essential elements of a
cause of action for breach of confidence were laid down

thus:-

(i) The information was of a confidential.

(ii) It was indicated in circumstances importing an
obligation of confidence.

(iii) There was an authorised use of the information.

In that case the Plaintiff designed a Moped engine and

sought co-operation of the Defendants in its manufacturing.
The Plaintiff disclosed details of the design and the
proposals of the manufacture to the Defendants. The parties
fell out and the Defendants manufactured their own engine.

The Defendants engine closing resembled the Plaintiff s
design. The Plaintiff brought an action before the
Defendants could sell the product proposed by it to be
manufactured. Though an injunction did not come to be

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granted, it was observed that the Plaintiff s remedy in
damages remained.

48. In what may be described as a poetic expression,

Megarry, J. described the equitable jurisdiction in
cases of breach of confidence, as an ancient law,

thus:-

Confidence is the cousin of trust.

He cited Sir Thomas More, Lord Chancellor thus:-

Three things are to be helpt in Conscience;

Fraud, Accident and things of Confidence.

Again citing Lord Greene M.R. in Saltman Engineering s case

(supra), the three requirements of the ambit of
confidential information was laid down at pages 47 and 48

thus:-

the information must be of a confidential
nature. As Lord Greene said in the Saltman case
at page 215, something which is public property
and public knowledge cannot per se provide any
foundation for proceedings for breach of

confidence. However confidential the circumstances
of communication, there can be no breach of
confidence in revealing to others something which
is already common knowledge. But this must not be
taken too far. Something that has been constructed
solely from materials in the public domain may
possess the necessary quality of being by the

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application of the skill and ingenuity of the
human brain. Novelty depends on the thing itself,
and not upon the quality of its constituent parts.

Indeed, often the more striking the novelty, the
more commonplace its components.

The second requirement is that the information
must have been communicated in circumstances
importing an obligation of confidence. However

secret and confidential the information, there can
be no binding obligation of confidence if that
information is blurted out in public or is
communicated in other circumstances which negative

any duty of holding it confidential.

Thirdly, there must be an unauthorised use of the
information to the detriment of the person
communicating it.

49. Public domain is defined in Black s Law Dictionary,

Eighth Edition at page 1265 thus:-

When copyright, trademark, patent, or trade-
secret rights are lost or expire, the
intellectual property they had protected

becomes part of the public domain and can be
appropriated by anyone without liability for
infringement.

Public domain is the status of an invention,

creative work, commercial symbol, or any other
creation that is not protected by any form of
intellectual property. Public domain is the
rule: intellectual property is the exception.
J. Thomas McCarthy, McCarthy on Trademarks and
Unfair Competition 1.01[2], at 1-3 (3d ed.
1996).

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Lord    Megarry     observed     that    information         which         is      partly




                                                                               
public       and   partly   private     may     pose   some        difficulty              as
observed by Lord Denning in Seager s case (supra).                               In that




                                                       

case the Defendant would have to segregate the two; he
would be free to use the former and must take no advantage

of the latter. He must not use the confidential
communication as a springboard as observed in the case of
Cranleigh s case (supra) and Seager s case (supra).

It would have to be seen in this case which part of what

the Plaintiff disclosed as confidential information is
truly so confidential as not to have been in the knowledge

of the public or in public domain such that the Defendant
could not have used it as a springboard either by himself,

or passed it on to those others with whom he proposed to
work or already worked.

50. In the case of Universal Thermosensors Ltd. vs.

Hibben and others, 1992 (3) All England Law Reports 257
at page 266, the test of what the employee can carry
outside his employment and his work has been enunciated
thus:-

…. they were entitled to approach the
plaintiff s customers, and seek and accept orders
from them. Still further, they were entitled to
use for their own purposes any information they
carried in their heads regarding the identity of

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the plaintiff s customers, or customer contracts,
or the nature of the customers product
requirements, or the plaintiff s pricing policies,

provided they had acquired the information
honestly in the ordinary course of their

employment and had not, for instance, deliberately
sought to memorise lists of names for the purposes
of their own business. What the defendants were
not entitled to do was to steal documents

belonging to the plaintiff, or to use for their
own purposes information, which can sensibly be
regarded as confidential information, contained in
such documents regarding the plaintiff s customers
or customer contacts or customer requirements or

the prices charged. Nor were they entitled to
copy such information onto scraps of paper and

take these away and then use the information in
their own business.

51. In the case of Rivendell Forest Products Ltd. vs.
Georgia-Pacific Corporation and Timothy L. Cornwell, 31

U.S.P.Q.2d 1472, the United States of Court of Appeals,

Tenth Circuit, considered a wrongful appropriation of a
trade secret. In that case the Defendant was employed
by the Plaintiff, who had lumber business as a reload

wholesaler . The Plaintiff had designed a computer
software system developed over the years which it
asserted was a trade secret under Colorado Law. It

enabled the Plaintiff to provide its customers with
special service to manage its distribution centres
which other competitors did not have. By virtue of the
system, the Plaintiff s employees could give immediate
answers to customers questions on phone inquiries as

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to prices, quantities, places and delivery for the
various lumber sizes to be delivered. The Plaintiff s

employee the Defendant had learnt about the software
system though he had not developed it. He leaked the

information relating to the software system to the
competitor against whom also the action was brought.

The Plaintiff alleged infringement of its trade secret
under the Colorado s Trade Secrets Act, which defined
trade secret thus:-

Trade secret means the whole or any

portion or phase of any scientific or
technical information, design, process,
procedure, formula, improvement, confidential

business or financial information, listing of
names, addresses, or telephone numbers, or
other information relating to any business or
profession which is secret and of value. To

be a trade secret the owner thereof must
have taken measures to prevent the secret from

becoming available to persons other than those
selected by the owner to have access thereto
for limited purposes.

Quoting from the earlier decision in Kodekey Electronics,
Inc. vs. Mechanex Corp., 486 F. 2d 449 (10th Cir.1973), it
was observed thus:

a trade secret consists of any formula, patent,
device, plan, or compilation of information which
is used in one s business, and which gives him an
opportunity to obtain an advantage over
competitors who do not know it.

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In that case we also noted that generally just
what constitutes a trade secret under the above

definition is a question of fact for the trial
court.

Considering these definitions, the elements which could be
identified as a trade secret, although the exact definition

may not be possible, was laid down as the following
factors:-

(1) The extent to which the information is known
outside the business.

(2) The extent to which it is known to those inside
the business i.e. by the employees.

(3) The precautions taken by the holder of the trade

secret to guard the secrecy of the information.

(4) The savings effected and the value to the holder
in having the information as against competitors.

(5) The amount of effort or money expended in
obtaining and developing the information; and

(6) The amount of time and expense it would take for
others to acquire and duplicate the information.

Drawing from Kodekey s case (supra), it was held that

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novelty and intention were not elements required in trade
secret doctrines. But a computer software was protected

under the typical trade secret statutes and doctrine. (30
Geo. Wash Law Rev. 909)

It was observed that a computer software system of the

Plaintiff took nine years to develop at a cost of nearly a
million dollars. The employee Defendant knew it well and
had a significant role although he was not a computer

expert. He was contacted by the Defendant and was later
hired by the Defendant ig who was the competitor of the
Plaintiff to develop a new computer software system for the
competitor. Upon its development the competitor

consolidated its entire distribution division of about 100
distribution centres which was not done before. Upon

consolidation itself the employees was offered the task to
develop the system. The Plaintiff s system was the only

one which one its employee was familiar with and was the
only one in the industry which could provide immediate

answers on all aspects of the customers need. Upon the
fact that employee left the Plaintiff s services and joined
a competitor and very soon the competitor had a software
system developed which was for all practical purposes the

same as the one which was developed by the Plaintiff, it
was held that there could be breach of confidence which had
to be ascertained in evidence of the parties.

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52. Of course, the procedure of summary judgments in
civil practice followed in the U.S. by the Trial

Judge was held not applicable in a case such as this in
which oral evidence would be required of the breach of

confidence and of handing out confidential information.
Since the Plaintiff s system was the only one in the

industry but later his competitor had developed such a
system, the information let out was held to be a trade
secret which included even the elements which were

otherwise in public domain. It was held that trade
secret could consist of a combination of elements,

characteristics and components which were in public
domain. It was observed The protection is merely

against breach of faith and reprehensible means of
learning another s secret.

In this case, e-mailing the manual as a dot.doc document of

the software purchased by the Plaintiff at the cost of Rs.
93 Lakhs would be a matter impliedly within the ambit of

confidence in the Plaintiff s Corporation. The officers
including the Defendant who knew of this software, even
without an express clause in their employment agreement or
in the employees Code of Ethics, were enjoined not to part

with the information. Though the original software itself
may be kept by the Plaintiff in its safe custody, the
manual showing the use of the software was confidential
information which could not have been parted with. It is

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not in issue that it was. What is in issue is only whether
it would tantamount to confidential information. In fact

the definition of trade secret enunciated above shows that
it would be confidential information and not within public

domain.

53. What would be in public domain, therefore, must be
understood to conceptualise what the Defendant may give
away as matters already in the knowledge of the public

and in which there is nothing confidential. The list
of confidential matters enumerated in paragraph 17 of

the Plaint indeed shows what competitors in real estate
field would have knowledge of and what they would use

and require just as much as the Plaintiff would.
Information relating to strategic business plans,

product mix, square footage of construction, capital
expenditure or revenue budgets cannot be claimed to be

matters of any confidential nature which no other
competitor would know.

54. A similar case was considered by this Court in the
case of Star India Private Limited vs. Laxmiraj
Seetharam Nayak & anr., 2003 (3) Bom. C.R. 563. The

Plaintiff was in the business of acquiring copyright in
cinematographic films. Upon resignation of its
employee, the Plaintiff sought an order restraining him
inter alia from divulging the confidential information

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and trade secret and knowledge relating to the
Plaintiff s business including the Plaintiff s business

plans, strategies, marketing policies, franchisee
agreements, affiliates / joint ventures, etc. The

Plaintiff itemised the so-called trade secrets and
confidential information. It was observed that the

itemised list exhibited to the Plaint did not show any
trade secret or confidential information. All the
items were within the knowledge of the concerned

persons. Anyone in any employment for some period would
know certain facts which would come to his knowledge

without any special effort. It would be openly known
information as the rates of advertisement which were in

public domain and every businessman generally knows the
rates of his rivals. These were observed to be not

even open secrets . It was observed that mere use of
the word strategy, policy decisions or crucial

policies did not give them character of secrecy.
These items are well-known to the personal of the sales

department. They could be anticipated by a prudent and
clever businessman in the field.

55. In that case when the Court called upon the

Plaintiff s Counsel to illustrate even one item of the
trade secret which the Defendant had acquired during
the course of his employment, it was not illustrated on
the premise that it could not be revealed or disclosed.

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It was held that parties, contract rates and other
items and conditions could not be called trade secrets.

Every player in the field of his game knows the rules
of the game and the strategies of the rivals. Such

things could not be called trade secrets. At best they
could be called the human skills acquired by the

concerned persons in the field. Such skill could not
be called a proprietary right of the Plaintiff-Company.
The skill which was acquired by the 1st Defendant was

by his own virtue which he had developed with his
personality, with his inherent qualities and with his

hard work and experience. He had acquired the
refinement and polish over his skill by experience. He

was not paid the sumptuous remuneration on account of
his knowledge of some trade secrets or the confidential

information. Acquisition of excellence was a very long
process in the career of every one. No one else could

have proprietary rights or interest in such acquisition
of excellence. Such excellence could not be acquired

merely by possessing a trade secret of any one.

56. The striking illustration given by the Court was of a
salesman who left the Company much like a heart surgeon

who left the hospital. Neither of these could be
prevented from performing a surgery or negotiating with
the customers on the premise that they acquired the
skill by experience and those skills can be carried

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with the employee. It has been observed thus:-

He learns from the experience how to talk with
the different people differently and how to

canvas for the sale of the product successfully.
He knows the selling points of a particular
product by experience. He acquires good and
sweet tongue if he is a salesman dealing with

the female folks for the products required by
them. He learns the art of tackling the
illiterate people. He comes to know how to deal
with the old and aged people. He knows the
quality of his products. He knows the rates. He

might perhaps also be knowing the cost of the
products and the profit margin of the employer.

All these factors cannot be called trade
secrets. As disclosed by the 1st defendant in
his detailed affidavit on the basis of the

documentary evidence it cannot be said that the
advertising business of the plaintiff wholly
depended on any trade secret or confidential
information as repeatedly and rightly submitted

by Shri Sibal that the business of advertisement
depended on the popularity of the serial and the

programme time during which the serial was
displayed. There is no secret in such business
which can attract the shackles stipulated in
Clause 12 of the contract.

57. This would apply to the injunction sought by the
Plaintiff with regard to the enumeration in paragraph

17 of the Plaint which the Plaintiff, under the guise
of its confidentiality, seeks to prevent from being
disclosed to others.

58. However, the injunction with regard to the use of the

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software by keeping and understanding the manual is
quite another matter. This would fall within the

mischief of the common law relating to confidential
information as held in the case of BLB Institute of

Financial Markets Ltd. vs. Ramakar Jha, 2008 (4) Arb.
LR 12 (Delhi). The employee of the institution who had

himself developed business strategies for the Plaintiff
institution threatened to use it for his own purpose or
other authors. The Plaintiff acquired rights in what

was developed by its employee by virtue of granting its
employee a huge salary and perquisites which were from

time to time increased under the agreement with the
employee for not parting with information during the

period of his employment contract. During such period
itself the employee threatened and ultimately resigned

and was about to join the employment of another and
divulge the proprietary confidential information which

was by way of study materials and handouts of different
specialised course which the Plaintiff institution ran

as Post Graduate Diploma Courses. The negative
convenant in the employment contract was allowed to be
enforced under Section 27 of the Contract Act. The
service contract was held to be a contract of trust and

faith and the material resources and infrastructure, it
was held, cannot be allowed to be used by a rival
through the conduct of the employee divulging
confidential systems developed and used by the

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Plaintiff during the course of its employees service
agreement. It was held, placing reliance upon Zee

Telefilms Ltd. & anr. vs. Sundial Communications Pvt.
Ltd. & ors., 2003 (27) PTC 457 (Bom.) (DB) = 2003(5)

BCR 404 in which it was held at page 409 that the right
to restrain the publication of a work using

confidential information is a broader right than the
proprietary right of copyright, though the law of
confidence is different from the law of copyright. It

held that a breach of good faith in publishing an idea
or information acquired by a person in confidence could

be restrained by an injunction if it has not become
public knowledge otherwise.

Upon investment by the institute to the tune of more than

Rs.100 Lakhs in launching an individual curriculum, setting
up of the art infrastructure, it was held that though

stricto senso the Plaintiff did not have copyright,
divulging the Plaintiff s business to its rival would cause

it irreparable injury which could be prevented by an
injunction upon breach of the Plaintiff s confidence.

59. Taking a holistic view of the scenario that emerges

from a reading of all the aforesaid judgments spanning
the last half century of the common law of confidence
analogous to the contractual obligation of the
Defendant, the Plaintiff s case of injunction sought in

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respect of the manual of the Plaintiff s software and
in respect of the most of itemised intangible and

incorporeal rights would have been considered
differently.

60. The Plaintiff has a proprietary right in the manual

of customised software sent by the Defendant to the
officers of DD, however, remains at large. Even if DD
does not misuse that e-mail, the fact that the

Defendant had its custody, its future misuse cannot be
ruled out and rather can be anticipated given his past

conduct. The competitors using or developing their real
estate business plans and strategies identical to those

of the Plaintiff as reflected in the manual e-mailed by
the Defendant to them would cause damage to the

Plaintiff using such software assisted by the manual
provided by the Plaintiff. However, the case which the

Plaintiff disclosed in its business plans and
strategies or its product mix and its budgets cannot be

on par.

61. Though the Defendant has exhibited himself as a man
of No-Confidence, who has proved to be untrustworthy

and disloyal, the Plaintiff s case stretched to the
Plaintiff s decisions or plans with regard to the real
estate business, its expenditure or the decisions of
the extent of the construction are not matters which

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are even prima facie shown by the Plaintiff to be
copyable products as the Plaintiff s customised

software except, of course, documents such as the MOU
relating to the Goa Project of the Plaintiff shown

above which are sought to verbatim copied. Though the
Defendant who attended the Board meetings of the

Company from time to time, minutes of which are shown
to the Court, would have amassed the information and
knowledge with regard to the Plaintiff s plans of

operation, the Defendant cannot be injuncted from
disclosing those plans,
ig if any, to the competitor
except for what would cause injury or damage to the
Plaintiff by such disclosure alone, if he carried them

in his head . The competitors in the real estate,
which is a fiercely competitive market, cannot be taken

to be driven by the Defendant s disclosure alone.

62. Hence, the following order:-

ORDER

(i)The Defendant shall not, in any manner, divulge or
hand over the confidential information contained in the

manual of the software attached to the E-mail of the
Defendant dated 15.12.2007 as also the Memorandum of
Understanding attached to the Defendant s E-mail dated
21.2.2008 relating to the Goa property of the Plaintiff

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to any person or Company or any of the Plaintiff s
competitors or utilise the same for the Defendant s own

use in any manner whatsoever.

(ii) There shall be no order in respect of the
particulars of the information contained in paragraph

17 of the Plaint.

(iii) Prayer (b) is refused. However, the Plaintiff

shall be entitled to separately sue in respect of the
said prayer and apply for relief in that Suit.

(iv)The Notice of Motion is disposed of.

(v)No order as to costs.

The ad-interim order, if any, shall continue for 2

weeks.

(SMT.ROSHAN DALVI, J.)

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