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Bombay Dyeing And Manufacturing ...

vs Mehar Karan Singh on 24 August, 2010

Bench: R S Dalvi

1 nm-4248

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 2
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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

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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:-

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

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 6 nm-4248

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

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 9 nm-4248

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 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.

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14. This ambiguous, dilatory and mis-directed e- mail was replied by the Director O.K. It would 10 nm-4248

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 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 11 nm-4248

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 12 nm-4248

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. 13 nm-4248

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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 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 14 nm-4248

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, 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 15 nm-4248

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 16 nm-4248

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,
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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- 18 nm-4248

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 19
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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. 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.
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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 20 nm-4248

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 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 21 nm-4248

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 22 nm-4248

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


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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 23
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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 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 24 nm-4248

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.

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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 25 nm-4248

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 26 nm-4248

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. 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 28 nm-4248
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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 29 nm-4248

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. 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 30 nm-4248

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 31 nm-4248

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

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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 32 nm-4248

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.
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1996).

33 nm-4248

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 34 nm-4248

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
35 nm-4248

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:-
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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.

36 nm-4248

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 37 nm-4248

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 who was the
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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. 38 nm-4248

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 39 nm-4248

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 40 nm-4248

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
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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. 41 nm-4248

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 42
nm-4248

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 43 nm-4248

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
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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 44 nm-4248

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 45 nm-4248

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 46
nm-4248

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, if any, to the competitor except for what would cause injury or damage to the Plaintiff by such
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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
47 nm-4248

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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