Delhi High Court’s appellate judgment in Navigators Logistics Limited v Kashif Qureshi and Ors addressed copyright infringement, trade secrets and the enforceability of non-compete clauses in employment contracts. A single judge had rejected the appellant’s case under order VII, rule 11, of the Code of Civil Procedure, 1908 (CPC). The Division Bench overturned the dismissal, analysing in detail the claims and legal framework involved.
Navigators, a logistics and freight forwarding company, brought a number of allegations against its former employees, the first to eighth respondents, and others. The appellant claimed that the respondents had misappropriated confidential business data, including customer databases and trade secrets, and used them to benefit a competing company, respondent 12.
The appellant alleged that a forensic examination of returned company laptops revealed deleted data and incriminating Skype chats, pointing to a conspiracy by the respondents to divert the appellant’s business.
The single judge had dismissed the plaint on the grounds of vagueness, particularly in the claims of copyright infringement and confidentiality breaches. The appellant had failed to demonstrate a clear basis for copyright claims or to specify what constituted confidential information. The judge held that the non-compete clauses in the employees’ contracts were void under section 27 of the Indian Contract Act, 1872, which prohibits agreements in restraint of trade. Such clauses could not restrict employees from pursuing gainful employment after they left the company.
The appellate bench emphasised that an application under order VII, rule 11, required the court to examine the plaint as a whole and assume the facts stated in it were true. The judge had relied on extraneous evidence, including the local commissioners’ reports, something inappropriate at that stage of the proceedings. The bench found that the allegations of misuse of confidential information and business diversion, supported by forensic evidence and communications, merited further examination in a trial.
The bench carefully analysed the legal framework governing copyright and confidentiality. Although customer lists may not of themselves be entitled to copyright protection, they could still be protected as confidential information if they demonstrated significant commercial value and were developed using substantial effort and expertise. The court pointed to confidentiality agreements, although not codified, being enforceable under the common law principles of equity. This was particularly so when they were backed by clear and specific contractual clauses.
As to the non-compete clauses, the bench acknowledged that such clauses were generally void under section 27 of the 1872 act. However, it found that this did not automatically invalidate the entire plaint. The court held that certain reliefs, such as the return of proprietary data and damages for misappropriation, were unrelated to the enforceability of the non-compete clauses and required independent consideration.
The court adopted procedural principles, holding that under order VII, rule 11, plaints cannot be rejected in part. If any portion of the claims appeared viable, the entire plaint must proceed to trial. It found support in Sejal Glass Limited v Navilan Merchants Private Limited and Madhav Prasad Aggarwal v Axis Bank Limited, which held that partial rejection of a plaint is not permitted.
This judgment reflects a careful balancing of employee rights and employer interests. It highlights the importance of protecting trade secrets and confidential information in a competitive business environment while respecting statutory safeguards against the restraint of trade. It ensures disputes involving complex factual matrices and contractual principles are decided on their merits rather than being summarily dismissed at the threshold stage.
The court reinstated the plaint filed by Navigators Logistics and allowed the case to proceed to trial. This is an important precedent for cases involving trade secret protection, IP protection, employee contracts and the interpretation of CPC rules. By supporting a fair and thorough adjudication process, the judgment has contributed to the evolving jurisprudence of trade secrets and employment law in India.
Authors: Manisha Singh and Shivi Gupta
First Published by: IBLJ Here