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* IN THE HIGH COURT OF DELHI AT NEW DELHI

Date of Reserve:24th April, 2024
Date of Decision: 11th July, 2024
+ ARB.P. 1210/2023
LILY PACKERS PRIVATE LIMITED ..... Petitioner
Through: Mr. Anand Mishra, Mr. Sachin
Midha & Mr. Aditya Vikram Bajpai,
Advocates (M- 9910908594).
versus
VAISHNAVI VIJAY UMAK ..... Respondent
Through: Mr. Pravin Salunkhe and Mr. Ashish,
Advocates (M: 9423406815)
WITH
+ ARB.P. 1212/2023
LILY PACKERS PRIVATE LIMITED ..... Petitioner
Through: Mr. Anand Mishra, Mr. Sachin
Midha & Mr. Aditya Vikram Bajpai,
Advocates
versus
MEETKUMAR PATEL ..... Respondent
Through: None.
AND
+ ARB.P. 1213/2023
LILY PACKERS PRIVATE LIMITED ..... Petitioner
Through: Mr. Anand Mishra, Mr. Sachin
Midha & Mr. Aditya Vikram Bajpai,
Advocates
versus
RAHUL SHARMA ..... Respondent
Through: Mr. Anupam Kishore Sinha, Adv.

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Digitally Signed
By:DHIRENDER KUMAR
Signing Date:11.07.2024
19:05
 CORAM:
JUSTICE PRATHIBA M. SINGH

JUDGMENT
Prathiba M. Singh, J.
1. This hearing has been done through hybrid mode.
2. These three petitions raise an important issue concerning appointment
of an arbitrator under Section 11(6) of the Arbitration and Conciliation Act,
1996 (hereinafter, the ‘Act, 1996’) in employment contracts.
3. The two main questions that arise for consideration in these petitions
are:
i. Whether a lock-in period in employment contracts is valid in
law, or does it violate the fundamental rights enshrined in the
Constitution of India?
ii. Whether disputes relating to a lock-in period in employment
contracts are arbitrable in terms of the Act, 1996?
4. The parties in all the three petitions are set out in the following table:

Case Number Petitioner Respondents Agreement

ARB.P. Lily Packers Ms. Vaishnavi Service Employment

1210/2023 Private Vijay Umak Agreement
Limited (Executive) dated 16th
April, 2022

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Digitally Signed
By:DHIRENDER KUMAR
Signing Date:11.07.2024
19:05
 ARB.P. Lily Packers Mr. Meetkumar Service Employment
1212/2023 Private Patel Agreement
Limited (Executive) dated 30th
June, 2021

ARB.P. Lily Packers Mr. Rahul Service Employment

1213/2023 Private Sharma Agreement
Limited (Executive) dated 21st
March, 2022

The facts in each of the three petitions are as under:

ARB.P. 1210/2023
5. The present petition has been filed on behalf of the Petitioner-Lily
Packers Pvt. Ltd. under Section 11 (6) of the Act, 1996. The Petitioner vide
the present petition is seeking constitution of an Arbitral Tribunal in terms of
the Service Employment Agreement (Executive) dated 16th April, 2022
(hereinafter, ‘Agreement dated 16th April, 2022’).
6. In the present petition, the Petitioner claims to be a company, which is
engaged in the business of manufacturing and trading of corrugated
packaging, sourcing and outsourcing of materials by way of hiring and/or
contracting with third-parties to perform tasks, handle operations, or provide
services for various companies worldwide.
7. It is stated that the Petitioner on 16th April, 2022 employed the
Respondent- Ms. Vaishnavi Vijay Umak as a fashion designer in its division
called ‘De Belle’ (hereinafter, ‘division company’). Further, in this regard,
Agreement dated 16th April, 2022 was executed between the parties, wherein

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Digitally Signed
By:DHIRENDER KUMAR
Signing Date:11.07.2024
19:05
 scope of the employee’s services were defined.
8. In terms of the Agreement dated 16th April, 2022, there were various
conditions agreed upon by the parties including-salary and benefits, working
hours, other employment conditions, lock-in period, confidentiality clause,
data protection, etc.
9. Clause 5 of the Agreement dated 16th April, 2022 pertains to a lock-in
period vide which the Respondent employee agreed to serve the Petitioner
company for a period of 3 years from the date of joining. Clause 5 is
extracted hereinunder for ready reference:
“5. LOCK IN PERIOD. After successful
completion of probation period, the Employee will be
on lock in period for (2) three years with the company
from the date of the joining which cannot be
terminated by the Employee before completion of the
LOCK IN PERIOD, the Employee contract can be
terminated before the Lock in period at sole discretion
of the Company or may continue subject to his/her
satisfactory performance and conduct, the Company
may confirm his/her employment pursuant to expiry of
Lock in Period according to the terms of the
employment. During his/her Lock in Period or
extended period if any, the Employee's employment
shall be liable to be terminated by the Company
without any notice and without assigning any reason
thereof”

10. The Agreement dated 16th April, 2022 contains a negative covenant in
Clause 9, as per which, the Respondent employee has agreed to devote her
full time and energy to the Petitioner company during the course of her

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Digitally Signed
By:DHIRENDER KUMAR
Signing Date:11.07.2024
19:05
 employment. Clause 9 of the said agreement reads as under:
“9. OTHER EMPLOYMENT. During the terms of
his/her employment the Employee agrees to devote
his/her full time and energy to the duties assigned to
him/her. During the term of his/her employment, the
Employee will not work, directly or indirectly, for any
other person, firm, company or organisation, whether
with or without remuneration, or do any free lancing,
nor he/she will engage himself/herself or be interested,
directly or indirectly, in any trade or business either as
employer or Employee or partner or advisor or in any
other capacity. The Employee will not, directly or
indirectly, engage himself or his dependants in any
other employment or business (full time or part time)
without prior written approval of the Company.”

11. Clause 10 of the Agreement dated 16th April, 2022 sets out the general
terms which the Respondent employee has to comply with. It further
emphasizes that the Petitioner company attaches great importance to its
information and trade secrets, and the employee may be asked to disclose
information pertaining to the Petitioner company’s business activities only
under certain situations or if there are any local laws or regulatory
requirements. The relevant portion of Clause 10 of the Agreement dated 16th
April, 2022 is extracted herein for reference:
“10. COMPLIANCE. The Employee
agrees/understands that
(a) He will fully adhere /comply the rules, regulation,
and directions relating to the Employee including the
HR Policy of the Company.
(b) The Company attaches great importance to
company secrets, confidential information, security,

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Digitally Signed
By:DHIRENDER KUMAR
Signing Date:11.07.2024
19:05
 compliance and fair dealing procedures. He/ She may
be asked to disclose Information as deemed necessary
to Company with local regulatory requirements arising
from the Company's business activities (including the
records relating to the investment held by him/her and
his/her family members) or which are otherwise
consistent with the best practices of the Company.”

12. The Agreement dated 16th April, 2022 also contains a separate
confidentiality clause i.e. Clause 12, which defines the various kinds of
confidential information that the Petitioner company seeks to protect. As per
Clause 12.2 of the said agreement, the Respondent employee agrees to not
dissipate the confidential information of the Petitioner company. Clause 12.2
of the Agreement dated 16th April, 2022 is extracted hereinunder for a ready
reference:
“12.2 During course of the employment with the
Company, the Employee may learn or obtain
confidential and proprietary information or that may
be received by or for the Company in confidence.
Unless required to do so in the proper performance of
his/her duties, the Employee must:
(a) keep all confidential and proprietary
information in confidence; and
(b ) not divulge or communicate the same to any
person; and
(c) not use for his/her own purpose or for any
purposes other than those of the Company or,
(d) not cause any unauthorised disclosure,
directly or indirectly;

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Digitally Signed
By:DHIRENDER KUMAR
Signing Date:11.07.2024
19:05
 (e) use greater degree of care and caution so that
such confidential and proprietary information is not
published or disseminated to third party knowledge.”

13. In Clause 13 of the Agreement dated 16th April, 2022, Intellectual

Property of the Petitioner company is defined. The said clause, further
defines the obligations of the Respondent employee towards the Intellectual
Property of the Petitioner company. In Clause 14 of the said agreement,
certain obligations are placed on the Respondent employee towards
protection of data of the Petitioner Company.
14. Clause 16 of the Agreement dated 16th April, 2022 defines the
termination clause. As per Clause 16.1 of the said agreement, the Petitioner
company has the right to terminate the employment of the Respondent
employee by giving a 30 days’ notice in writing. Clause 16.1 of the
Agreement dated 16th April, 2022 is extracted hereinunder for reference:
“16.1 Termination with notice: Pursuant to
confirmation of the employment, the Company may
terminate Employee's employment by giving 30
[Thirty] days' notice in writing or salary in lieu of
notice. The Employee may also leave the employment
of the Company by tendering 180 [One Hundred
Eighty] days' notice or salary in lieu of notice. This
clause of 180 days shall only be valid after completion
of the Lock In period of 03 years mentioned in Clause
(5). During notice period the Company reserves its
right to direct the Employee to not to perform any of
his / her duties or to remain away from Company's
premises and/or not to contact clients or other

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Digitally Signed
By:DHIRENDER KUMAR
Signing Date:11.07.2024
19:05
 Employee of the Company for all or part of the notice
period.”

15. Clause 16.3 and Clause 16.4 of the Agreement dated 16th April, 2022
imposes certain obligations on the employee which read as under:
“16.3 Consequences of Termination: In the event the
Employee’s employment with the Company is
terminated, for any reason whatsoever,
(a) He / She will be liable enter into a full and
final settlement with the Company and complete the
requisite formalities in respect thereof,
(b) He / She must return all the Company's
property/confidential information/Intellectual Property
in her / her possession.
16.3 In the event of breach of any or all the covenants
of this Agreement, the Company, without prejudice to
any of the rights to initiate legal proceedings and is
entitled inter-alia to recover a compensation
equivalent to the damages, suffered by the Company in
addition to an amount equivalent to 6 month's total
emoluments calculated at the rate drawn at the time of
breach. The Company is further entitled to seek
permanent injunction in case of such breach. The
Company's decision as to what constitute breach and
the damages suffered shall be final and binding.
16.4 The Employee agrees that the work being
performed by him/her is or may be highly confidential
technical and gives him/her an in-depth exposure to
know how and confidential information of the
Company and the Employee will also be coming into
direct contact with the co- employees, clients,
associated of Company or of its sister/group concern.
In light of the same it has been willingly agreed by the
Employee that in the event of termination of his / her

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Digitally Signed
By:DHIRENDER KUMAR
Signing Date:11.07.2024
19:05
 employment for any reason whatsoever, he/ she will
not directly / indirectly establish or set up, maintain,
engage or participate in a Related or Competing
Business for period of 6 months after his / her
employment is ceased to exist with the Company. The
Employee acknowledges that the abovementioned
provisions are reasonable and are entered into for the
purposes of protecting the Confidentiality &the
goodwill of the Company.”

16. The Agreement dated 16th April, 2022 in Clause 17 provides for a
dispute resolution clause, as per which, disputes between the parties shall be
adjudicated through arbitration in terms of the Act, 1996. Clause 17 of the
Agreement dated 16th April, 2022 is extracted hereinunder:
“17. DISPUTE RESOLUTION In case of any dispute
or differences arising out of this agreement or any
communication, transaction or dealings with Lily
Packers Private Limited, its divisions or its
management the same shall be adjudicated through
arbitration. The sole arbitrator shall be appointed by
Lily Packers Private Limited. The arbitration
proceedings shall be governed by the provisions of the
Arbitration and Conciliation Act, 1996 or any statutory
modification or enactment thereof from time to time.
The seat and venue of arbitration shall be New Delhi,
India. The arbitration proceedings shall be undertaken
in English. The arbitration award shall be final and
binding upon the Parties. Subject to the
aforementioned, the courts at New Delhi alone shall
have the jurisdiction in relation to the disputes as
mentioned hereinbefore.
In case of any other communication in any form what
so ever initiated by the employee containing clauses

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Digitally Signed
By:DHIRENDER KUMAR
Signing Date:11.07.2024
19:05
 inconsistent with the aforementioned clause, it shall be
construed as nonest and would stand superseded by the
above-mentioned clause. The orbitration clause
mentioned herein above shall be final & binding unless
& until an express agreement to the contrary in writing
is executed or communicated by Lily Packers Private
Limited.”

17. The case of the Petitioner as stated in the petition is that the
Agreement dated 16th April, 2022 consists of a lock-in period in Clause 5,
vide which the Respondent employee is bound to serve the Petitioner
company for a period of 3 years from the date of joining. However, the
Respondent on 14th June, 2023 went on leave and never came back, thereby,
working only for a period of one year and two months as opposed to the
agreed lock-in period of 3 years.
18. As per the Petitioner, apart from the violation of Clause 5 of the
Agreement dated 16th April, 2022 there is an apprehension of violation of
Clause 12 i.e. the Confidentiality clause, Clause 13 i.e. the Intellectual
Property clause and Clause 14 i.e. Data Protection clause of the Agreement
dated 16th April, 2022 on behalf of the Respondent employee.
19. In view of the disputes that arose between the parties, the Petitioner on
21st June, 2023 issued a notice of demand and invocation of arbitration under
Section 21 of the Arbitration and Conciliation Act, 1996, in terms of Clause
17 of the Agreement dated 16th April, 2022. However, it is alleged by the
Petitioner that in reply to said notice dated 18th July, 2023 the Respondent
made false allegations and stated that she was subjected to harassment and

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Digitally Signed
By:DHIRENDER KUMAR
Signing Date:11.07.2024
19:05
 humiliation and that none of the allegations contained in the notice dated 21 st
June, 2023 are made out. In the said reply, the Respondent did not agree to
submit to arbitration as per the Act, 1996. Hence, the present petition,
seeking appointment of an Arbitral Tribunal under Section 11 of the Act,
1996.
ARB.P. 1212/2023
20. This petition has been filed on behalf of the Petitioner-Lily Packers
Pvt. Ltd. under Section 11 (6) of the Act, 1996. The Petitioner vide the
present petition is seeking constitution of an Arbitral Tribunal in terms of the
Service Employment Agreement (Executive) dated 30th June, 2021
(hereinafter, ‘Agreement dated 30th June, 2021’).
21. The Petitioner claims to be a company, which is engaged in the
business of manufacturing and trading of corrugated packaging, sourcing
and outsourcing of materials by way of hiring and/or contracting with third-
parties to perform tasks, handle operations, or provide services for various
companies worldwide.
22. It is stated that the Petitioner employed the Respondent- Mr.
Meetkumar Patel as an Autocad Design Engineer, vide the Agreement dated
30th June, 2021 wherein the scope of his services were defined.
23. Further, in terms of the said agreement, there were various conditions
agreed upon by the parties including-salary and benefits, working hours,
other employment conditions, lock-in period, confidentiality clause, data
protection, etc.
24. Clause 5 of the Agreement dated 30th June, 2021 pertains to a lock-in

Signature Not Verified ARB.P. 1210/2023 & connected matters Page 11 of 51

Digitally Signed
By:DHIRENDER KUMAR
Signing Date:11.07.2024
19:05
 period vide which the Respondent employee agreed to serve the Petitioner
company for a period of 3 years from the date of joining. Clause 5 is
extracted hereinunder for a ready reference:
“5. LOCK IN PERIOD. After successful
completion of probation period, the Employee will be
on lock in period for (3) three years with the company
from the date of the joining which cannot be
terminated by the Employee before completion of the
LOCK IN PERIOD, the Employee contract can be
terminated before the Lock in period at sole discretion
of the Company or may continue subject to his/her
satisfactory performance and conduct, the Company
may confirm his/her employment pursuant to expiry of
Lock in Period according to the terms of the
employment. During his/her Lock in Period or
extended period if any, the Employee's employment
shall be liable to be terminated by the Company
without any notice and without assigning any reason
thereof”
25. The Agreement dated 30th June, 2021 contains a negative covenant in
Clause 9, as per which, the Respondent employee has agreed to devote his
full time and energy to the Petitioner company during the course of his
employment. Clause 9 of the said agreement reads as under:
“9. OTHER EMPLOYMENT. During the terms of
his/her employment the Employee agrees to devote
his/her full time and energy to the duties assigned to
him/her. During the term of his/her employment, the
Employee will not work, directly or indirectly, for any
other person, firm, company or organisation, whether
with or without remuneration, or do any free lancing,
nor he/she will engage himself/herself or be interested,

Signature Not Verified ARB.P. 1210/2023 & connected matters Page 12 of 51

Digitally Signed
By:DHIRENDER KUMAR
Signing Date:11.07.2024
19:05
 directly or indirectly, in any trade or business either as
employer or Employee or partner or advisor or in any
other capacity. The Employee will not, directly or
indirectly, engage himself or his dependants in any
other employment or business (full time or part time)
without prior written approval of the Company.”

26. Clause 10 of the Agreement dated 30th June, 2021 sets out the general
terms which the Respondent employee has to comply with. It further
emphasizes that the Petitioner company attaches great importance to its
information and trade secrets, and the employee may be asked to disclose
information pertaining to the Petitioner company’s business activities only
under certain situations or if there are any local laws or regulatory
requirements. The relevant portion of Clause 10 of the Agreement dated 30th
June, 2021 is extracted herein for reference:
“10. COMPLIANCE. The Employee
agrees/understands that
(a) He will fully adhere /comply the rules, regulation,
and directions relating to the Employee including the
HR Policy of the Company.
(b) The Company attaches great importance to
company secrets, confidential information, security,
compliance and fair dealing procedures. He/ She may
be asked to disclose Information as deemed necessary
to Company with local regulatory requirements arising
from the Company's business activities (including the
records relating to the investment held by him/her and
his/her family members) or which are otherwise
consistent with the best practices of the Company.”

Signature Not Verified ARB.P. 1210/2023 & connected matters Page 13 of 51

Digitally Signed
By:DHIRENDER KUMAR
Signing Date:11.07.2024
19:05
 27. The Agreement dated 30th June, 2021 also contains a separate
confidentiality clause i.e. Clause 12, which defines the various kinds of
confidential information that the Petitioner company seeks to protect. As per
Clause 12.2 of the said agreement, the Respondent employee agrees to not
dissipate the confidential information of the Petitioner company. Clause 12.2
of the Agreement dated 30th June, 2021 is extracted hereinunder for a ready
reference:
“12.2 During course of the employment with the
Company, the Employee may learn or obtain
confidential and proprietary information or that may
be received by or for the Company in confidence.
Unless required to do so in the proper performance of
his/her duties, the Employee must:
(a) keep all confidential and proprietary
information in confidence; and
(b ) not divulge or communicate the same to any
person; and
(c) not use for his/her own purpose or for any
purposes other than those of the Company or,
(d) not cause any unauthorised disclosure,
directly or indirectly;
(e) use greater degree of care and caution so that
such confidential and proprietary information is not
published or disseminated to third party knowledge.”

28. In Clause 13 of the Agreement dated 30th June, 2021, Intellectual

Property of the Petitioner company is defined. The said clause, further
defines the obligations of the Respondent employee towards the Intellectual
Property of the Petitioner company. In Clause 14 of the said agreement,

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Digitally Signed
By:DHIRENDER KUMAR
Signing Date:11.07.2024
19:05
 certain obligations are placed on the Respondent employee towards
protection of data of the Petitioner Company.
29. Clause 16 of the Agreement dated 30th June, 2021 defines the
termination clause. As per Clause 16.1 of the said agreement, the Petitioner
company has the right to terminate the employment of the Respondent
employee by giving a 30 days’ notice in writing. Clause 16.1 of the
Agreement dated 30th June, 2021 is extracted hereinunder for reference:
“16.1 Termination with notice: Pursuant to
confirmation of the employment, the Company may
terminate Employee's employment by giving 30
[Thirty] days' notice in writing or salary in lieu of
notice. The Employee may also leave the employment
of the Company by tendering 180 [One Hundred
Eighty] days' notice or salary in lieu of notice. This
clause of 180 days shall only be valid after completion
of the Lock In period of 03 years mentioned in Clause
(5). During notice period the Company reserves its
right to direct the Employee to not to perform any of
his / her duties or to remain away from Company's
premises and/or not to contact clients or other
Employee of the Company for all or part of the notice
period.”

30. Clause 16.3 and Clause 16.4 of the Agreement dated 30th June, 2021
imposes certain obligations on the employee which read as under:
“16.3 Consequences of Termination: In the event the
Employee’s employment with the Company is
terminated, for any reason whatsoever,
(a) He / She will be liable enter into a full and
final settlement with the Company and complete the
requisite formalities in respect thereof,

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Digitally Signed
By:DHIRENDER KUMAR
Signing Date:11.07.2024
19:05
 (b) He / She must return all the Company's
property/confidential information/Intellectual Property
in her / her possession.
16.3 In the event of breach of any or all the covenants
of this Agreement, the Company, without prejudice to
any of the rights to initiate legal proceedings and is
entitled inter-alia to recover a compensation
equivalent to the damages, suffered by the Company in
addition to an amount equivalent to 6 month's total
emoluments calculated at the rate drawn at the time of
breach. The Company is further entitled to seek
permanent injunction in case of such breach. The
Company's decision as to what constitute breach and
the damages suffered shall be final and binding.
16.4 The Employee agrees that the work being
performed by him/her is or may be highly confidential
technical and gives him/her an in-depth exposure to
know how and confidential information of the
Company and the Employee will also be coming into
direct contact with the co- employees, clients,
associated of Company or of its sister/group concern.
In light of the same it has been willingly agreed by the
Employee that in the event of termination of his / her
employment for any reason whatsoever, he/ she will
not directly / indirectly establish or set up, maintain,
engage or participate in a Related or Competing
Business for period of 6 months after his / her
employment is ceased to exist with the Company. The
Employee acknowledges that the abovementioned
provisions are reasonable and are entered into for the
purposes of protecting the Confidentiality &the
goodwill of the Company.”
31. The Agreement dated 30th June, 2021 in its Clause 17 provides for a
dispute resolution clause, as per which, the disputes arisen between the

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Digitally Signed
By:DHIRENDER KUMAR
Signing Date:11.07.2024
19:05
 parties shall be adjudicated through arbitration in terms of the Act, 1996.
Clause 17 of the Agreement dated 30th June, 2021 is extracted hereinunder:
“17. DISPUTE RESOLUTION In case of any dispute
or differences arising out of this agreement or any
communication, transaction or dealings with Lily
Packers Private Limited, its divisions or its
management the same shall be adjudicated through
arbitration. The sole arbitrator shall be appointed by
Lily Packers Private Limited. The arbitration
proceedings shall be governed by the provisions of the
Arbitration and Conciliation Act, 1996 or any statutory
modification or enactment thereof from time to time.
The seat and venue of arbitration shall be New Delhi,
India. The arbitration proceedings shall be undertaken
in English. The arbitration award shall be final and
binding upon the Parties. Subject to the
aforementioned, the courts at New Delhi alone shall
have the jurisdiction in relation to the disputes as
mentioned hereinbefore.
In case of any other communication in any form what
so ever initiated by the employee containing clauses
inconsistent with the aforementioned clause, it shall be
construed as nonest and would stand superseded by the
above-mentioned clause. The arbitration clause
mentioned herein above shall be final & binding unless
& until an express agreement to the contrary in writing
is executed or communicated by Lily Packers Private
Limited.”

32. The case of the Petitioner as stated in this petition is that the
Agreement dated 30th June, 2021 consists of a lock-in period in Clause 5,
vide which the Respondent employee was to serve the Petitioner company
for a period of 3 years from the date of joining i.e., till 1st July, 2024.

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Digitally Signed
By:DHIRENDER KUMAR
Signing Date:11.07.2024
19:05
 However, the Respondent on 17th December, 2022 tendered his resignation
vide an email, stating that his last working day shall be on 13 th January, 2023
thereby working for a period of approximately 1 year and 6 months. This is
stated to be contrary to Clause 5 of the Agreement dated 30th June, 2021 and
hence, the claim of the Petitioner that the Respondent employee is in breach
of the Agreement dated 30th June, 2021.
33. The Petitioner further apprehends that there is a violation of Clause 12
i.e. the Confidentiality clause, Clause 13 i.e. the Intellectual Property clause
and Clause 14 i.e. Data Protection clause of the Agreement dated 30 th June,
2021 on behalf of the Respondent employee.
34. In view of the disputes arisen between the parties, the Petitioner on
26th May, 2023 issued a notice of demand and invocation of arbitration
under Section 21 of the Act, 1996 in terms of Clause 17 of the Agreement
dated 30th June, 2021. However, there was no reply to the said notice on
behalf of the Respondent. Hence, the present petition.
ARB.P. 1213/2023
35. This petition has been filed on behalf of the Petitioner-Lily Packers
Pvt. Ltd. under Section 11 (6) of the Act, 1996. The Petitioner vide the
present petition is seeking constitution of an Arbitral Tribunal in terms of the
Service Employment Agreement (Executive) dated 21st March, 2022
(hereinafter, ‘Agreement dated 21st March, 2022’).
36. In the present petition, the Petitioner claims to be a company, which is
engaged in the business of manufacturing and trading of corrugated
packaging, sourcing and outsourcing of materials by way of hiring and/or

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Digitally Signed
By:DHIRENDER KUMAR
Signing Date:11.07.2024
19:05
 contracting with third-parties to perform tasks, handle operations, or provide
services for various companies worldwide.
37. It is stated that the Petitioner company employed the Respondent- Mr.
Rahul Sharma as a General Supply Chain Manager, vide the Agreement
dated 21st March, 2022 and the scope of his services were defined.
38. Further, in terms of the said agreement, there were various conditions
agreed upon by the parties including-salary and benefits, working hours,
other employment conditions, lock-in period, confidentiality clause, data
protection, etc.
39. Clause 5 of the Agreement dated 21st March, 2022 pertains to a lock-
in period vide which the Respondent employee agreed to serve the Petitioner
company for a period of 3 years from the date of joining. Clause 5 is
extracted hereinunder for a ready reference:
“5. LOCK IN PERIOD. After successful
completion of probation period, the Employee will be
on lock in period for (3) three years with the company
from the date of the joining which cannot be
terminated by the Employee before completion of the
LOCK IN PERIOD, the Employee contract can be
terminated before the Lock in period at sole discretion
of the Company or may continue subject to his/her
satisfactory performance and conduct, the Company
may confirm his/her employment pursuant to expiry of
Lock in Period according to the terms of the
employment. During his/her Lock in Period or
extended period if any, the Employee's employment
shall be liable to be terminated by the Company
without any notice and without assigning any reason
thereof”

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 40. The Agreement dated 21st March, 2022 contains a negative covenant
in Clause 9, as per which, the Respondent employee has agreed to devote his
full time and energy to the Petitioner company during the course of his
employment. Clause 9 of the said agreement reads as under:
“9. OTHER EMPLOYMENT. During the terms of
his/her employment the Employee agrees to devote
his/her full time and energy to the duties assigned to
him/her. During the term of his/her employment, the
Employee will not work, directly or indirectly, for any
other person, firm, company or organisation, whether
with or without remuneration, or do any free lancing,
nor he/she will engage himself/herself or be interested,
directly or indirectly, in any trade or business either as
employer or Employee or partner or advisor or in any
other capacity. The Employee will not, directly or
indirectly, engage himself or his dependants in any
other employment or business (full time or part time)
without prior written approval of the Company.”

41. Clause 10 of the Agreement dated 21st March, 2022 sets out the
general terms which the Respondent employee has to comply with. It further
emphasizes that the Petitioner company attaches great importance to its
information and trade secrets, and the employee may be asked to disclose
information pertaining to the Petitioner company’s business activities only
under certain situations or if there are any local laws or regulatory
requirements. The relevant portion of Clause 10 of the Agreement dated 21st
March, 2022 is extracted herein for reference:

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 “10. COMPLIANCE. The Employee
agrees/understands that
(a) He will fully adhere /comply the rules, regulation,
and directions relating to the Employee including the
HR Policy of the Company.
(b) The Company attaches great importance to
company secrets, confidential information, security,
compliance and fair dealing procedures. He/ She may
be asked to disclose Information as deemed necessary
to Company with local regulatory requirements arising
from the Company's business activities (including the
records relating to the investment held by him/her and
his/her family members) or which are otherwise
consistent with the best practices of the Company.”

42. The Agreement dated 21st March, 2022 also contains a separate
confidentiality clause i.e. Clause 12, which defines the various kinds of
confidential information that the Petitioner company seeks to protect. As per
Clause 12.3 of the said agreement, the Respondent employee agrees to not
dissipate the confidential information of the Petitioner company. The
relevant portion of Clause 12 of the Agreement dated 21 st March, 2022 is
extracted hereinunder for a ready reference:
“12. CONFIDENTIALITY.

12.1 For all intents and purposes, the Employee

shall be construed to be a Receiving Party and Lily
Packers Private Limited shall be construed to be a
Disclosing Party. Since the nature of employment and
work tasks to be entrusted to the Employee would
necessarily involve the sharing of confidential and
proprietary information of Lily Packers Private
Limited (Disclosing Party) in written, oral and/or

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 physical/sample form (collectively "Confidential
Information").
12.3. During course of the employment with the
Company, the Employee may learn or obtain
confidential and proprietary information or that may
be received by or for the Company in confidence.
Unless required to do so in the proper performance of
his/her duties, the Employee must:
(a) keep all confidential and proprietary
information in confidence; and
(b) not divulge or communicate the same to any
person; and
(c) not use for his/her own purpose or for any
purposes other than those of the Company or,
(d) not cause any unauthorised disclosure,
directly or indirectly;
(e) use greater degree of care and caution so that
such confidential and proprietary information is not
published or disseminated to third party knowledge. By
the use of such degree of care, the Receiving Party
agrees not to in any way disclose, copy, reproduce,
modify, use (except as permitted under this Agreement),
or otherwise transfer the Confidential Information to
any other person or entity without obtaining prior
written consent from the Disclosing Party.
(f) The Receiving Party shall not reverse engineer,
disassemble or decompile any prototypes, software or
other tangible objects which embody the Confidential
Information and which are provided during the
employment.
(g) Further the Receiving Party & Disclosing
Party, at the request, return all originals, copies,
reproductions and summaries of Confidential
Information and all other tangible materials and

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 devices provided and at its option certify destruction of
the same.
(h) The Employee undertakes and agrees not to
directly supply the goods in any circumstances to the
end user or provide the pricing information to anyone.
Even if permissions have been provided to the
Employee to come in contact with the end user directly,
the same would not entitle the Employee to establish
any direct negotiations with the end User.”

43. In Clause 13 of the Agreement dated 21st March, 2022, Intellectual

Property of the Petitioner company is defined. The said clause, further
defines the obligations of the Respondent employee towards the Intellectual
Property of the Petitioner company. In Clause 14 of the said agreement,
certain obligations are placed on the Respondent employee towards
protection of data of the Petitioner Company.
44. Clause 16 of the Agreement dated 30th June, 2021 defines the
termination clause. As per Clause 16.1 of the said agreement, the Petitioner
company has the right to terminate the employment of the Respondent
employee by giving a 30 days’ notice in writing. Clause 16.1 of the
Agreement dated 21st March, 2022 is extracted hereinunder for reference:
“16.1 Termination with notice: Pursuant to
confirmation of the employment, the Company may
terminate Employee's employment by giving 30
[Thirty] days' notice in writing or salary in lieu of
notice. The Employee may also leave the employment
of the Company by tendering 180 [One Hundred
Eighty] days' notice or salary in lieu of notice. This
clause of 180 days shall only be valid after completion
of the Lock In period of 03 years mentioned in Clause

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 (5). During notice period the Company reserves its
right to direct the Employee to not to perform any of
his / her duties or to remain away from Company's
premises and/or not to contact clients or other
Employee of the Company for all or part of the notice
period.”

45. Clause 16.3 and Clause 16.4 of the Agreement dated 21st March, 2022
imposes certain obligations on the employee which read as under:
“16.3 Consequences of Termination: In the event the
Employee’s employment with the Company is
terminated, for any reason whatsoever,
(a) He / She will be liable enter into a full and
final settlement with the Company and complete the
requisite formalities in respect thereof,
(b) He / She must return all the Company's
property/confidential information/Intellectual Property
in her / her possession.
16.3 In the event of breach of any or all the covenants
of this Agreement, the Company, without prejudice to
any of the rights to initiate legal proceedings and is
entitled inter-alia to recover a compensation
equivalent to the damages, suffered by the Company in
addition to an amount equivalent to 6 month's total
emoluments calculated at the rate drawn at the time of
breach. The Company is further entitled to seek
permanent injunction in case of such breach. The
Company's decision as to what constitute breach and
the damages suffered shall be final and binding.
16.4 The Employee agrees that the work being
performed by him/her is or may be highly confidential
technical and gives him/her an in-depth exposure to
know how and confidential information of the
Company and the Employee will also be coming into

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 direct contact with the co- employees, clients,
associated of Company or of its sister/group concern.
In light of the same it has been willingly agreed by the
Employee that in the event of termination of his / her
employment for any reason whatsoever, he/ she will
not directly / indirectly establish or set up, maintain,
engage or participate in a Related or Competing
Business for period of 6 months after his / her
employment is ceased to exist with the Company. The
Employee acknowledges that the abovementioned
provisions are reasonable and are entered into for the
purposes of protecting the Confidentiality &the
goodwill of the Company.”

46. The Agreement dated 21st March, 2022 in its Clause 17 provides for a
dispute resolution clause, as per which, the disputes arisen between the
parties shall be adjudicated through arbitration in terms of the Act, 1996.
Clause 17 of the Agreement dated 21st March, 2022 is extracted hereinunder:
“17. DISPUTE RESOLUTION In case of any dispute
or differences arising out of this agreement or any
communication, transaction or dealings with Lily
Packers Private Limited, its divisions or its
management the same shall be adjudicated through
arbitration. The sole arbitrator shall be appointed by
Lily Packers Private Limited. The arbitration
proceedings shall be governed by the provisions of the
Arbitration and Conciliation Act, 1996 or any statutory
modification or enactment thereof from time to time.
The seat and venue of arbitration shall be New Delhi,
India. The arbitration proceedings shall be undertaken
in English. The arbitration award shall be final and
binding upon the Parties. Subject to the
aforementioned, the courts at New Delhi alone shall

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 have the jurisdiction in relation to the disputes as
mentioned hereinbefore.
In case of any other communication in any form what
so ever initiated by the employee containing clauses
inconsistent with the aforementioned clause, it shall be
construed as nonest and would stand superseded by the
above-mentioned clause. The arbitration clause
mentioned herein above shall be final & binding unless
& until an express agreement to the contrary in writing
is executed or communicated by Lily Packers Private
Limited.”

47. The case of the Petitioner as stated in this petition is that the
Agreement dated 21st March, 2022 consists of a lock-in period, vide which
the Respondent employee was to serve the Petitioner company for a period
of 3 years from the date of joining i.e. till 21st March, 2025. However, the
Respondent vide an email dated 15th May, 2022 resigned without giving any
notice period, thereby breaching the Agreement dated 21st March, 2022. In
the said resignation email, the Respondent employee stated that his mental
health is deteriorating due to stress caused from work.
48. It is stated that due to unauthorized absence of the Respondent
employee as also the overall conduct of the Respondent, which included,
irregular attendance in office, miscommunication of information to the
employees of the Petitioner, etc. the Petititioner issued a legal notice in May,
2022. However, instead of a written reply, the Respondent employee
responded to the said legal notice via a call to the management stating that
he is not in the right mental framework to continue with the position.

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 49. The Petitioner alleges that the statement made by the Respondent
employee in the said call stating that he is not in the right mental framework
to continue with employment is false and merely an attempt by the
Respondent to avoid legal action. The Petitioner further states that the
Respondent has already been employed in a different organization.
50. It is also the case of the Petitioner that apart from the violation of
Clause 5 of the Agreement dated 21st March, 2022, there is an apprehension
of violation of Clause 12 i.e. the Confidentiality clause, Clause 13 i.e. the
Intellectual Property clause and Clause 14 i.e. Data Protection clause of the
Agreement dated 21st March, 2022, on behalf of the Respondent.
51. In view of the disputes arisen between the parties, it is stated that the
Petitioner on 26th May, 2023 and further on 13th July, 2023 issued a notice of
demand and invocation of arbitration under Section 21 of the Arbitration and
Conciliation Act, 1996. However, as per the Petitioner, the notice dated 26th
May, 2023 was returned due to it being unclaimed. The notice dated 13 th
July, 2023 is stated to have been duly served to the Respondent but no reply
to the said notice has been received by the Petitioner. Hence, the present
petition seeking appointment of an Arbitral Tribunal to adjudicate the
disputes that have arisen between the parties.
Submissions:
52. Mr. Anand Mishra, ld. Counsel appearing on behalf of the Petitioner,
Lily Packers Private Limited submits that disputes in the present petitions
arise out of the Respondent employees not abiding the respective Service
Employment Agreements (Executive) entered into by them and the

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 Petitioner. Further, the Petitioner has made enormous investments in training
the respective Respondents during their employment and thus, the lock-in
period as mentioned in the agreements entered into between the parties,
ought to have been honoured. The ld. Counsel further submits that the
respective Service Employment Agreement (Executive) entered into
between the parties contain a dispute resolution clause, as per which, any
dispute that arises between the parties with respect to the said agreements,
ought to have been referred to arbitration.
53. On the other hand, Mr. Pravin Salunkhe, ld. Counsel appearing on
behalf of the Respondent, Ms. Vaishnavi Vijay Umak in ARB. P. 1212/2023
submits that the Respondent herein is not an employee of the Petitioner
company but of its division called De Belle. Hence, there is no privity of
contract between the Petitioner and the Respondent herein.
54. The ld. Counsel, Mr. Anupam Sinha appearing on behalf of the
Respondent-Mr. Rahul Sharma in ARB.P. 1213/2023, submits that disputes
raised in the present cases are not arbitrable as per the Act, 1996. The ld.
Counsel states that Clause 5 of the Agreement dated 21st March, 2022
provides for a lock-in period as per which the Respondent employee is
bound to serve the Petitioner company for a period of 3 years from the date
of joining. The said clause, as per the ld. Counsel, would be contrary to law
and in violation of the fundamental rights of life and employment of the
Respondent employee, as provided in Article 19 and 21 of the Constitution
of India.

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 55. Mr. Anupam Sinha, ld. Counsel further submits that disputes
involving violation of fundamental rights are not arbitrable and hence the
present dispute is not liable to be adjudicated by an Arbitral Tribunal. To
substantiate this position, the ld. Counsel relies upon the decision of the
Supreme Court in Lombardi Engineering Limited v. Uttarakhand Jal
Vidyut Nigam Limited [(2023) SCC OnLine SC 1422] wherein the
question-whether a clause in an agreed upon arbitration agreement
stipulating pre-deposit for going to arbitration under the Act, 1996 is
violative of Article 14 of the Constitution of India, was decided. The
Supreme Court in this judgment held that there can be no consent against the
law. Further, while holding the arbitration clause therein to be violative of
Article 14 of the Constitution of India, the Supreme Court observed that
there cannot be an agreement to waive the fundamental rights as provided in
the Constitution of India.
56. Mr. Anupam Sinha also places reliance upon the decision of the
Supreme Court in Kaushal Kishore v. State of Uttar Pradesh & Ors.,
[(2023) 4 SCC 1] to argue that fundamental rights under Article 19 and 21 of
the Constitution of India can even be enforced against persons other than the
state or its instrumentalities. Thus, in the present cases, the fundamental
rights of the Respondent employees as provided in the Constitution of India
can be enforced against the Petitioner company.
57. Thereafter, ld. Counsel, Mr. Anupam Sinha raised an issue with regard
to the notice of demand and invocation of arbitration under Section 21 of the
Act, 1996 sent to the Respondent employee on 13th July, 2023 in ARB. P.

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 1213/2023. The ld. Counsel submits that the Petitioner in the said notice has
demanded Rs. 50,00,000/- as opposed to the amount of Rs. 10,00,000/-
prayed by the Petitioner in the petition.
58. On the said issue raised, Ld. Counsel for the Petitioner, Mr. Pravin
Salunkhe submits that, in both petitions being ARB. P. 1210/2023 and
ARB.P. 1213/2023, the amount claimed by the Petitioner is to the tune of Rs.
10,00,000/-. However, in ARB.P. 1212/2023, the Petitioner claims an
amount of Rs. 50,00,000/- from the Respondent employee.
Analysis and Conclusions
59. The present petitions seek constitution of an Arbitral Tribunal under
Section 11 (6) of the Act, 1996. The said provision is set out below for a
ready reference:
“11. Appointment of arbitrators. —
(6) Where, under an appointment procedure
agreed upon by the parties, —
(a) a party fails to act as required under that
procedure; or
(b) the parties, or the two appointed arbitrators,
fail to reach an agreement expected of them under that
procedure; or
(c) a person, including an institution, fails to perform
any function entrusted to him or it under that
procedure,
a party may request [the Supreme Court or, as the case
may be, the High Court or any person or institution
designated by such Court]to take the necessary
measure, unless the agreement on the appointment
procedure provides other means for securing the
appointment.

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 [(6A) The Supreme Court or, as the case may be, the
High Court, while considering any application under sub-
section (4) or sub-section (5) or sub-section (6), shall,
notwithstanding any judgment, decree or order of any
Court, confine to the examination of the existence of an
arbitration agreement.
(6B) The designation of any person or institution by
the Supreme Court or, as the case may be, the High Court,
for the purposes of this section shall not be regarded as a
delegation of judicial power by the Supreme Court or the
High Court.]

60. The dispute in the present petitions arises with respect to Clause 5 of
the Service Employment Agreements (Executive) dated 30th June, 2021, 21st
March, 2022 and 16th April, 2022. The said clause provides for a lock-in
period, as per which, the Respondent employees are restrained from leaving
the Petitioner company for 3 years from the date of joining the Petitioner
company.
61. The Respondents in the present petitions are employees of the
Petitioner company who resigned pre maturely i.e., before the completion of
3 years from the date of joining, as provided in Clause 5 of the aforesaid
agreements.
62. The Petitioner, then issued notices invoking arbitration under Section
21 of the Act, 1996. The arbitration clause is contained in Clause 17 of the
said Service Employment Agreements (Executive). However, the
Respondent employees did not agree for the disputes to be referred to
arbitration. Hence, the present petitions.

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 63. The fundamental submission of Mr. Anupama Sinha, ld. Counsel for
the Respondent is that the disputes raised in the present petitions are not
arbitrable. The ld. Counsel submits that Clause 5 of the said agreements is
violative of Article 19 of the Constitution of India as also Section 27 of the
Indian Contract Act, 1872.
64. The law relating to covenants in employment contracts has been
discussed in detail in various judicial decisions for over a century. As early
as 1885, in The Brahmaputra Tea Co. Ltd. v. Scarth
(MANU/WB/0175/1885) the Civil Appellate Court in Calcutta was
considering the question as to whether it would be lawful to bind an
employee to the exclusive employment of the employer for a particular term.
The employment contract existing in this case provided for a covenant, as
per which, the employee was bound to serve the employer exclusively for a
particular term and if he leaves the company before the end of his term, he
will have to pay liquidated damages. Further there was a restraint on the
employee, post termination of his employment, from engaging himself in
cultivation of tea for a period of 5 years. The trial court held that both the
said covenants were in the teeth of Section 27 of the Indian Contract Act,
1872 and is void, however, some damages were awarded. The Court of
Appeal considered the said trial court decision and held that the covenant
restraining the employee from engaging in the cultivation of tea for a period
of five years from the date of termination of the agreement is void. However,
the Court held that the covenant which bound the employee to serve the

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 employer exclusively for a particular term, during the term of the agreement
is valid. The relevant portion of the judgment is hereinunder:
“ An agreement of service by which a person binds
himself during the term of the agreement not to take
service with any one else, or directly or indirectly take
part in, promote or aid any business in direct
competition with that of his employer, is, we think,
different. An agreement to serve a person exclusively
for a definite term is a lawful agreement, and it is
difficult to see how that can be unlawful which is
essential to its fulfilment, and to the due protection of
the interests of the employer, while the agreement is in
force. It is unnecessary to consider all the conditions in
the 10th clause. It is sufficient to say that we are not
disposed to agree with the Judge that it is wholly
void.”

The Court, thereafter, proceeded to enhance the damages to from Rs. 900/-
to Rs.2000/-.
65. The covenants in an employment contract similar to the one
considered in Brahmaputra Tea Co. Ltd. v. Scarth (supra) were again
considered by the Supreme Court in Niranjan Shankar Golikari v. Century
Spinning And Manufacturing Co. [(1967) SCC OnLine SC]. In this case,
the covenants operating in the employment contract bound the employee to
serve the employer exclusively for a particular term. However, a negative
covenant to the effect that the said employee was not to engage himself in
similar trade as was carried by the employer, post the expiry of his
employment term was also considered. The Supreme Court while deciding
on the issues raised therein, drew a distinction between the negative

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 covenants that operate during the term of the employee’s contract and the
negative covenants that operate on the employee, post termination of the
employment contract. The Supreme Court held that negative covenants
operating during the period of the contract of employment wherein the
employee is bound to serve the employer exclusively are generally not
contrary to law. The relevant portion of the judgment is extracted
hereinunder:
“14. A similar distinction has also been drawn by
courts in India and a restraint by which a person binds
himself during the term of his agreement directly or
indirectly not to take service with any other employer
or be engaged by a third party has been held not to be
void and not against Section 27 of the Contract Act.
In Brahmaputra Tea Co. Ltd. v. Scarth [ILR (XI) Cal
545] the condition under which the covenantee was
partially restrained from competing after the term of
his engagement was over with his former employer was
held to be bad but the condition by which he bound
himself during the term of his agreement, not, directly
or indirectly, to compete with his employer was held
good. At p. 550 of the report the court observed that an
agreement of service by which a person binds himself
during the term of the agreement not to take service
with any one else, or directly or indirectly take part in,
promote or aid any business in direct competition with
that of his employer was not hit by Section 27. The
Court observed:
“An agreement to serve a person exclusively
for a definite term is a lawful agreement, and it
is difficult to see how that can be unlawful which
is essential to its fulfilment, and to the due

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 protection of the interests of the employer, while
the agreement is in force.”
[See also Pragji v. Pranjiwan [5 Bom LR 872]
and Lalbhai Dalpatbhai & Co. v. Chittaranjan
Chandulal Pandya [AIR 1966 Guj 189] ].
In Deshpande v. Arbind Mills Co. [48 Bom LR 90] an
agreement of service contained both a positive
covenant viz. that the employee shall devote his whole-
time attention to the service of the employers and also
a negative covenant preventing the employee from
working elsewhere during the term of the agreement.
Relying on Pragji V. Pranjiwan
Charlesworth v. MacDonald [ILR 23 Bom 103]
, Madras Railway Company v. Rust [ILR 14 Mad 18]
, Subba Naidu v. Haji Badsha Sahib [ILR 26 Mad 168]
and Burn & Co. v. MacDonald [ILR 36 Cal 354] as
instances where such a negative covenant was
enforced, the learned Judges observed that
Illustrations (c) and (d) to Section 57 of the Specific
Relief Act in terms recognised such contracts and the
existence of negative covenants therein and that
therefore the contention that the existence of such a
negative covenant in a service agreement made the
agreement void on the ground that it was in restraint of
trade and contrary to Section 27 of the Contract Act
had no validity.
xxx
17. The result of the above discussion is that
considerations against restrictive covenants are
different in cases where the restriction is to apply
during the period after the termination of the contract
than those in cases where it is to operate during the
period of the contract. Negative covenants operative
during the period of the contract of employment when
the employee is bound to serve his employer

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 exclusively are generally not regarded as restraint of
trade and therefore do not fall under Section 27 of
the Contract Act. A negative covenant that the
employee would not engage himself in a trade or
business or would not get himself employed by any
other master for whom he would perform similar or
substantially similar duties is not therefore a restraint
of trade unless the contract as aforesaid is
unconscionable or excessively harsh or unreasonable
or one-sided as in the case of W.H. Milsted & Son
Ltd. Both the trial court and the High Court have
found, and in our view, rightly, that the negative
covenant in the present case restricted as it is to the
period of employment and to work similar or
substantially similar to the one carried on by the
appellant when he was in the employ of the respondent
Company was reasonable and necessary for the
protection of the company's interests and not such as
the court would refuse to enforce. There is therefore no
validity in the contention that the negative covenant
contained in clause 17 amounted to a restraint of trade
and therefore against public policy.”

66. In Niranjan Shankar (supra), the Supreme Court proceeded to even

grant an injunction restraining the employee from disclosing or divulging
any confidential information.
67. This position was reiterated in Percept D’ Mark (India) (P) Ltd. v.
Zaheer Khan & Anr. [(2006) 4 SCC 227] wherein the Supreme Court while
deciding on the legal position with regard to covenants in contracts,
distinguished between the covenants that apply during the subsistence of the
contract and post termination of the contract. The Supreme Court observed:

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 “63. Under Section 27 of the Contract Act: (a) a
restrictive covenant extending beyond the term of the
contract is void and not enforceable, (b) the doctrine of
restraint of trade does not apply during the
continuance of the contract for employment and it
applies only when the contract comes to an end, (c) as
held by this Court in Gujarat Bottling v. Coca-
Cola [(1995) 5 SCC 545] this doctrine is not confined
only to contracts of employment, but is also applicable
to all other contracts.”

68. The legal position with regard to restrictive covenants in employment

contracts is further clarified by various coordinate Benches of this Court. In
Affle Holdings Pte Limited Vs. Saurabh Singh (MANU/DE/0152/2015),
while reaffirming the established legal position, the Court held that negative
covenants in employment contracts which prohibit the employee from
carrying on a competing business beyond the term of the contract are void
and not enforceable. However, the Court further observed that such negative
and restrictive covenants that operate during the subsistence of the
employment contract, are valid. The relevant portion of the judgment is
extracted hereinunder:
“9.8 In my opinion, the principles with regard to grant
of injunction where a negative covenant obtains are far
too well settled for me to reinvent the wheel. In the
present case, what has to be considered is, can an
injunction operate qua respondent no. 1 post
termination of his employment contract. Undoubtedly,
the answer has to be that, a negative covenant in the
employment contract which prohibits carrying on a
competing business beyond the tenure of the contract

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 is void and not enforceable. This prohibition operates
on account of the provisions of Section 27 of the
Contract Act. However, the prohibition does not
operate during the subsistence of the employment
contract. Since, the employment contract, has been
terminated on 16.10.2014, clause 6 of the employment
contract prima facie ceased to operate qua respondent
no. 1. [See Superintendence Co. of India Pvt.
Ltd. v. Krishan Murgai AIR 1980 SC 1717; Niranjan
Shankar Golikari v. Century Spg and Mfg. Co.
Ltd. (1967) 2 SCR 367; and Gujarat Bottling Co.
Ltd. v. Coca Cola Co. AIR 1995 SC 2372]”

69. In the present petitions, the Respondent employees entered into

Service Employment Agreements (Executive) dated 30th June, 2021, 21st
March, 2022 and 16th April, 2022 with the Petitioner company. Clause 5 of
the said agreements provide for a lock-in period, as per which, the
employees were bound to serve the employer i.e., the Petitioner company for
a period of 3 years from the date of joining the Petitioner. The reasons for
the same are not required to be gone into as they could be fact specific
depending on the nature of employment, the position held by the employee,
the kind of training imparted, the investment made by the employer, etc.
70. The question that arises for consideration is, whether Clause 5 of the
said agreements, which provides for a lock-in period for the employees,
violate the Fundamental Rights as enshrined in the Constitution of India. In
the opinion of this Court, it does not. This is because the fixation or
prescription of a lock-in period in employment contracts, merely means that
the employee would serve the employer for a certain period. In employment

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 contracts, the terms which the employees agree to, such as, the lock-in
period provided herein, pay fixation, emolument benefits, etc. are usually the
subject matter of negotiation. Such clauses in an agreement are usually
decided upon voluntarily, as also such employment contracts are entered into
by the parties by their own individual consent and volition. It is also noted
that such clauses in employment contracts may in fact be necessary for the
health of the employer institution as it provides the required stability and
strength to the employer institution and its framework. Lock-in periods in
employment contracts are especially prevalent at the executive levels in the
trade and industry and are considered necessary for the purpose of stability
and continuance of the employer organization. It also reduces the employee
attrition levels.
71. In the present cases, apart from the clauses that incorporate the lock-in
period for employees in the Service Employment Agreements (Executive)
dated 30th June, 2021, 21st March, 2022 and 16th April, 2022, there are also
various other covenants that apply to the employees, during the term of their
employment. The employees during the term of the contract were bound to
other employment conditions, such as the confidentiality clause, data
protection clause, salary and benefits, etc.
72. The Respondent employees have sought to terminate their
employment with the Petitioner company on their own volition, before the
expiry of the agreed upon period of 3 years from the date of joining the
Petitioner company, as stated in Clause 5 of the Service Employment
Agreements (Executive) dated 30th June, 2021, 21st March, 2022 and 16th

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 April, 2022. The said clause is challenged in the present petitions as being
violative of the fundamental rights.
73. Tracing the law back to The Brahmaputra Tea Co. Ltd. v. E. Scarth
(supra) as also on analysis of the law laid down in Niranjan Shankar
Golikari v. Century Spinning And Manufacturing Co. (supra), Percept D’
Mark (India) (P) Ltd. v. Zaheer Khan & Anr (supra) and Affle Holdings
Pte Limited Vs. Saurabh Singh (supra), it is observed that principles with
regard to the validity of covenants in employment contracts are well settled.
Any reasonable covenant operating during the term of the employment
agreement would be valid and lawful. It cannot, therefore, be argued that in
the present cases there is a violation of any Fundamental Right as enshrined
in the Constitution of India. It is further observed that employment contracts
in general are contractual disputes and not disputes which raise issues of
violation of fundamental rights, in such fact situations. There may be certain
employment conditions which could be considered unreasonable curtailment
of the employee’s right to employment but a 3-year period of lock-in cannot
be held to be such a condition.
74. The next question that arises for consideration in the present cases is
whether the disputes herein are in itself arbitrable in terms of the Act, 1996?
75. This Court while considering the issue of arbitrability of the present
dispute, considers it fit to consider the judgment relied upon by Mr. Anupam
Sinha, ld. Counsel for the Respondent. The ld. Counsel has relied upon the
recent decision of the Supreme Court in Lombardi Engineering Limited v.
Uttarakhand Jal Vidyut Nigam Limited (supra). In the said case, the

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 Supreme court was dealing with the validity of Clause 55 of the agreement
therein, which contained the arbitration clause. The said clause reads as
under:
“CLAUSE-55: ARBITRATION:
(a) All question and disputes relating to the
meaning of the specification design, drawing and
instructions herein and as to the quality of
workmanship or materials used on the work or as to
any other question claim, right, matter or thing,
whatsoever, drawings, specification, estimates
instructions, orders or these condition or otherwise
concerning the works or the execution or failure to
execute the same, whether arising during the progress
of the work or after the cancellation, termination,
completion or abandonment, thereof, shall be
conducted in accordance with the provisions of the
Arbitration and Conciliation Act, 1996 or any statutory
modification or re-enactment thereof and the rules
made the under and for the time being in force, shall
apply to the arbitration proceedings. However, the
Party initiating the arbitration claim shall have to
deposit 7% of the arbitration claim in the shape of
Fixed Deposit Receipt as security deposit.
(b) On submission of claims the Arbitrator shall
be appointed as per the following procedure:
I) For claim amount upto 10.00 Crores, the case shall
be referred to Sole Arbitrator to be appointed by the
Principal Secretary/Secretary (Irrigation), GoU…”

76. In the said case, the agreement therein contained a clause as per
which, pre-deposit of a certain percentage of the arbitral claim was a
condition for invocation of arbitration in terms of the Act, 1996. In respect of

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 the said clause, the Supreme Court held that an agreement which mandates a
pre-deposit of the claimed amount for even referring the matter to
arbitration, clearly prevents the party from availing legal remedies in
accordance with law. The Supreme Court held that such a clause is in
violation of Article 14 of the Constitution of India and there cannot be an
agreement to waive of the fundamental rights provided in the Constitution of
India. The relevant portion of the judgment Lombardi Engineering Limited
v. Uttarakhand Jal Vidyut Nigam Limited (supra) is extracted hereinunder:
“24. Having heard the learned counsel appearing for
the parties and having gone through the materials on
record, the following issues fall for the consideration
of this Court:

(1) Whether the dictum as laid down in ICOMM Tele

Limited (supra) can be made applicable to the case in
hand more particularly when Clause 55 of the General
Conditions of Contract provides for a pre-deposit of
7% of the total claim for the purpose of invoking the
arbitration clause?
(ii) Whether there is any direct conflict between the
decisions of this Court in S.K. Jain (supra) and
ICOMM Tele Limited (supra)?
(iii) Whether this Court while deciding a petition filed
under Section 11(6) of the Act, 1996 for appointment
of a sole arbitrator can hold that the condition of pre-
deposit stipulated in the arbitration clause as provided
in the Contract is violative of the Article 14 of the
Constitution of India being manifestly arbitrary?
(iv) Whether the arbitration Clause No. 55 of the
Contract empowering the Principal
Secretary/Secretary (Irrigation), State of Uttarakhand

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 to appoint an arbitrator of his choice is in conflict with
the decision of this Court in the case of Perkins
Eastman (supra)?

Xxx

84. The concept of "party autonomy" as pressed into

service by the respondent cannot be stretched to an
extent where it violates the fundamental rights under
the Constitution. For an arbitration clause to be
legally binding it has to be in consonance with the
"operation of law" which includes the Grundnorm i.e.
the Constitution. It is the rule of law which is supreme
and forms parts of the basic structure. The argument
canvassed on behalf of the respondent that the
petitioner having consented to the pre-deposit clause at
the time of execution of the agreement, cannot turn
around and tell the court in a Section 11(6) petition
that the same is arbitrary and falling foul of Article 14
of the Constitution is without any merit.

85. It is a settled position of law that there can be no

consent against the law and there can be no waiver of
fundamental rights. The Constitution Bench of this
Court speaking through Chief Justice Y.V.
Chandrachud (as His Lordship then was) in Olga
Tellis v. Bombay Municipal Corporation, (1985) 3
SCC 545 observed something very illuminating on the
said aspect:
“28. It is not possible to accept the contention that the
petitioners are estopped from setting up their
fundamental rights as a defence to the demolition of
the huts put up by them on pavements or parts of public
roads. There can be no estoppel against the
Constitution. The Constitution is not only the

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 paramount law of the land but, it is the source and
sustenance of all laws. Its provisions are conceived in
public interest and are intended to serve a public
purpose. The doctrine of estoppel is based on the
principle that consistency in word and action imparts
certainty and honesty to human affairs. If a person
makes a representation to another, on the faith of
which the latter acts to his prejudice, the former cannot
resile from the representation made by him. He must
make it good. This principle can have no application to
representations made regarding the assertion or
enforcement of fundamental rights. For example, the
concession made by a person that he does not possess
and would not exercise his right to free speech and
expression or the right to move freely throughout the
territory of India cannot deprive him of those
constitutional rights, any more than a concession that
a person has no right of personal liberty can justify his
detention contrary to the terms of Article 22 of the
Constitution. Fundamental rights are undoubtedly
conferred by the Constitution upon Individuals which
have to be asserted and enforced by them, if those
rights are violated. But, the high purpose which the
Constitution seeks to achieve by conferment of
fundamental rights is not only to benefit individuals but
to secure the larger interests of the community. The
Preamble of the Constitution says that India is a
democratic Republic. It is in order to fulfil the promise
of the Preamble that fundamental rights are conferred
by the Constitution, some on citizens like those
guaranteed by Articles 15, 16, 19, 21 and 29 and, some
on citizens and non-citizens alike, like
those guaranteed by Articles 14, 21, 22 and 25 of the
Constitution. No individual can barter away the
freedoms conferred upon him by the Constitution. A

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 concession made by him in a proceeding, whether
under a mistake of law or otherwise, that he does not
possess or will not enforce any particular fundamental
right, cannot create an estoppel against him in that or
any subsequent proceeding. Such a concession, if
enforced, would defeat the purpose of the Constitution.
Were the argument of estoppel valid, an all-powerful
State could easily tempt an individual to forego his
precious personal freedoms on promise of transitory,
immediate benefits. Therefore, notwithstanding the fact
that the petitioners had conceded in the Bombay High
Court that they have no fundamental right to construct
hutments on pavements and that they will not object to
their demolition after October 15, 1981, they are
entitled to assert that any such action on the part of
public authorities will be in violation of their
fundamental rights. How far the argument regarding
the existence and scope of the right claimed by the
petitioners is well- founded is another matter. But, the
argument has to be examined despite the concession.

29. The plea of estoppel is closely connected with the

plea of waiver, the object of both being to ensure bona
fides in day-today transactions. In Basheshar Nath v.
CIT [1959 Supp (1) SCR 528: AIR 1959 SC 149:
(1959) 35 ITR 190], a Constitution Bench of this Court
considered the question whether the fundamental rights
conferred by the Constitution can be waived. Two
members of the Bench (Das, C.J. and Kapoor, J.) held
that there can be no waiver of the fundamental right
founded on Article 14 of the Constitution. Two others
(N.H. Bhagwati and Subba Rao, JJ.) held that not only
could there be no waiver of the right conferred by
Article 14, but there could be no waiver of any other
fundamental right guaranteed by Part III of the

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 Constitution. The Constitution makes no distinction.
according to the learned Judges, between fundamental
rights enacted for the benefit of an individual and those
enacted in public interest or on grounds of public
policy."
(Emphasis supplied)”

Clearly, a clause which seeks deposit of a part of the claimed amount to avail
of the remedy of arbitration is one which would be illegal and unlawful as it
is barring a legal remedy from being invoked without deposit of money. No
remedy can be subjected to payment of money, unless authorised by law.
Such a clause in a contract lacks legitimacy and would not be enforceable.
77. However, the law with regard to covenants in employment contracts
is settled. The lawful and reasonable covenants which are operative during
the term of employment are valid and enforceable. Such covenants are not in
violation of the fundamental rights as provided in the Constitution of India.
78. In the present cases, this Court holds that reasonable lock-in periods in
employment contracts that apply during the term of employment are valid in
law and do not violate Fundamental Rights as enshrined in the Constitution
of India. Hence, in the opinion of this Court, disputes relating to lock-in
periods that apply during the subsistence of employment contracts, are
arbitrable in terms of the Act, 1996.
79. In fact, in similar factual situations, this Court in BLB Institute of
Financial Markets Ltd. v. Ramakar Jha [(2008) SCC OnLine Del 1075]
has referred the disputes to arbitration. In the said case, there existed a
clause in the employment contract, as per which, the Respondent employee

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 therein has agreed to be bound to serve the employer for a period of three
years. However, the employee, contrary to the agreed upon lock-in period,
left employment after approximately one year. The Court in this case
observed that the employee is in breach of the employment contract as the
negative covenant in the employment contract was operating during the
subsistence of his service agreement and is hence not in restraint of trade.
The relevant portion of the judgement is extracted hereinunder for a ready
reference:
“43. In the instant case, indubitably the respondent is in
breach of the negative covenant contained in his service
agreement, during the subsistence of his service
agreement with the petitioner, and the doctrine of
restraint of trade cannot therefore be held to apply. The
respondent must, accordingly, in my opinion, be held to
be bound by the terms of his service agreement, at least
till such time as the arbitrator renders his award on the
dispute between the parties. The petitioner has thus made
out a prima facie case for the grant of interim relief
under Section 9 of the Act, restraining the respondent
from seeking employment with any business rival of the
petitioner or with any organization dealing in Stock
Market/Capital Market/Financial Market Education
Institute. The balance of convenience also tilts in favour
of the petitioner, as the petitioner cannot be monetarily
compensated, if any of its trade secrets or information
relating to its courses, course materials and business is
divulged by the respondent to any other organization
carrying on a business akin to that of the petitioner.
Irreparable injury would also undoubtedly be caused to
the petitioner's business, if such an eventuality occurs.
xxx

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 45. The above interim orders shall enure during the
pendency of the arbitration proceedings. The nominated
Arbitrator shall, however, render his award as
expeditiously as possibly and latest within three months
from the date of entering into the reference. The
arbitrator shall enter upon the reference forthwith, if
already nominated and shall be nominated latest within
one week, in case no arbitrator is so far nominated. The
parties shall fully cooperate in the arbitration
proceedings and endeavour to expedite the same.”

80. At this juncture, this Court finds it appropriate to consider the

judgment passed by the single bench of this Court in Desiccant Rotors
International Pvt. Ltd. Vs. Bappaditya Sarkar and Ors.,
(MANU/DE/1215/2009). In the said case, the employee signed an obligation
agreement dated 12th June, 2007 with the employer company which, in part,
sought to restrain the employee from seeking employment with an employer
in a competing business, post termination of his contract with the erstwhile
employer. The Court while holding this clause to be invalid, observed that
right of livelihood of the employee must prevail. Further, in this case, the
Court upheld the injunction order passed, to the effect that the employee
would be restrained from approaching the employer’s suppliers and
customers for soliciting business which was in direct competition to that of
the employer. The relevant portion of the judgment is extracted hereinunder:
15. I have no doubt that such was the intention of the
plaintiff, but with equal conviction I believe that such is
the intention of all employers who rely on like negative
covenants in employment contracts with their employees.
It is this attempt to protect themselves from competition

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 which clashes with the right of the employees to seek
employment where so ever they choose and in a clash
like this, it is clear that the right of livelihood of the latter
must prevail. Clearly, in part at least, the Obligation
Agreement sought to restrain Defendant No. 1 from
seeking employment with an employer dealing in
competitive business with the plaintiff after he had
ceased to be an employee of the plaintiff, and that too for
a period of two years. Such an act cannot be allowed in
view of the crystal clear law laid on this issue. However,
in the impugned order dated February 20, 2008 the
injunction restraining Defendant No. 1 is limited in
scope, in the sense that it does not restrain the Defendant
No. 1 from working with Defendant No. 2 or any other
person/company, thereby steering clear of impinging the
formers freedom to choose his own work place. The
injunction only restrains Defendant No. 1 from
approaching the plaintiffs suppliers and customers for
soliciting business which is in direct competition with the
business of the plaintiff. Hence, the injunction which has
already been granted by order dated February 20, 2008
is made absolute. The interim application is disposed of
accordingly.

81. The present cases factually distinguish themselves from the judgment,
Desiccant Rotors International Pvt. Ltd. Vs. Bappaditya Sarkar and Ors.
(supra). In the present cases, the employer is not seeking to restrain the
employees from seeking employment with any competitor of the employer,
post termination of the employment agreements. Covenants in the present
employment agreements are only operative during the subsistence of the
employment agreements.
82. The Court has perused the letters dated 21st June, 2023 in ARB.P.

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 1210/2023, 26th May, 2023 in ARB.P. 1212/2023 and 13th July, 2023 in
ARB.P. 1213/2023 sent by the Petitioner to the respective Respondents,
invoking arbitration under Section 21 of the Act, 1996. The Court has also
perused the prayers sought by the Petitioner in the petitions filed herein. The
same would show that the Petitioner is interested in protecting its
confidential information as also wishes to seek damages from the
Respondents. These are disputes within the four-corners of the respective
employment agreements entered into between the parties.
83. In the light of reliefs sought by the Petitioner in the present cases, this
Court holds that the disputes raised herein are clearly arbitrable in terms of
the Act, 1996.
84. It is clarified that all observations made in this order, shall however,
not bind the ld. Arbitrator, who shall take an independent view on all the
issues that may arise in accordance with law, without being influenced by
any observations made by this Court.
85. Accordingly, Mr. Akshay Makhija, Sr. Adv. [M:9810079901] is
appointed as a ld. Sole Arbitrator to adjudicate the disputes that have arisen
in these cases under the Employment contracts between the Petitioner and
the following Respondents:
a. Service Employment Agreement (Executive) dated 16th April,
2022 executed between the Petitioner and the Respondent-Ms.
Vaishnavi Vijay Umak.
b. Service Employment Agreement (Executive) dated 30th June,
2021 executed between the Petitioner and the Respondent-Mr.

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 Meetkumar Patel.
c. Service Employment Agreement (Executive) dated 21st March,
2022 executed between the Petitioner and the Respondent-Mr. Rahul
Sharma.
86. The Arbitration proceedings shall take place under the aegis of the Delhi
International Arbitration Centre (hereinafter, ‘DIAC’). The arbitration
proceedings shall be conducted under the Rules of DIAC. The fee of the ld.
Sole Arbitrator shall be as per the Fourth Schedule of the Arbitration and
Conciliation Act, 1996, as amended by the DIAC Rules.
87. List before the DIAC on 5th August, 2024. Let a copy of the present
order be emailed to Secretary, DIAC on the email id-
delhiarbitrationcentre@gmail.com. All contentions of the parties are left open.
88. Petitions are disposed of with all pending applications, if any.

PRATHIBA M. SINGH
JUDGE
JULY 11, 2024
dj/rks

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