Neosky India Limited & Anr Vs Nagendran Kandasamy & Ors (Delhi High Court)
Background: A petition was filed under Section 9 of the Arbitration and Conciliation Act, 1996, seeking interim relief against former executives of the petitioner-company. The dispute revolved around a Non-Compete Agreement (NCA) dated 25 May 2022, which imposed restrictions on promoters and employees from engaging in competing business activities for a period of three years.
The petitioners alleged that respondent Nos. 1–3, who were serving as CEO, COO, and CTO of petitioner No. 2 company, resigned on 3 July 2023. Shortly thereafter, they incorporated respondent No. 6, a new company, on 6 October 2023, to run a competing business. It was further alleged that respondent Nos. 7 and 8, as directors, were also actively involved in the competing venture.
The petitioners contended that the incorporation of respondent No. 6 constituted a breach of the NCA during its subsistence. They sought injunctive relief to restrain the respondents from carrying on competing business and relied upon the earlier interim order dated 31 May 2024, by which the Court had temporarily restrained respondents Nos. 1–4 from engaging in competition.
Petitioners’ Arguments
The petitioners argued that:
- The breach of the NCA commenced on 6 October 2023, within the agreed three-year period, and the violation was continuous in nature.
- Relying on principles that no party should be allowed to benefit from its own wrong, they contended that the respondents could not take advantage of the expiry of the NCA while continuing to breach it.
- They invoked precedents such as Beg Raj Singh v. State of U.P. (2003) 1 SCC 726, Dharam Veer v. Union of India, AIR 1989 Del 227, and Avtar Singh v. Union of India, 1992 SCC OnLine Del 539, to argue that when a contractual right is interrupted by unlawful conduct, the period of breach must be excluded, and the contractual benefit extended for the entire intended term.
- Thus, they submitted that the non-compete obligations should be deemed to continue until the breach ceases, effectively extending the NCA beyond its original expiry.
Respondents’ Arguments
