venture star defence aviation india private limited and another vs ketan kumar

8/6/2019 Venture Star Defence Aviation India Private Limited and Another vs Ketan Kumar

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VENTURE STAR DEFENCE AVIATION INDIA PRIVATE LIMITED AND ANOTHER

VS KETAN KUMAR

1)VENTURE GLOBAL DEFENCE CORPORATION(VCDC) is a company incorporated and

governed by laws of USA.VCDC is a company listed in new York stock exchange and

has revenues in excess of USD 20 BILLION.VCDC is the registered owner of morethan 200 patents registered globally including India which is conservatively

estimated to be worth USD 15 BILLION.

2) BHARAT STAR DEFENCE SERVICES INDIA PRIVATE LIMITED (BSDS) is an Indian

company incorporated under companies act 1956 carrying on the business as a

sub-contractor in many major defence deals for Indian armed forces and is also the

biggest manufacturer of small arms for Indian armed forces.

3) In 2008, with India being the 10th largest buyer of defence equipments, VCDC

decided to make its foray into India in order to increase its share as top supplier of

defence goods to the Indian armed forces. Due to the prevailing foreign investmentregulation in defence sector at that time, VCDC entered into a joint venture with

BSDS. The joint venture ‘VENTURE STAR DEFENCE AVIATION INDIA PRIVATE

LIMITED(VSDA) was incorporated under Indian companies act 1956.VCDC had also

entered into a separate technology transfer agreement with BSDS as per the terms

of joint venture agreement to transfer technology and technical knowhow to the

newly incorporated VSDA that would enable it to manufacture its products.

4) As per the terms of joint venture agreement, VCDC has the right to nominate it

employee to the position of CEO of newly formed VSDA. In June 2008, Mr.Ketan

Kumar formerly a senior executive of VCDC was nominated by VCDC to the position

of CEO in the newly constituted VSDA. The said nomination was unanimouslyaccepted by Board of Directors of VSDA to fulfill his new role Mr.Ketan Kumar was

seconded from VCDC to VSDA. An extract of the following clause as set out in the

secondment contract between VCDC and Mr.Ketan Kumar is as follows

“It is hereby agreed by and b/w the parties to this employment agreement that

Mr.Ketan Kumar (employee) shall be seconded from VCDC to VSDA for tenure of 3

yrs, at the conclusion of his tenure at VSD, Mr. Ketan Kumar shall return to the

employment at VCDC from VSDA.

5) The employment contract of VSDA gives Mr.Ketan Kumar tenure of 3 yrs as its

CEO.

6) the terms of joint venture stipulated that the senior level employees employed at

VSDA were required to enter into a separate employment contract with VSDA

containing a non- disclosure and non- compete clause as they had knowledge of

extremely sensitive information relating to its products, customer details, technical

details and market information vital to survive in a market of fierce competition.

The non compete clause in the employment contracts of VSDA with its employees



(that includes the CEO) provides that every such employee who resigns from his

employment at VSDA is restrained from taking employment with a competitor of

VSDA for a period of 2 years after resigning from employment with VSDA.VSDA has

another specific contract with Mr.Ketan Kumar providing it as follows-

‘11.0 The parties hereby agree that either party to this agreement is free to rescindthis agreement by giving the other party one months prior notice of their intention

of rescinding the said agreement

14.0 it has been agreed by Mr.Ketan Kumar that being the CEO he is bound by the

confidentiality, non- disclosure and non- compete clauses with a greater measure

of force due to his position in the company which gives him unparalleled access to

trade secret, market information and matters relating to IPR of the company’

7) In January 2011, Skybus Defence Corporation Ltd (SDC) was the latest entrant in

the market as a private defence contractor to Indian armed forces. On 1st February

2011, Mr.Ketan Kumar announced to the board of directors of VSDA of his intention

to resign as the CEO where he cited his reasons for resignation as the CEO of VSDA

as accepting the position of CEO of SDC where he thereby gave a month’s prior

notice required under the employment contract. In response to the same, VSDA

sent an official email communication to Mr.Ketan Kumar on 3rd Feb 2011,stating that

he shall not be discharged from his present position as CEO at VSDA and

highlighting that his term of 3yrs as CEO had not yet been completed and that on a

more serious note he was bound by the employment contract which contained a

non- compete clause which states that he will be restrained from taking an

employment for a period of 2yrs after resigning from the employment with VSDA,

provided such an employment be with a competitor of VSDA and reminded him of

his obligation to VCDC who had seconded him to VSDA

8) On 4th Feb 2011, Mr.Ketan Kumar in his reply to the email communication from

VSDA dated 3rd Feb 2011 threatened the company of civil action. Anticipating the

same VSDA and VCDC as plaintiff 1 and 2 filed a civil suit in the city civil court

Mumbai seeking injunction and specific performance contending that-

a) Mr.Ketan Kumar had knowingly and expressly entered into the employment

contract which contained non- compete clause which set out that he shall be

restrained from taking any employment with a competitor in the same line of work

b)Mr.Ketan Kumar was bound by the contract which stipulated that he shall enjoytenure of 3yrs as CEO of VSDA and further he was in breach of the contract by

resigning prior to the conclusion of the said tenure.

c) Further, it was also contended that Mr.Ketan Kumar having been seconded to

VSDA for a term of 3yrs as per the original contract, had to return to his primary

employers at the end of 3 yrs i.e. VCDC by resigning he was in breach of the terms

of secondment contract



9) On 11th Feb 2011, Mr.Ketan Kumar filed a reply in the civil suit contending that

a) VSDA can’t restrain him from taking employment with another firm after he

resigned from his present employment at VSDA and the same is untenable in law

b) The non- compete clause provided in the employment contract by VSDA is bad in

law when read under section 27 of Indian Contract Act,1872 and the same is void.

c) The terms of secondment contract with VCDC are not capable of enforcement

and these terms ought not to be specifically enforced.

10) On 1st march 2011 VSDA filed a reply affidavit in response stating that:

a) Mr.Ketan Kumar being a senior official of VSDA had access to and knowledge of

confidential information and IP and him having accepted employment with a

competitor will be severely detrimental to VSDA

b)non- compete clause provided by VSDA is not void under law as the same fallsunder exception given in section 3 of Competition Act 2002 which provides for

protecting the intellectual property of a person

c) Secondment contract is enforceable

11)In June 2011 an interim order was passed by the city civil court granting

temporary injunction in favour of VSDA and VCDC and restraining Mr.Ketan Kumar

for the time being from taking up his new employment with SDC. Mr.Ketan Kumar

has filed a revision from the said order to the Bombay High court which is fixed for

hearing

12) Argue for

1) Ketan Kumar

2) VCDC and VSDA in revision pet.

venture star defence aviation india private limited and another vs ketan kumar

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