Injunction to Perform a Negative Agreement

1. A contract comprising an affirmative agreement to do a certain act.
2. Coupled with a negative agreement, EXPRESS OR IMPLIED, not to do a certain act.
3. The court is unable to compel specific performance of the affirmative agreement, typically under section 14(c).
4. The plaintiff has not failed to perform the contract so far as it is binding on him.

"Express or implied"

The negative agreement need not be spelt out. Where a contract to sing exclusively at one theatre necessarily implies a promise not to sing at another during the same period, the negative agreement is implied and section 42 applies.

But the implication must be real. A court will not manufacture a negative covenant out of a bare affirmative promise merely to make an injunction available, because that would let section 42 swallow sections 14(c) and 41(e).

The proviso: the plaintiff's own performance

"Provided that the plaintiff has not failed to perform the contract so far as it is binding on him."

This is mutuality, and it is the counterpart of section 16(c) in specific performance. An employer who has not paid, or a promoter who has not provided what he promised, cannot ask the court to hold the other side to a negative covenant.

The limit the courts observe

An injunction under section 42 must not become indirect specific performance. Where the practical effect of restraining the defendant is to leave him with the choice of performing for the plaintiff or of not working at all, the court will hesitate, because it would be compelling the very personal service that section 14(c) puts out of reach.

The line commonly drawn: an injunction is granted where the defendant retains a real alternative, and refused where it would compel him to perform or starve.

Section 42 and section 27 of the Contract Act

This is the most important qualification in the chapter for an Indian student, and it is regularly missed.

Section 42 is about the ENFORCEMENT of a negative covenant. It says nothing about its VALIDITY.

Validity is governed by section 27 of the Indian Contract Act 1872, which makes every agreement in restraint of a lawful profession, trade or business void to that extent, subject only to the sale of goodwill exception. India has no general reasonableness test.

The consequence, and it must be stated in this order:

1. Is the negative covenant valid under section 27? A covenant operating during the employment is not a restraint of trade at all, on Golikari. A covenant operating after it ends is void under section 27.
2. Only if it is valid does section 42 come into play to enforce it.

So section 42 will enforce a negative covenant during the currency of a contract of service, and it can do nothing for one that bites after the employment ends, because there is nothing valid to enforce.

Niranjan Shankar Golikari v. The Century Spinning and Manufacturing Co. Ltd., AIR 1967 SC 1098.

Facts. The appellant joined the respondent company as a shift supervisor and was trained in the manufacture of tyre cord yarn. His contract ran for five years and provided that during that period he would not work in a similar capacity for any other concern and would keep the technical aspects of his work secret. Shortly after his training he left and joined a rival concern at higher pay. The company sued for an injunction, which was granted, and his appeal to the High Court failed.

Held. The appeal failed. Negative covenants operative during the period of employment, when the employee is bound to serve his employer exclusively, are not to be regarded as being in restraint of trade and do not fall under section 27, unless the contract is unconscionable, excessively harsh, unreasonable or one sided.

Why it matters here. It supplies the validity half of the analysis. The covenant in that case bit during the term, so it was outside section 27, and an injunction could issue. Had it bitten after the term, section 27 would have made it void and section 42 would have had nothing to work on. See [Agreements in Restraint of Trade].

A worked example

Priyanka, a well known singer, contracts with Qamar to perform exclusively at his auditorium for six months, and the contract provides that she will not sing at any other venue during that period. Qamar pays the agreed advance. In month two she begins singing at a rival hall.

• Can Qamar compel her to sing for him? No. Section 14(c): the contract is so dependent on her personal qualifications that the court cannot enforce its material terms.
• Does section 41(e) then bar an injunction? It would, but for section 42, which operates notwithstanding clause (e).
• Is the negative covenant valid? It operates during the currency of the engagement, so on Golikari it is not a restraint of trade within section 27 of the Contract Act.
• So what may the court do? Grant an injunction restraining her from singing at other venues during the six months. The affirmative promise is unenforceable; the negative one is not.
• Qamar has not paid the instalments due under the contract. The proviso applies: he has failed to perform the contract so far as it is binding on him, and the injunction is refused.
• The contract had no express negative clause, but promised exclusive performance. The negative agreement may be implied, since exclusivity necessarily imports a promise not to sing elsewhere, and section 42 applies to an implied negative agreement.
• The contract said she would not sing anywhere for two years AFTER the engagement ended. That covenant is a post employment restraint and is void under section 27. Section 42 cannot enforce it, because there is nothing valid to enforce.
• Restraining her would leave her unable to earn at all, the injunction covering every venue in the country. The court will hesitate, because the order would in substance compel her to perform for Qamar or not work, which is the specific performance section 14(c) forbids.

What it does NOT mean

"Section 42 makes a negative covenant valid." It governs enforcement. Validity is a question under section 27 of the Contract Act.

"A post employment restraint can be enforced by injunction." Not in India. Section 27 makes it void, and section 42 has nothing to operate on.

"The negative agreement must be express." It may be express or implied.

"An injunction follows automatically once the covenant is broken." Preventive relief remains discretionary under section 36, and the proviso and section 41 both apply.

"The court can use section 42 to get round section 14(c)." It can enforce the negative promise only. Where the injunction would in substance compel the personal service, the court will not grant it.

Quick revision

• s.42: notwithstanding s.41(e), where a contract comprises an affirmative agreement coupled with a negative agreement, express or implied, the court's inability to compel specific performance of the affirmative agreement shall not preclude it from granting an injunction to perform the negative one.
• Proviso: the plaintiff must not have failed to perform the contract so far as it is binding on him. Mutuality, the counterpart of s.16(c).
• The chain it breaks: s.14(c) (personal qualifications, not specifically enforceable) plus s.41(e) (no injunction where the contract would not be specifically enforced) would otherwise leave only damages.
• s.42 governs ENFORCEMENT, not VALIDITY. Validity is s.27 of the Contract Act, which voids restraints of a lawful profession, trade or business, with no general reasonableness test.
• Golikari, AIR 1967 SC 1098: a negative covenant operating DURING the employment is not a restraint of trade, so it is valid and may be enjoined. A post employment covenant is void under s.27 and cannot be enjoined.
• The injunction must not become indirect specific performance: the defendant must retain a real alternative.
• The provision was s.57 of the 1877 Act, and old reports still cite that number.

Test yourself

1. State section 42 and the problem it solves. Notwithstanding clause (e) of section 41, where a contract comprises an affirmative agreement to do a certain act coupled with a negative agreement, express or implied, not to do a certain act, the circumstance that the court is unable to compel specific performance of the affirmative agreement shall not preclude it from granting an injunction to perform the negative agreement, provided the plaintiff has not failed to perform the contract so far as it is binding on him. It solves the problem that section 14(c) prevents specific performance of a contract dependent on personal qualifications, and section 41(e) would then bar an injunction as well, leaving only damages.

2. Must the negative agreement be express? No. Section 42 applies to a negative agreement that is express or implied, so a promise of exclusive performance may carry an implied promise not to perform elsewhere. The implication must be genuine, since a court that manufactured negative covenants out of bare affirmative promises would defeat sections 14(c) and 41(e).

3. What is the effect of the proviso? That the plaintiff must not have failed to perform the contract so far as it is binding on him. It is the mutuality requirement, corresponding to section 16(c) in specific performance, so an employer who has not paid, or a promoter who has not provided what he promised, cannot obtain an injunction on the negative covenant.

4. Can a post employment restrictive covenant be enforced under section 42? No. Section 42 deals with the enforcement of a negative covenant, not its validity, and validity is governed by section 27 of the Indian Contract Act 1872, which makes every agreement restraining a lawful profession, trade or business void to that extent, with no general reasonableness test. A covenant biting after the employment ends is therefore void, and there is nothing for section 42 to enforce.

5. What did Golikari decide, and why does it matter here? That negative covenants operative during the period of employment, when the employee is bound to serve his employer exclusively, are not to be regarded as being in restraint of trade and do not fall under section 27, unless the contract is unconscionable, excessively harsh, unreasonable or one sided. It matters because it supplies the validity half of the analysis: only a covenant that survives section 27 can be enforced by an injunction under section 42.