Capgemini India Private Ltd & Anor v Krishnan

An undertaking given after employment has ended, with independent legal advice, is a material circumstance when deciding whether to enforce a post-termination restraint. It ordinarily provides the starting point and engages the public policy favouring settlements, but it is not an unassailable bar to examining the covenant’s validity or the justice of interim relief. The court must consider all the circumstances, including the strength of the alleged legitimate interest, the likely harm, the adequacy of damages, the balance of convenience and whether an injunction would serve a useful purpose. Where the employer has already lost the relevant business, the alleged harm is vague or tenuous, the restriction is shortly to expire and damages are adequate, an injunction may be disproportionate and should be refused.

The claimants sought an interim injunction against three former employees who had given written undertakings, after receiving independent legal advice, not to provide services to First Data or use the claimants’ confidential information. The defendants had subsequently withdrawn the undertakings and argued that the restrictive covenant was unreasonable and unenforceable.

The claimants relied on the public policy favouring settlements and contended that the undertakings prevented the defendants from challenging the covenant. The defendants maintained that the court had to consider the covenant’s merits and the ordinary principles governing interim injunctions. The central issues were whether the undertakings barred that challenge and whether an injunction was necessary and just on the evidence.

1. The application was dismissed. The claimants had established a serious issue to be tried, but the undertakings did not determine the application.
2. The court rejected the claimants’ submission that the mere fact of undertakings given to avoid threatened proceedings created an unassailable bar to arguments about the validity or width of the restraint. The court had to consider all the circumstances, including the undertakings, the parties’ independent legal advice and the merits of the covenant.
3. The public policy favouring compromises was powerful. The undertakings were freely given after the employment relationship had ended, and therefore had greater weight than an ordinary disputed employment covenant. They ordinarily formed the starting point when considering interim relief. Nevertheless, that policy did not make the undertakings decisive. Agreements of this kind could be set aside or denied effect for good reason, principally on public policy grounds.
4. The question was whether, notwithstanding the undertakings, the claimants had shown that an injunction was necessary and just to protect an alleged legal right. The court considered the serious issue to be tried, the alleged harm, the adequacy of damages and the balance of convenience. The defendants’ right to use their own skills and experience also required consideration.
5. The claimants had already lost the First Data contract through no fault of the defendants or Infosys. There was no realistic prospect that an injunction would enable the claimants to recover that business. The evidence of confidential information, wrongdoing and non-compensable loss was limited and equivocal. The alleged loss was vague and tenuous, the covenant was shortly to expire, and the defendants appeared able to meet any damages award.
6. An injunction would therefore serve no real or useful purpose and would be disproportionate. Damages were an adequate remedy, and it was neither necessary nor just to grant the interim injunction.

Not stated in the judgment.