Delhi High Court
Paul Deepak Rajaratnam & Ors vs Surgeport Logistics Pvt. Ltd. & Anr on 28 July, 2025
Author: Jasmeet Singh
Bench: Jasmeet Singh
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment reserved on: 09.05.2025
Judgment pronounced on: 28.07.2025
+ ARB. A. (COMM.) 5/2025, I.A. 1730/2025 & I.A. 1731/2025
PAUL DEEPAK RAJARATNAM & ORS. .....Appellants
Through: Mr. Vivek Kohli, Sr. Adv.
with Mr. S. Santanam
Swaminadhan, Mr. Anindit
Mandal, Mr. Kartik Malhotra,
Ms. Vasudha Chadha, Advs.
versus
SURGEPORT LOGISTICS PRIVATE LIMITED & ANR.
.....Respondents
Through: Ms. Rimali Batra, Mr.
Abhishek Lalwani, Mr. K.
Kumar, Advs.
CORAM:
HON'BLE MR. JUSTICE JASMEET SINGH
JUDGMENT
Digitally Signed ARB. A. (COMM.) 5/2025 Page 1 of 54
By:MAYANK
Signing Date:28.07.2025
14:11:15
FACTUAL MATRIX …………………………………………………………………. 3
SUBMISSIONS ON BEHALF OF THE APPELLANTS ……………. 11
SUBMISSIONS ON BEHALF OF THE RESPONDENTS ………… 14
ANALYSIS AND FINDINGS …………………………………………………… 21
Scope of Interference under Section 37(2)(b) of the Act. ……………… 21
Ambit of Section 17 of the Act. ………………………………………………….. 25
Whether the Shareholders’ Agreement was Validly Terminated. ….. 27
A. Conduct of the Appellants Inconsistent with Termination. ……. 31
B. Separation from Management ≠ Termination of Contractual
Obligations. ……………………………………………………………………………… 36
Non-Applicability of Section 27 of the Indian Contract Act, 1882. .. 39
The Impugned Interim Award Satisfies the Triple Test of Granting an
Interim Relief. ………………………………………………………………………….. 43
A. Prima Facie Case Exists. ……………………………………………………. 46
B. Irreparable Injury Exists. …………………………………………………… 48
C. Balance of Convenience in Favour of the Respondents. ……….. 52
CONCLUSION ……………………………………………………………………….. 53
Digitally Signed ARB. A. (COMM.) 5/2025 Page 2 of 54
By:MAYANK
Signing Date:28.07.2025
14:11:15
1. This is an appeal filed under Section 37(2)(b) of the Arbitration and
Conciliation Act, 1996 (for brevity “the Act”) challenging the order
dated 16.12.2024 (for brevity “the impugned interim award”) passed
by the learned arbitrator under Section 17 of the Act in the arbitration
matter titled as “Surgeport Logistics Private Limited & Anr. v. Paul
Deepak Rajaratnam &Anr.“.
FACTUAL MATRIX
2. The brief facts of the case as per the appellants are that the appellants
No. 1 and No. 2 are seasoned professionals with approximately 25
years of experience in the logistics and freight forwarding industry.
Appellant No. 1, an Indian citizen, was a former Director and minority
shareholder of respondent No. 1, holding a 12% equity stake under the
Shareholders’ Agreement dated 28.04.2018 (for brevity “the SHA”),
until his termination via a notice dated 25.07.2023. Similarly,
appellant No. 2, a Sri Lankan citizen, was also a Director and minority
shareholder of respondent No. 1 with a 12% equity share and was
terminated by the same notice.
3. Appellant No. 3 is a partnership firm incorporated on 18.07.2018,
engaged in various logistics services, such as shipping, freight
forwarding, warehousing, packaging, distribution, national and
international transportation, container freight station operations,
customs clearance, supply chain management related services. The
firm was formed by appellants No. 1 and No. 2 with the full
knowledge and consent of the respondents to support the business
expansion of respondent No. 1.
Digitally Signed ARB. A. (COMM.) 5/2025 Page 3 of 54
By:MAYANK
Signing Date:28.07.2025
14:11:15
4. Respondent No. 1 is a joint venture company incorporated in 2017 by
respondent No. 2 under the guidance of its Director, Mr. Yashpal
Sharma. Mr. Yashpal Sharma has been central to the operations of the
respondents and the relationship between the parties was
fundamentally rooted in the trust and confidence the appellants placed
in him.
5. In 2017, Mr. Yashpal Sharma approached appellants No. 1 and 2 to
form a joint venture. He assured them that respondent No. 2 would
provide financial and operational support, while the appellant No. 1
and 2 would handle sales and business development. Relying on these
assurances and months of discussions that built trust, the appellants
agreed to contribute their expertise. A joint venture company,
respondent No. 1, was incorporated on 16.06.2017, with oral promises
that appellants would initially hold 12% each in equity and eventually
be elevated to 25% each.
6. Subsequently, on 28.04.2018, the SHA was prepared, but the
appellants were neither given a draft nor allowed to review it before
signing. They were never given a copy and only saw scanned
signatures later. Despite this, they continued working based on mutual
trust, as is common in the logistics industry. On 18.07.2018,
appellants No. 1 and 2 formed appellant No. 3, a partnership firm,
with the consent of Yashpal Sharma and respondent No. 2, to expand
the business and serve the clients of respondent No. 1.
7. From 14.09.2018 to 22.05.2023, appellant No. 3 raised invoices
totaling around Rs. 1.7 crores for services rendered to respondent No.
1. Despite this long-standing relationship, respondents later falsely
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By:MAYANK
Signing Date:28.07.2025
14:11:15
claimed ignorance of the existence of appellant No. 3 before 2019. On
07.01.2019, Mr. Yashpal Sharma even emailed stating that the
appellant No. 3 was part of respondent No. 1 and could work
seamlessly with it. In 2019, appellants issued client letters shifting
operations to appellant No. 3 with the knowledge of the respondents,
confirmed in board minutes dated 18.06.2022.
8. On 06.10.2019, the Board Meeting of respondent No. 1 acknowledged
the value of appellant No. 3 and authorized invoice payments of
appellant No. 3. By 2020, due to the efforts of the appellants,
respondent No. 1 reported profits and increased budgets, which led to
company wide salary hikes. From 2020 to 2023, appellant No. 3
continued engaging services of respondent No. 1 for its clients, with
ongoing account reconciliations and encouragement from Mr. Yashpal
Sharma. On 18.06.2022, a board meeting formalized the role of
appellant No. 3 in customs and brokerage services and appellants were
promised 10% of the net profits of respondent No. 1, though profit
figures were never disclosed.
9. In 2022-2023, the appellants No. 1 and 2 demanded their promised
increase in equity, which was persistently deferred. They later
discovered siphoning of Rs. 4-5 crores from respondent No. 1 by
respondent No. 2. On 06.06.2023, without a board meeting,
respondents fabricated a resolution to initiate civil and criminal action
against the appellants No. 1 and 2. The appellate No. 1 also instituted
criminal proceedings against the respondents, which is pending
investigation. This was followed by a Show Cause Notice on
07.06.2023, containing vague allegations and invoking non-compete
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By:MAYANK
Signing Date:28.07.2025
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and non-solicit clause under Clause 15 of the SHA. Clause 15 reads as
under:-
“15. NON-COMPETE AND NON-SOLICIT
OBLIGATIONS:
1. Unless otherwise agreed by the party at the First Part,
the Party at the Second Part and/or the Party at the Third
Part shall not engage in any activity, directly or indirectly,
in the same or relatively same business. The Party at the
Second Part and the Party at the Third Part warrants that
its subsidiaries and other firms or individuals over which it
has control will comply with this requirement.
2. Non compete clause to be implied with even after 3 years
of the termination of Agreement business.
3. In the event of non compliance of 1 and 2 above, the
party at the Second Part and/or the Party at the Third Part
shall be liable to compensate by way of penalty to the party
at First Part with minimum amount of Rupee one crore and
subject to maximum of loss suffered party at the First Part
due to breach of agreement by the party at Second and/or
Third Part.”
10. On 09.06.2023, the respondents escalated the matter by sending
defamatory emails, cutting off email access of appellants and halting
dues, including salaries and profit shares. Appellant No. 1 replied to
the Show Cause Notice on 16.06.2023, denying allegations and
reiterating their equity claim. A Termination Notice dated 25.07.2023
was issued, severing all ties with appellants No. 1 and 2, while falsely
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By:MAYANK
Signing Date:28.07.2025
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accusing them of fund misappropriation. This notice, signed by Mr.
Yashpal Sharma, was relied on by all parties.
11. Soon after, the respondents filed a petition under Section 9 of the Act
in this Court, suppressing the Termination Notice and sought to
restrain the appellants from engaging in competing business. On
03.08.2023, this Court issued notice to the appellants only on prayers
(a) and (b) and not on prayers (c), (d) and (e) of the petition. The
appellants only discovered the contents of the SHA upon receiving the
paperback of the petition. The prayers of the said petition are
reproduced as under:-
“a. Pass an order of ad-interim/interim injunction,
restraining the Respondents, and any of its agents / partners
/ subsidiaries / affiliates / associates from operating or
engaging in competing business activities to the prejudice
of the Petitioners and in violation of the non-compete
provisions of the Shareholders Agreement under Clause 15;
b. Pass an order directing the Respondent No.1 and
Respondent No.2 to continue to comply with all the
obligations under the Shareholders Agreement and not
disrupt the business of the Petitioners or take any such step
which would jeopardize the smooth functioning of the
Petitioners, in accordance with the terms of the
Shareholders Agreement during the pendency of the
adjudication of disputes between the parties
c. Pass an order directing rendition of accounts in respect
of businesses, relating to, akin to or similar to, the businessDigitally Signed ARB. A. (COMM.) 5/2025 Page 7 of 54
By:MAYANK
Signing Date:28.07.2025
14:11:15
of the Petitioner No. 2 whether managed, contributed
and/or owned by Respondent No. 1 and Respondent 2,
directly or indirectly from 28.04.2018 and the accounts of
profits earned by the Respondents till date (including but
not limited to their held companies, proprietorships and
partnerships);
d. Pass an Order appointing and deputing a local
commissioner for the purpose of clause (c) above, to assess
and examine the loss caused by Respondent No. 1 and 2 by
diverting the business and breaching the terms of the
Shareholders Agreement;
e. Pass an ex-parte/ad-interim/interim order directing the
Respondents to deposit an amount of Rs. l,00,00,000/-
(Rupees One Crore only) before this Hon’ble Court; and/or;
***”
12. Thereafter, respondents issued a notice invoking arbitration under
Section 21 of the Act on 24.08.2023, seeking a three-member tribunal,
which was objected to by the appellants on 16.09.2023 due to
inconsistencies in the SHA, including irrelevant clauses like “Civil
Construction Projects.”
13. On 16.10.2023, this Court directed the appellants to submit an
affidavit regarding the SHA, wherein the appellants stated that they
had never received a copy of the SHA and questioned its authenticity,
though admitted the signatures appeared to be theirs. On 16.05.2024,
this Court directed the appellants to disclose sales turnover, balance
sheets, complete list of clients and nature of services rendered to such
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By:MAYANK
Signing Date:28.07.2025
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clients, including that of the appellant No. 3. The appellants termed
this direction unjustified and harmful to their business, especially after
having lost access to servers and emails and highlighted that the non-
compete clause was unenforceable post-termination.
14. On 31.05.2024, the respondents challenged the Order dated
16.05.2024 under Section 37 of the Act seeking vacation of the
directions contained in paragraph 8 of the said Order. Meanwhile, on
19.07.2024, the Hon’ble Supreme Court appointed the learned
arbitrator. The first procedural hearing occurred on 10.08.2024, but
the respondents did not file their Statement of Claim. On 23.08.2024,
the Division Bench of this Court directed that the petition under
Section 9 of the Act be treated as an application under Section 17 of
the Act before the learned Arbitral Tribunal and liberty was granted to
the learned Arbitral Tribunal to vacate, vary, modify or affirm the
Order dated 16.05.2024. The appellants were also granted liberty to
move a fresh application under Section 17 of the Act before the
learned Arbitral Tribunal.
15. Finally, on 16.12.2024, the learned arbitrator passed an interim award
under Section 17 of the Act, as recorded in paragraph 62 of the
impugned interim award, which reads as under:-
“62. Based on the consideration recorded in the foregoing
paragraphs, more particularly in paragraphs 60 and 61
above, the Arbitral Tribunal is satisfied, that an interim
order needs to be passed, restraining the Respondents – Mr.
Paul Deepak Rajaratnam, and Mr. Mohamed Naushad
Basheer, including their agents, partners, subsidiaries,Digitally Signed ARB. A. (COMM.) 5/2025 Page 9 of 54
By:MAYANK
Signing Date:28.07.2025
14:11:15
affiliates and associates, from engaging themselves in
competing business activities pertaining to ‘international
freight forwarding and logistics’, to the prejudice of
SurgePort Logistics Private Limited – Claimant No. 1 and
Skyways Air Services Private Limited – Claimant No. 2 (as
would infringe the ‘non-compete and non-solicit
obligations’, contained in Clause 15 of the ‘Shareholders
Agreement’, dated 28.04.2018). It is accordingly, so
ordered. Needless to mention, that the Respondents would
be entitled to seek a recall and/or modification of the above
directions, consequent upon the Respondent’s disclosing the
entire business activities of the Respondents – Mr. Paul
Deepak Rajaratnam, and Mr. Mohamed Naushad Basheer,
including their agents, partners, subsidiaries, affiliates and
associates, with effect from the date of incorporation of
Accel Transport and Logistics (ie., from 18.07.2018), as
directed by the Hon’ble Delhi High Court, vide its order
dated 16.05.2024. The above disclosures can be made by
the Respondents, if the Respondents are so advised, by filing
separate affidavits of both the Respondents. If the affidavits
filed by the Respondents, turn out to be false or incorrect,
or if any information concerning such business activity is
withheld, the Respondents – Mr. Paul Deepak Rajaratnam,
and Mr. Mohamed Naushad Basheer, will expose
themselves to civil and criminal consequences. With the
above observations, the application filed by the ClaimantsDigitally Signed ARB. A. (COMM.) 5/2025 Page 10 of 54
By:MAYANK
Signing Date:28.07.2025
14:11:15
under Section 9 of the Arbitration and Conciliation Act,
1996 (which has been treated as having been filed under
Section 17 of the Arbitration and Conciliation Act, 1996, on
the basis of the order passed by Hon’ble Delhi High Court,
dated 23.08.2024 – extracted in paragraph 18, above), is
disposed of.”
SUBMISSIONS ON BEHALF OF THE APPELLANTS
16. Mr. Vivek Kohli, learned senior counsel for the appellants, challenges
the impugned interim award contending that it is erroneous in law and
warrants being set aside. The core grievance arises from the direction
of the learned arbitrator enforcing non-compete and non-solicit
clauses i.e. Clause 15 of the SHA, despite the undisputed fact that the
SHA was unilaterally terminated by the respondents through
Termination Notices dated 25.07.2023, which were further accepted
by the appellants via email dated 13.10.2024. It is stated that the said
direction of the learned arbitrator imposes a wrongful restraint of trade
upon the appellants.
17. The facts clearly demonstrate that the respondents themselves severed
the contractual relationship, terminating services of the appellants,
denying them access to workplace infrastructure and withholding all
forms of remuneration, including salary, commission and dividends.
The respondents also communicated this severance to clients, thereby
conclusively ending any business associations/engagement with the
appellants. Yet, the learned arbitrator erroneously relied on an oral
submission made by the respondents claiming no termination had
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By:MAYANK
Signing Date:28.07.2025
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occurred, citing technicalities like the lack of a second termination
letter to appellant No. 2, the authority to terminate the SHA vests with
respondent No. 2 and the continued appearance of the appellants as
Directors on the MCA portal, despite it being the responsibility of the
respondents to update those records.
18. The learned arbitrator’s acceptance of these flawed arguments ignores
categorical written evidence of termination. It proceeds to grant
specific performance of Clause 15 of the terminated SHA, which is
impermissible under Sections 14(c) and 14(d) read with Section 41(e)
of the Specific Relief Act, 1963 (for brevity “the SRA”) and is
contrary to Section 27 of the Indian Contract Act, 1882 (for brevity
“the ICA”) which renders agreements in restraint of trade void. The
appellants argue that enforcing a negative covenant from a terminated
agreement deprives them of their right to earn a livelihood and
amounts to compelling performance of a personal service contract and
determinable contract, which is legally unenforceable in view of
Sections 14(c) and 14(d) read with 41(e) of the SRA.
19. The impugned interim award is also criticized for denying immediate
relief to the appellants in the form of salary, commissions or
dividends, while requiring them to file a separate application for their
rightful dues. This imposes an unjust procedural burden on the
appellants, already suffering financial hardship due to unlawful
termination.
20. Further, the SHA itself quantifies liquidated damages under Clause
15(3), which under established legal principles, precludes grant of
injunctive relief at the interim stage. In support, reliance is placed on
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By:MAYANK
Signing Date:28.07.2025
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Dalpat Kumar v. Prahlad Singh, (1992) 1 SCC 719 and Indian Oil
Corporation Limited v. Amritsar Gas Service & Ors., (1991) 1 SCC
533, where it was held that when damages are an adequate remedy,
injunctions should not be granted.
21. The impugned clause is also void for being in restraint of trade post-
termination. The law is clear that such restrictive covenants are
unenforceable beyond the life of the contract. This has been affirmed
in Percept D’Mark (India) Private Limited v. Zaheer Khan, (2006) 4
SCC 227, Niranjan Shankar Golikari v. Century Spinning and
Manufacturing Company Limited (1967) 2 SCR 378 and Country
Development and Management Services Private Limited v.
Brookside Resorts Private Limited, 2006 SCC OnLine Del 200,
which hold that post-termination restraints, even outside employment
contracts, are contrary to public policy.
22. Reliance is further placed on Arvind Medicare Private Limited v. Dr.
Neeru Mehra, 2021 SCC OnLine Del 2225, to urge that personal
service contracts cannot be specifically enforced.
23. The enforcement of such a restraint not only violates settled law but
also results in grave real-life consequences for the appellants. These
include forced idleness, loss of livelihood, corporate subjugation and
harm to families dependent on their earnings. Such consequences are
disproportionate, unjust and contrary to the equitable principles
underlying arbitral relief.
24. In conclusion, the appellants pray that the impugned interim award be
set aside as it is legally untenable, factually flawed and causes
irreparable harm to the rights and livelihood of the appellants.
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By:MAYANK
Signing Date:28.07.2025
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25. In addition, on 22.05.2025, the appellants have submitted a
supplementary written note stating that they ceased to be Directors of
respondent No. 1 with effect from 25.07.2023. This fact is relevant for
the proper adjudication of the present appeal and to counter any
continuing misrepresentation regarding the subsistence of their
directorship.
26. The appellants have submitted that appellant No. 2 was in the process
of having his name removed from the Ministry of Corporate Affairs
(for brevity “the MCA”) Master Data records of respondent No. 1 and
the said process is now complete.
27. The updated MCA Master Data as of 19.05.2025 confirms that both
appellants are no longer listed as Directors of respondent No. 1 since
25.07.2023. It is clarified that the name of appellant No. 1 name was
removed earlier on 24.04.2024 and the name of appellant No. 2 has
now also been removed.
28. In light of the above factual developments, the appellants reiterate
their prayer that the impugned interim award be set aside, as the
contractual relationship between the parties has conclusively ended
and the underlying basis for enforcing the impugned interim award no
longer exists.
SUBMISSIONS ON BEHALF OF THE RESPONDENTS
29. The respondents oppose the present appeal against the impugned
interim award passed by the learned arbitrator under Section 17 of the
Act and submit that the appeal is not maintainable and must be
outrightly rejected for there are no grounds made out to suggest that
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By:MAYANK
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the impugned interim award is against the fundamental policy of
Indian Law, and/or perverse or manifestly arbitrary, and/or the learned
arbitrator exceeded his jurisdiction, for it to be challenged under
Section 37(2)(b) of the Act.
30. The respondents contend that the core challenge of the appellants,
claiming the impugned interim award is equivalent to a “commercial
death sentence” or “corporate slavery”, is fundamentally flawed. The
impugned interim award merely enforces the non-compete obligations
under Clause 15 of the valid and subsisting SHA. The learned
arbitrator had already considered and rejected the argument of the
appellants that the SHA had been terminated. Therefore, the present
appeal amounts to a re-litigation of issues that were fully argued and
addressed in the Section 17 hearing.
31. The second contention raised by the appellants, alleging that the
learned arbitrator misinterpreted Clause 15(1) of the SHA by ignoring
its conditionality, is also meritless. The learned arbitrator had
thoroughly reviewed and upheld the unambiguous language of the
clause and the current argument of the appellants seeks nothing but a
re-appreciation of evidence and record, which is impermissible under
Section 37 of the Act.
32. The third ground, alleging violation of client confidentiality, thereby
enforcing an unconscionable and geographically undefined restraint of
trade, compelling perpetual service to the respondent No. 1 in respect
of the business of the respondent No. 1, was already adequately
considered by the learned arbitrator. The respondents maintain that
this claim too is outside the permissible scope of review under Section
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37 of the Act.
33. Further, the respondents allege that the appellants have made shifting
and contradictory claims throughout the dispute to avoid their
contractual obligations under the SHA. Initially, the appellants denied
the existence of a valid SHA and claimed they were not Directors or
shareholders. However, these contentions were later retracted through
affidavits acknowledging the validity of the SHA, their directorships
and the nature of the business governed by Clause 15.
34. The respondents also highlight that in earlier proceedings under
Section 9 of the Act before this Court, the contentions of the
appellants were considered and this Court passed an order on
16.05.2024 directing them to disclose specific commercial
information. The operative part of the said Order reads as under:
“7. On a specific query, Mr. Ritin Rai, ld. Senior Counsel
submits that the Respondent Nos. 1&2 are currently
directors of SurgePort Logistics Private Limited and are
not engaging himself in any of the competitive business
against SurgePort Logistics Private Limited. Mr. Rai
further submits that the only business being carried out by
the Respondent Nos. 1&2 is a business which was within
the knowledge of the Petitioners.
8. A perusal of Clause 15 of the Shareholders‟ Agreement
clearly shows that the Respondent Nos. 1&2 cannot engage
in any business competitive to the Petitioner No. 1‟s
business, where they are currently directors. The
Respondent No. 1&2 shall, accordingly, place on record theDigitally Signed ARB. A. (COMM.) 5/2025 Page 16 of 54
By:MAYANK
Signing Date:28.07.2025
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sales turnover and the balance sheets for the partnership
firm Respondent No. 3-M/s Accel Transport and Logistics
since its incorporation on 18th July, 2018, as well as the
complete list of its clients and the nature of services
rendered to such clients. It is also directed that Respondent
No. 1&2 shall not use the email addresses of SurgePort
Logistics Private Limited in any manner whatsoever.”
35. While the appellants challenged that the said Order under Section 37
of the Act, this Court later directed, via its Order dated 23.08.2024,
that the petition under Section 9 of the Act be treated as an application
under Section 17 of the Act before the learned arbitrator, where all
issues were again thoroughly adjudicated. The operative part of the
said Appeal Order reads as under:-
“4. Given this position, we are inclined to dispose of the
present appeal with the following directions: (i) The
application filed by the respondents under Section 9 of the
1996 Act [qua which the impugned judgment and order has
been passed], will be treated by the arbitral tribunal as an
application under Section 17 of the 1996 Act. (ii) The
arbitral tribunal will, after hearing both sides, be at liberty
to vacate/vary/modify or even confirm the order and if
necessary, grant further relief(s), as may be available in
law.
5. Needless to say, the respondents will be at liberty to move
a fresh application under Section 17 of the 1996 Act.
6. Given the aforesaid, the respondents will place the order
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passed today before the learned Single Judge, who will pass
appropriate orders qua the application preferred by the
respondents under Section 9 of the 1996 Act, having regard
to the directions contained herein.”
36. The appellants had argued that the SHA stood terminated due to
various alleged violations and a termination notice issued on
25.07.2023. They claimed their relationship with respondent No. 1
had ended, as they were no longer receiving salary, profits or
dividends and were accused of engaging in competing businesses.
They relied on alleged termination letters, including one dated
25.07.2023. The appellants also relied on precedents asserting that
non-compete clauses cannot be enforced post-termination of a
contract.
37. The respondents state that the termination notice dated 25.07.2023
could not be considered valid under Clause 14 of the SHA, which only
empowered respondent No. 2 to terminate the agreement and not
respondent No. 1. Since the said notice was issued by respondent No.
1 and not respondent No. 2, it lacked authority and did not amount to
lawful termination. Additionally, this letter mainly pertained to
criminal complaints filed before the Economic Offences Wing (for
brevity “the EOW”), not for termination of the SHA.
38. There exist contradictions in the stand of the appellants: while they
earlier denied being party to the SHA, they later acknowledged its
execution. Also, the appellants failed to show that a termination notice
was ever issued to appellant No. 2. The appellants were still listed as
Directors of respondent No. 1 as per the Order dated 16.05.2024
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passed by this Court and continued to receive board meeting
invitations, indicating an ongoing associations/engagement.
39. On the issue of financial entitlements, the learned arbitrator held that
claims regarding profit share, salaries or dividends could be pursued
through separate legal means but had no bearing on the enforceability
of the SHA or its non-compete and non-solicit clauses. The learned
arbitrator found the SHA to be valid and enforceable and that the
relationship of the appellants with the company had not been severed.
40. Regarding the applicability of Section 27 of the ICA, the learned
arbitrator accepted the argument of the respondents that the appellants
were not mere employees but also shareholders and directors.
Therefore, the non-compete and non-solicit clauses remained
enforceable even during the subsistence of the SHA. The precedents
cited by the appellants were found to be inapplicable to the current
facts by the learned arbitrator.
41. In conclusion, the learned arbitrator correctly found the SHA to be
intact and enforceable, rejected the claim of termination and upheld
the enforceability of the restrictive covenants.
42. The respondents had filed a petition under Section 9 of the Act
seeking interim reliefs including restraining the appellants from
engaging in competing businesses, compliance with the SHA,
rendition of accounts, appointment of a local commissioner and
deposit of Rs. 1 crore. The appellants opposed these reliefs by arguing
that Clause 15(3) of the SHA already provided a penalty framework
for breaches, making interim injunctive relief unnecessary. They
further contended that the SHA was not breached as their activities
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were transparent and approved and any breach could be compensated
monetarily as per the penalty clause.
43. However, the respondents contend that Clause 15 alone did not limit
their right to injunctive relief, as Clause 25 of the SHA also allowed
enforcement through specific performance. The learned arbitrator
upheld this view, stating that the respondents would otherwise be
unable to identify violations without disclosure from the appellants.
Since the appellants had not complied with court directions to disclose
their business activities, it became necessary to grant interim
protection to preserve the rights of the respondents under the SHA.
44. The learned arbitrator also pointed out that the appellants had earlier
questioned the validity of the SHA, calling it unregistered and
unstamped, only to later abandon that argument. This inconsistency,
along with non-compliance with the Orders of this Court to submit
affidavits regarding disclosing their business details, raised questions
on the credibility of the appellants.
45. The learned arbitrator held that the interim relief granted was aligned
with the terms of the SHA and not excessive. It merely restrained the
appellants from engaging in competing business activities in
international freight forwarding and logistics. The learned arbitrator
noted that while appellant No. 3 was permitted to act as a vendor, it
was not authorised to engage in competing businesses. The learned
arbitrator found five letters evidencing the intent of the appellants to
breach non-compete obligations and cited their continued refusal to
disclose business activities as directed by this Court.
46. Additionally, the learned arbitrator found no merit in the argument of
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the appellants that Clause 15 was ambiguous and rejected the
contentions of the appellants. He held that Clause 15 clearly
prohibited not only direct competition but also businesses that are
“relatively same business”, thereby establishing a broad scope for
prohibited activities.
47. In view of the above, the respondents urge that the present appeal be
dismissed.
ANALYSIS AND FINDINGS
48. I have heard learned counsel for the parties and also perused the
material available on record.
Scope of Interference under Section 37(2)(b) of the Act.
49. Before delving into the substantive merits of the impugned interim
award, it is important to delineate the permissible scope of judicial
interference under Section 37(2)(b) of the Act. The said provision is
extracted below:-
“37. Appealable orders.–
***
(2) Appeal shall also lie to a court from an order of the
arbitral tribunal–
***
(b) granting or refusing to grant an interim measure under
section 17.”
50. Under Section 37(2)(b) of the Act, the jurisdiction of an appellate
court to interfere with an interim order passed by an arbitral tribunal
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under Section 17 of the Act is limited and well-settled. This restrained
approach is rooted in the legislative policy of the Act, as reflected in
Section 5 of the Act, which mandates minimal judicial intervention in
arbitral proceedings.
51. Judicial intervention is warranted only when the order is (A) perverse,
arbitrary or unreasonable, (B) contrary to the fundamental policy of
Indian law, (C) the arbitral tribunal has exceeded or failed to exercise
its jurisdiction, and/or (D) it results in a miscarriage of justice.
52. This standard has been laid down and reiterated in multiple decisions
of the Hon’ble Supreme Court and this Court including National
Highways Authority of India v. HK Toll Road Private Limited, 2025
SCC OnLine Del 2376. The relevant paragraphs read as under:-
“54. The Supreme Court and this Court in catena of
judgments have held that the powers of appellate court
while exercising jurisdiction under Section 37(2)(b) of the
1996 Act against orders passed by the Arbitral Tribunal is
very restricted and narrow and the same should be
exercised when the orders seems to be perverse, arbitrary
and contrary to law. …
***
56. A perusal of the aforesaid judgments show that the
appellate court while exercising powers/jurisdiction under
Section 37 of the 1996 Act and more particularly under
Section 37(2)(b) of the 1996 Act has to keep in mind the
limited scope of judicial interference as prescribed under
Section 5 of the 1996 Act. Section 5 of the 1996 Act clearlyDigitally Signed ARB. A. (COMM.) 5/2025 Page 22 of 54
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reflects the legislative intent to minmize judicial
interference in the arbitration process. Unlike the appeals
under other statutes, the appeals under the 1996 Act against
the orders passed by the Arbitral Tribunal are subject to
strict and narrow grounds. The 1996 Act aims at minimal
court involvement, thereby to uphold the autonomy and
efficiency of the arbitration process. (Reference: paras 64,
66, 68-70 of Dinesh Gupta case13).
57. The appellate court is not required to substitute its
views with the view taken by the Arbitral Tribunal which is
a reasonable or a plausible view except where the
discretion is exercised arbitrarily or where the AT has
ignored the settled principles of law. In fact, the whole
purpose to bring the 1996 Act is to give supremacy to the
discretion exercised by the AT. The appellate court is not
required to interfere in the arbitral orders especially a
decision taken is at an interlocutory stage. The appellate
court is only required to see the whether the AT has
adhered to the settled principles of law rather than
reassessing the merits of the AT’s reasoning.
58. A coordinate Bench of this Court in Tahal Consulting
Engineers India (P) Ltd. case22 has observed as under:
(SCC OnLine Del paras 36 and 38)
“36. L & T Finance lays emphasis on the need of the
appellate court to bear in mind the basic and
foundational principles of the Act and that being ofDigitally Signed ARB. A. (COMM.) 5/2025 Page 23 of 54
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judicial intervention being kept at the minimal. It also
correctly finds that the power conferred by Section
37(2)(b) is not to be understood as being at par with
the appellate jurisdiction which may otherwise be
exercised by courts in exercise of their ordinary civil
jurisdiction. This clearly flows from the foundational
construct of the Act which proscribes intervention by
courts in the arbitral process being kept at bay except
in situations clearly contemplated under the Act or
where the orders passed by the Arbitral Tribunal may
be found to suffer from an evident perversity or patent
illegality.
∗∗∗
38. It would thus appear to be well settled that the
powers under Section 37(2)(b) is to be exercised and
wielded with due circumspection and restraint. An
appellate court would clearly be transgressing its
jurisdiction if it were to interfere with a discretionary
order made by the Arbitral Tribunal merely on the
ground of another possible view being tenable or upon
a wholesome review of the facts the appellate court
substituting its own independent opinion in place of the
one expressed by the Arbitral Tribunal. The order ofthe
Arbitral Tribunal would thus be liable to be tested on
the limited grounds of perversity, arbitrariness and a
manifest illegality only.”
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59. To sum up, it is clear that in view of the limited judicial
interference, the appellate court has to exercise its power
only if the arbitral order suffers from perversity,
arbitrariness and a manifest illegality.”
53. Hence, it is clear that in view of the limited judicial interference, the
Appellate Court must intervene only where the order is vitiated by
perversity, arbitrariness, jurisdictional error or contravention of public
policy.
Ambit of Section 17 of the Act.
54. Section 17 of the Act empowers an arbitral tribunal to grant interim
measures during arbitral proceedings or after the arbitral award but
prior to its enforcement under Section 36 of the Act. Such measures
may include the protection relating to the preservation or sale of
goods, securing monies in dispute, inspection or preservation of
disputed property, interim injunctions or receivership and any other
protective or convenient orders deemed necessary. The arbitral
tribunal is vested with powers equivalent to those of a civil court for
granting such reliefs and the orders under Section 17 of the Act are
treated as court orders and are enforceable under the Code of Civil
Procedure, 1908 (for brevity “the CPC“) in the same manner as orders
of a civil court.
55. The Coordinate Bench of this Court in Handicraft and Handlooms
Exports Company of India v. SMC Comtrade Limited, 2023 SCC
OnLine Del 3981, reiterated the judgment of Arcelormittal Nippon
Steel (India) Limited (supra). The relevant paragraph reads as under:-
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“36. Once the scope of interference by this Court in an
order passed by the learned Arbitrator under Section 17 of
the 1996 Act is understood, it is necessary to look at the
scope of power of the Arbitral Tribunal under Section 17,
which to my mind is an issue no longer res integra. Section
17 of the 1996 Act has been specifically enacted by the
legislature to provide to a party, during the arbitral
proceedings or after the award is made but before it is
enforced, a right of seeking preservation of the subject
matter of the arbitration agreement and/or securing the
amount in dispute in arbitration. Post the amendment of
Section 17 of the 1996 Act, it is in the same province as
Section 9 of the Act, as held by the Supreme Court in a
recent decision in Arcelor Mittal Nippon Steel (India) Ltd.
v. Essar Bulk Terminal Ltd., (2022) 1 SCC 712 and bestows
power on the Arbitral Tribunal to make orders of interim
protection on a wider canvass. …”
56. To grant interim reliefs under Sections 9 or 17 of the Act, the
ingredients as set out in the judgment of Arcelormittal Nippon Steel
(India) Limited (supra) are to be satisfied. The relevant paragraph
reads as under:-
“89. The principles for grant of interim relief are (i) good
prima facie case, (ii) balance of convenience in favour of
grant of interim relief and (iii) irreparable injury or loss to
the applicant for interim relief. Unless applications for
interim measures are decided expeditiously, irreparableDigitally Signed ARB. A. (COMM.) 5/2025 Page 26 of 54
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injury or prejudice may be caused to the party seeking
interim relief.”
57. Having discussed the principles with regard to the powers of the
Appellate Court and the powers of the arbitral tribunal under Section
17 of the Act, I will now proceed to examine the contentions raised by
the parties.
Whether the Shareholders’ Agreement was Validly Terminated.
58. A pivotal issue in this case is whether the SHA dated 28.04.2018 was
validly terminated by the respondents through the termination notice
dated 25.07.2023. The appellants contend that upon termination of the
SHA, they ceased to owe any obligations under Clause 15, including
the non-compete and non-solicit obligations. The learned arbitrator,
however, found that the SHA continued to remain valid and binding
upon the parties.
59. The relevant paragraph of the impugned interim award is reproduced
as under:-
“55. The Respondents have also canvassed before the
Arbitral Tribunal, that the action of the Claimants towards
the Respondents, has been harsh and severe, after the
issuance of the „show cause notice‟, dated 07.06.2023. In
this behalf it was pointed out, that the Claimants have put
an end to everything between the Respondents – Mr. Paul
Deepak Rajaratnam, and Mr. Mohamed Naushad Basheer.
It was submitted, that the Claimants have prohibited the
Respondents, from carrying on any activity connected withDigitally Signed ARB. A. (COMM.) 5/2025 Page 27 of 54
By:MAYANK
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„international freight forwarding and logistics‟. This action
of the Claimants, it was argued, violates the safeguards
available to the Respondents, under Section 27 of the Indian
Contract Act, 1872. The Arbitral Tribunal has given its
thoughtful consideration to the instant submission advanced
by the learned Counsel for the Respondents. In support of
the instant assertion, reliance was placed by the learned
Counsel for the Respondents on the judgments noted in
paragraph 37, above. The same have been duly considered
by the Arbitral Tribunal. The Arbitral Tribunal has also
considered the judgments relied upon by the learned
Counsel for the Claimants, as have been referred to in
paragraph 50, above. The Arbitral Tribunal is of the
considered view, that the relationship of the Respondents
with SurgePort Logistics Private Limited – Claimant No. 1,
has not been severed. The Respondents – Mr. Paul Deepak
Rajarantnam, and Mr. Mohamed Naushad Basheer, still
continue to be the Directors of Claimant No.1 – SurgePort
Logistics Private limited. This position has been recorded
in the order of the Hon’ble Delhi High Court, dated
16.05.2024 (passed in O.M.P. (I) (COMM.) 246/2023). In
the instant order passed by the Hon‟ble High Court, it was
observed ” … On a specific query, Mr. Ritin Rai, ld. Senior
Counsel submits that the Respondent Nos. 1&2 are
currently directors of SurgePort Logistics Private Limited
and are not engaging himself in any of the competitiveDigitally Signed ARB. A. (COMM.) 5/2025 Page 28 of 54
By:MAYANK
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business against SurgePort logistics Private Limited. Mr.
Rai further submits that the only business being carried out
by the Respondent Nos. 1&2 is a business which was within
the knowledge of the Petitioners …”. The Respondents – Mr.
Paul Deepak Rajaratnam, and Mr. Mohamed Naushad
Basheer, continue to possess a right to dividends from
SurgePort Logistics Private Company, in consonance with
their respective share holdings. The Respondents – Mr. Paul
Deepak Rajaratnam, and Mr. Mohamed Naushad Basheer,
are also entitled to salary under Clause 4 (2) of the
„Shareholders Agreement‟, dated 28.08.2018. It is the case
of the learned counsel for the Claimants, that the
relationship of the Respondents – Mr. Paul Deepak
Rajaratnam, and Mr. Mohamed Naushad Basheer, with
SurgePort Logistics Private Limited, has not come to an
end, and that it still subsists. The Arbitral Tribunal finds
itself satisfied, with the above submission of the learned
Counsel for the Claimants. In the considered opinion of the
Arbitral Tribunal, till the relationship between the
Respondents – Mr. Paul Deepak Rajaratnam, and Mr.
Mohamed Naushad Basheer, with SurgePort Logistics
Private Limited subsists, there can be no question of any
breach of Section 27 of the Indian Contract Act. As such,
the „non-compete and non-solicit obligations‟ contained in
Clause 15 of the „Shareholders Agreement‟, dated
28.04.2018, is liable to be considered as valid, andDigitally Signed ARB. A. (COMM.) 5/2025 Page 29 of 54
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enforceable against the Respondents – Mr. Paul Deepak
Rajaratnam, and Mr. Mohamed Naushad Basheer. For the
reasons recorded above, the Arbitral Tribunal finds no
merit in the contention advanced on behalf of the
Respondents, on the basis of Section 27 of the Indian
Contract Act, 1872.”
60. On perusal, the conclusion of the learned arbitrator that the SHA is
subsisting was premised on the following grounds:-
A. The appellants continue to be Directors of the respondent No.
1 company and have not ceased to be associated with the
company. This fact was noted in the Order dated 16.05.2024
passed by this Court on a specific query put to learned counsel
of the appellants, which confirmed their position as directors
and their non-engagement in competing business.
B. The learned arbitrator found that, despite the issuance of a
show cause notice and the subsequent disputes, the formal
relationship between the parties under the SHA had not been
brought to an end and the rights and obligations of the
appellants under the SHA persisted.
Therefore, the learned arbitrator held that until the relationship
between the appellants and the respondent No. 1 is legally severed, the
SHA remains valid and subsisting, including all attendant rights and
obligations thereunder.
61. After examining the matter, I agree with the conclusion of the learned
arbitrator and set forth the following detailed reasons:-
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A. Conduct of the Appellants Inconsistent with Termination.
62. The fact that weighs with me is that the material on record does not
support the contention of the appellants that the SHA stood terminated
pursuant to the termination notice dated 25.07.2023.
63. At the outset, it is relevant to note that the Order dated 16.05.2024
passed by this Court in O.M.P.(I)(COMM) 246/2023 expressly
records that the appellants continued to hold the position of Directors
in the respondent No. 1 company as on the said date. This factual
finding, recorded by a coordinate Bench of this Court, directly
contradicts and undermines the present contention of the appellants
that all legal and contractual relationships with the respondent No. 1
were terminated as early as 25.07.2023.
64. The relevant extract from the said Order is reproduced as under:-
“7. On a specific query, Mr. Ritin Rai, ld. Senior Counsel
submits that the Respondent Nos. 1&2 are currently
directors of SurgePort Logistics Private Limited and are
not engaging himself in any of the competitive business
against SurgePort Logistics Private Limited. Mr. Rai
further submits that the only business being carried out by
the Respondent Nos. 1&2 is a business which was within
the knowledge of the Petitioners.
8. A perusal of Clause 15 of the Shareholders‟ Agreement
clearly shows that the Respondent Nos. 1&2 cannot engage
in any business competitive to the Petitioner No. 1‟s
business, where they are currently directors. The
Respondent No. 1&2 shall, accordingly, place on record theDigitally Signed ARB. A. (COMM.) 5/2025 Page 31 of 54
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sales turnover and the balance sheets for the partnership
firm Respondent No. 3-M/s Accel Transport and Logistics
since its incorporation on 18th July, 2018, as well as the
complete list of its clients and the nature of services
rendered to such clients. It is also directed that Respondent
No. 1&2 shall not use the email addresses of SurgePort
Logistics Private Limited in any manner whatsoever.”
65. This Order leaves little room for doubt. The representation made by
learned senior counsel and duly recorded by this Court, confirms the
continued role of the appellants as Directors and their ongoing legal
obligations under Clause 15 of the SHA. Therefore, the attempt of the
appellants to portray a clear severance from the corporate and
contractual framework post 25.07.2023 is not only factually incorrect
but also legally untenable in light of the express judicial record.
66. Beyond the documentary record, what also warrants an adverse
inference is the timing and evolving nature of the stand of the
appellants regarding the termination of the SHA. Although the
termination notice is dated 25.07.2023, it is noteworthy that the
appellants themselves neither acted upon nor relied on this notice until
much later. Their formal acceptance of the termination was
communicated only on 13.10.2024, well after the commencement of
arbitration proceedings on 10.08.2024. This delayed and selective
invocation of the termination plea, conveniently raised only in
response to the initiation of arbitral proceedings, appears to be a clear
afterthought.
67. Further, in their additional reply dated 13.09.2024 to the application of
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the respondents under Section 17 of the Act, the appellants made no
mention whatsoever of the alleged termination of the SHA or of
Clause 15 being rendered unenforceable as a consequence thereof.
This line of argument was raised for the first time only in their written
submissions dated 27.11.2024, over three months after the
commencement of arbitration and only after their acceptance of the
termination had been formally communicated.
68. It is also relevant to note that the appellants were subsequently
compelled to file an application dated 22.10.2024 seeking to bring on
record their acceptance of the termination. The said application states
as follows:
“3. … However, the aforesaid documents filed on
17.09.2024 (S.No.2) and 13.10.2024 (S.No.4) have not been
taken on record on account of the inadvertence of the
Respondents by failing to prefer an Application seeking
specific liberty of this Hon’ble Tribunal to bring the
aforesaid additional documents on record for the proper
and fair adjudication of the pending dispute between the
parties.
5. In re: the document at S.No.4, i.e. Annexure R13
(COLLY), viz. the Respondents‟ email to the Claimants
dated 13.10.2023, it is submitted that the said document is a
fresh document being the Respondents‟ Notices dated
13.10.2024 confirming the termination of Shareholders‟
Agreement dated 28.04.2018 w.e.f. 25.07.2023. The said
document was not in the power, possession or control of theDigitally Signed ARB. A. (COMM.) 5/2025 Page 33 of 54
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Respondents at the time of filing theReply or Additional
Reply to the Claimants‟ Section 17 Application as it was not
in existence at the relevant time.It is a matter of record that
this Hon’ble Tribunal, after recording no objection of the
Claimants, was pleased to take on record the Claimants‟
Termination Notice dated 25.07.2023 in terms of order
dated 30.09.2024. However, during the course of the
arguments, the Claimants have conveniently chosen to
wriggle out of the said termination by giving a different
interpretation totheir Notice of Termination dated
25.07.2023. Therefore, it was deemed necessary and
appropriate to issue notices of confirmation of the
termination of the Shareholders‟ Agreement.”
69. This extract further demonstrates that the position of the appellants
evolved only after the arbitral process had commenced and in
response to the legal strategy of the respondents. It reveals that the
termination was not treated as operative until it became expedient to
do so during the proceedings. Such conduct reinforces the inference
that the plea is opportunistic and designed to evade contractual
obligations, particularly those imposed under Clause 15 of the SHA.
70. Even more significantly, the appellants have, at different stages, taken
inconsistent positions regarding the very existence of the SHA. In
earlier pleadings and communications, the appellants outright denied
the existence and enforceability of the SHA. However, at a subsequent
stage, they chose to rely upon the same agreement to claim that it
stood terminated.
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71. The Order dated 19.12.2023 passed by this Court records the
contradictory stand of the appellants, which is reproduced as under:-
“1. On the last date, in the light of the specific plea raised
by the respondents that the shareholder agreement relied
upon by the petitioners, which contained the arbitration
clause had not been signed by them, directions were issued
to them to file their specific affidavits in this regard.
2. The respondent nos.1 & 2 have now filed their respective
affidavits wherein the said respondents have taken a
completely contradictory stand that the aforesaid
shareholder agreement dated 28.04.2018 relied upon by the
petitioners were signed by them. This Court is unable to
appreciate this apparently false stand which was being all
along taken by respondent nos. 1 &2 with an intent to
mislead this Court.
3. It further appears that when the respondents realised the
gravity of having taken a blatantly false stand before this
Court, they have now chosen to file a set of documents
without seeking any prior leave of this Court. Though the
said documents ought not to have been placed on record by
the Registry without any permission for the same having
been granted to the respondents by this Court, taking into
account that same have already been placed on record, no
further orders are being passed. However, as prayed for the
petitioners are granted two weeks‟ time to file a response
thereto. Reply, if any, by the respondents be filed within oneDigitally Signed ARB. A. (COMM.) 5/2025 Page 35 of 54
By:MAYANK
Signing Date:28.07.2025
14:11:15
week thereafter.”
72. Lastly, the MCA Master Data records reflecting the cessation of the
directorship of the appellants is, in essence, a self-serving document,
having been unilaterally filed by the appellants themselves with the
MCA. It does not, by itself, establish the termination of the broader
legal relationship governed by the SHA. The mere act of updating
statutory records cannot override or substitute the mutual obligations
contemplated under the SHA, particularly when the underlying
termination itself is disputed.
73. Taken cumulatively, the documentary recognition of the appellants
positioned as Directors of the respondent No. 1 company well after the
purported termination, their delay in asserting the plea of termination
and their inconsistent positions regarding the existence of the SHA, all
point to a lack of bona fides and undermine the credibility of their
claim that the SHA was validly terminated.
74. This Court accordingly finds no infirmity in the finding of the learned
arbitrator that the SHA continued to subsist and had not been
effectively or lawfully terminated.
B. Separation from Management ≠ Termination of Contractual
Obligations.
75. The appellants have contended that their removal from email systems,
cessation of remuneration and exclusion from day-to-day affairs
signify the termination of the SHA and removal from directorship.
Even if such an inference is accepted for the sake of argument, it is
critical to underscore that these actions may, at best, evidence a
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change in managerial or operational status. However, they do not, ipso
facto, result in the legal termination of the SHA.
76. The SHA is a commercial agreement entered into between equity
holders, establishing rights and obligations in the capacity of
shareholders, not as employees or executives. Employment or
managerial roles may flow from or coincide with shareholding
arrangements, but they are not synonymous with them. Consequently,
disengagement from management or operational responsibilities does
not bring about the cessation of contractual obligations imposed under
the SHA, including those that survive its termination, such as non-
compete and non-solicit covenants.
77. This distinction has been duly recognized by the learned arbitrator,
particularly in relation to the claim of the appellants regarding their
financial entitlements. The learned arbitrator granted liberty to the
parties to file their financial claims and held that the same have no
nexus to the non-compete and non-solicit obligations of the SHA.
78. The relevant paragraph reads as under:
“57. … The Arbitral Tribunal has given its thoughtful
consideration, to the aforesaid submissions, advanced on
behalf of the Respondents. The Arbitral Tribunal, however,
finds no merit in the same. In case the Respondents are
entitled to any financial benefits from the Claimants, it is
open to the Respondents to seek the same , in consonance
with law. Just like the Claimants, it is open to the
Respondents to seek the above noted dues, by moving an
appropriate application, before the Arbitral Tribunal.
Digitally Signed ARB. A. (COMM.) 5/2025 Page 37 of 54
By:MAYANK
Signing Date:28.07.2025
14:11:15
Alternatively, the Respondents may claim the same, by filing
‘counter claims’ before the Arbitral Tribunal. The instant
contention of the learned Counsel for the Respondents, has
no nexus to the ‘non-compete and non-solicit obligations’,
contained in the Clause 15 of the ‘Shareholders Agreement’,
dated 28.04.2018. For the above reasons, the Arbitral
Tribunal finds no merit in the instant contention of the
Respondents.”
79. This reasoning finds support in the decision of the Bombay High
Court, in Novartis Vaccines & Diagnostics Inc. v. Aventis Pharma
Limited, 2009 SCC OnLine Bom 2067, which emphasized the
enduring nature of contractual obligations arising out of joint venture
or shareholders’ agreements, irrespective of operational
disengagement. The relevant paragraph reads as under:-
“37. Where parties enter into any kind of Joint Venture
and/or partnership to do particular business and/or to
establish particular business or company and, accordingly,
enter into various contracts/agreements, it is always on the
foundation of meeting of mind with an intention to do the
joint business in cooperation, in Trust and in good faith for
the common advantage & benefit. The commercial
contracts always need to be respected and considered from
the above point of view. The scheme, the object and the
intention of the parties to enter into such type of
agreement/contract need to be read together by reading and
by considering the whole documents as well as the purposeDigitally Signed ARB. A. (COMM.) 5/2025 Page 38 of 54
By:MAYANK
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and the object behind formation of such
partnership/company. No provision is made for a partner to
do rival or competing business freely. Both the parties are
governed by JVA, shareholders agreement & the Article of
Association of CBVPL. Both the partners are aware of their
respective, written & unwritten obligations, liabilities,
duties.”
80. Accordingly, the mere cessation of managerial roles or non-
participation in operational affairs does not absolve a party from the
continuing legal and contractual obligations flowing from the SHA.
Any attempt to circumvent or disclaim such obligations by citing
managerial disengagement is legally unsustainable.
Non-Applicability of Section 27 of the Indian Contract Act, 1882.
81. The argument of the appellants is that the impugned interim award is
contrary to Section 27 of the ICA which renders agreements in
restraint of trade void. The appellants argued that enforcing a
restrictive covenant from a terminated agreement deprives them of
their right to earn a livelihood.
82. Section 27 of the ICA provides that every agreement by which anyone
is restrained from exercising a lawful profession, trade or business is
to that extent void, unless it falls within the statutory exception. The
sole exception to this provision pertains to the sale of goodwill, where
the seller may agree to a reasonable restriction on carrying on a
similar business within specified limits. The said provision reads as
under:
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“27. Agreement in restraint of trade, void.–Every
agreement by which any one is restrained from exercising a
lawful profession, trade or business of any kind, is to that
extent void.
Exception 1.–Saving of agreement not to carry on business
of which good-will is sold.–One who sells the good-will of
a business may agree with the buyer to refrain from
carrying on a similar business, within specified local limits,
so long as the buyer, or any person deriving title to the
good-will from him, carries on a like business therein,
provided that such limits appear to the Court reasonable,
regard being had to the nature of the business.”
83. It is well settled that restrictive covenants during the term of a valid
contract are not considered in restraint of trade under Section 27 of the
ICA. Since the learned arbitrator has found that the SHA is still in
force, to which I agree, Clause 15 of the SHA is not in restraint of
trade and remains enforceable, as detailed hereinunder.
84. In Niranjan Shankar Golikari (supra), the Hon’ble Supreme Court
upheld restrictions during the course of employment or contractual
engagement, distinguishing them from post-contractual restraints. The
relevant paragraph reads as under:-
“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.
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Negative covenants operative during the period of the
contract of employment when the employee is bound to
serve his employer 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 and Son Ltd. [W.H. Milsted and Son Ltd. v. Hamp
and Ross and Glendinning Ltd., 1927 WN 233].”
85. Recently, the Hon’ble Supreme Court in Vijaya Bank &Anr. v.
Prashant B. Narnaware, 2025 INSC 691, again upheld the validity of
the restrictive covenant operating during the subsistence of the
contract. The relevant paragraphs read as under:-
“15. In view of these authoritative pronouncements, it can
be safely concluded law is well settled that a restrictive
covenant operating during the subsistence of an
employment contract does not put a clog on the freedom of
a contracting party to trade or employment.
16. A plain reading of clause 11 (k) shows restraint was
imposed on the respondent to work for a minimum term i.e.
three years and in default to pay liquidated damages of Rs.
2 Lakhs. The clause sought to impose a restriction on theDigitally Signed ARB. A. (COMM.) 5/2025 Page 41 of 54
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respondent‟s option to resign and thereby perpetuated the
employment contract for a specified term. The object of the
restrictive covenant was in furtherance of the employment
contract and not to restrain future employment. Hence, it
cannot be said to be violative of Section 27 of the Contract
Act.”
86. The reliance of the appellants on a decision where restrictive
covenants were held unenforceable post-termination, such as Percept
D’Mark (India) Pvt. Ltd. (supra) is misconceived in the present case.
In this case, the agreement was validly terminated and the clause in
question extended far beyond the subsistence of the contract. The
relevant paragraph of the judgment reads as under:-
“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.”
87. I am of the considered view that the contention of the appellants that
the enforcement of a restrictive covenant from a terminated agreement
infringes upon their right to livelihood and is hit by Section 27 of the
ICA is misconceived. The learned arbitrator has expressly clarified
that the appellants are not barred from engaging in any lawful trade,
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business or profession, except from international logistics and freight
forwarding, in view of Clause 15 of the SHA.
88. In addition, the learned arbitrator entitled the appellants to seek a
recall or modification of the directions in the impugned interim award,
consequent upon the appellants’ disclosing their entire business
activities, as directed by this Court, vide its order dated 16.05.2024.
This narrowly tailored requirement ensures that the interim relief
granted remains proportionate and balanced and does not amount to an
unreasonable or absolute restraint on their right to earn a livelihood.
The Impugned Interim Award Satisfies the Triple Test of Granting
an Interim Relief.
89. The Hon’ble Supreme Court in Dalpat Kumar (supra) has discussed
the well-settled triple test that governs the grant of interim relief, which
reads as under:
“5. Therefore, the burden is on the plaintiff by evidence
aliunde by affidavit or otherwise that there is “a prima
facie case” in his favour which needs adjudication at the
trial. The existence of the prima facie right and infraction of
the enjoyment of his property or the right is a condition for
the grant of temporary injunction. Prima facie case is not to
be confused with prima facie title which has to be
established, on evidence at the trial. Only prima facie case
is a substantial question raised, bona fide, which needs
investigation and a decision on merits. Satisfaction that
there is a prima facie case by itself is not sufficient to grantDigitally Signed ARB. A. (COMM.) 5/2025 Page 43 of 54
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injunction. The Court further has to satisfy that non-
interference by the Court would result in “irreparable
injury” to the party seeking relief and that there is no other
remedy available to the party except one to grant injunction
and he needs protection from the consequences of
apprehended injury or dispossession. Irreparable injury,
however, does not mean that there must be no physical
possibility of repairing the injury, but means only that the
injury must be a material one, namely one that cannot be
adequately compensated by way of damages. The third
condition also is that “the balance of convenience” must be
in favour of granting injunction. The Court while granting
or refusing to grant injunction should exercise sound
judicial discretion to find the amount of substantial mischief
or injury which is likely to be caused to the parties, if the
injunction is refused and compare it with that which is
likely to be caused to the other side if the injunction is
granted. If on weighing competing possibilities or
probabilities of likelihood of injury and if the Court
considers that pending the suit, the subject matter should be
maintained in status quo, an injunction would be issued.
Thus the Court has to exercise its sound judicial discretion
in granting or refusing the relief of ad interim injunction
pending the suit.”
(emphasis supplied)
90. The interim relief granted by the learned arbitrator in the impugned
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interim award reads as under:-
“62. Based on the consideration recorded in the foregoing
paragraphs, more particularly in paragraphs 60 and 61
above, the Arbitral Tribunal is satisfied, that an interim
order needs to be passed, restraining the Respondents – Mr.
Paul Deepak Rajaratnam, and Mr. Mohamed Naushad
Basheer, including their agents, partners, subsidiaries,
affiliates and associates, from engaging themselves in
competing business activities pertaining to ‘international
freight forwarding and logistics’, to the prejudice of
SurgePort Logistics Private Limited – Claimant No. 1 and
Skyways Air Services Private Limited – Claimant No. 2 (as
would infringe the ‘non-compete and non-solicit
obligations’, contained in Clause 15 of the ‘Shareholders
Agreement’, dated 28.04.2018). It is accordingly, so
ordered. Needless to mention, that the Respondents would
be entitled to seek a recall and/or modification of the above
directions, consequent upon the Respondent’s disclosing the
entire business activities of the Respondents – Mr. Paul
Deepak Rajaratnam, and Mr. Mohamed Naushad Basheer,
including their agents, partners, subsidiaries, affiliates and
associates, with effect from the date of incorporation of
Accel Transport and Logistics (ie., from 18.07.2018), as
directed by the Hon’ble Delhi High Court, vide its order
dated 16.05.2024.”
91. In the present case, on a holistic appreciation of the record, I am of the
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opinion that the learned arbitrator has justifiably concluded that each
of the prongs of the triple test stand satisfied.
92. The impugned interim award restrains the appellants from engaging in
business activities that are identical or competing with the domain of
“international logistics and freight forwarding”, the precise scope
covered under Clause 15 of the SHA. Far from being overboard, the
impugned interim award is narrowly tailored to protect the contractual
interests of the parties and maintain the status quo in a domain
contractually agreed to be restricted.
93. Importantly, the learned arbitrator has expressly clarified that the
appellants are free to pursue any other lawful trade, business or
profession. Additionally, the injunction is also capable of being
recalled or modified upon the disclosure of the appellants of the
details of their ongoing business activities in compliance with the
Order dated 16.05.2024 passed by this Court. This carve-out ensures
that the interim relief remains proportionate and does not impose any
unreasonable restraint on their right to livelihood.
94. The detailed analysis of the satisfaction of the impugned interim
award on the established triple test for granting an interim relief is as
under:-
A. Prima Facie Case Exists.
95. The prima facie case is established through cogent documentary
evidence and conduct of the appellants, detailed in paragraph 60 of the
impugned interim award. Despite specific directions issued by this
Court vide order dated 16.05.2024, the appellants failed to disclose the
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nature and extent of their business operations, including that of the
appellant No. 3. This deliberate non-compliance warranted an adverse
inference by the learned arbitrator that such documents, if produced,
would have revealed active engagement in competing business
activities. The learned arbitrator further noted that the appellants
initially denied the very existence of the SHA, but later reversed their
position and admitted their signatures once pressed through judicial
proceedings. This shifting and evasive conduct reflected a lack of
candour and reinforced the case of the respondents.
96. The learned arbitrator also relied on five letters addressed by the
appellants to various international clients between May and August
2019, in which they falsely represented the appellant No. 3 company
as a “group company” of the respondent No. 1. These
communications, which were never denied by the appellants,
established that the appellants misused the name and the goodwill of
the respondents to divert business opportunities in violation of Clause
15 of the SHA. Further, two certificates issued by international
partners, Jilani Freight International (Pakistan) and NorthPort
Logistics (Sri Lanka), confirmed that the appellant No. 3 company
was acting as their principal in the same line of business. These
certificates remained uncontroverted during the arbitration
proceedings and clearly demonstrated engagement in competing
activities. Additionally, a “relieving certificate” dated 25.03.2022
issued by the appellant No. 2 falsely claimed that he was no longer
associated with the respondent No. 1, although he continued to be its
Director. The learned arbitrator rightly inferred that this falsehood was
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crafted to facilitate the solicitation of the appellants of international
business.
97. The learned arbitrator also examined emails dated 06.01.2023,
wherein the appellant No. 2 offered to represent Oceanwide Logistics
in India through the appellant No. 3 company and promised to expand
its operations into the Gulf and Africa. The email was marked to the
appellant No. 1, indicating collusion. Yet another email thread from
March 2022 and March 2023 revealed the appellants exploring
logistics business in Indonesia through the appellant No. 3 company
without any role for the respondent No. 1.
98. The above mentioned findings establish a consistent and continuing
breach of Clause 15 of the SHA, leaving little room for doubt as to the
existence of a strong prima facie case. At this interim stage of the
arbitration proceedings, a detailed examination of the above referred
material is not required to grant an interim relief, as long as a prima
facie case is established by the aggrieved party.
B. Irreparable Injury Exists.
99. With respect to the second limb of the triple test, the learned arbitrator
found that irreparable injury would result from continued breach of
Clause 15 of the SHA.
100. The argument of the appellants is that Clause 15(3) of the SHA
provides for liquidated damages in the event of breach of the non-
compete and non-solicit obligations under Clause 15 of the SHA and
once the parties have contractually agreed upon quantifiable
compensation, the grant of injunctive relief is legally impermissible.
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Clause 15(3) reads as follows:-
“3. In the event of non compliance of 1 and 2 above, the
party at the Second Part and/or the Party at the Third Part
shall be liable to compensate by way of penalty to the party
at First Part with minimum amount of Rupee one crore and
subject to maximum of loss suffered party at the First Part
due to breach of agreement by the party at Second and/or
Third Part.”
101. However, I do not find this argument tenable in the present
circumstances. In paragraph 60 of the impugned interim award, the
learned arbitrator noted that the global nature of international freight
forwarding renders it virtually impossible for the respondents to track
or unearth the activities of the appellants, particularly given the opaque
and cross-border character of such operations. The relevant paragraph
of the impugned interim award reads as under:-
“60. … It needs to be kept in mind, that the business activity
in the present case pertains to ‘international freight
forwarding and logistics’. Transaction of business, in the
field of ‘international freight forwarding and logistics’, are
spread over the entire world. This position is also apparent
from Clause 8 of the ‘Shareholders Agreement’ dated 28.04
.2018 (extracted in paragraph 45, above) . It is ‘not’ be
possible to expect, that the Claimants will ever be in a
position to ascertain the business activities of the
Respondents – Mr. Paul Deepak Rajaratnam, and Mr.
Mohamed Naushad Basheer, no matter how hard they mayDigitally Signed ARB. A. (COMM.) 5/2025 Page 49 of 54
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try to dig out the same. It is therefore meaningless on the
part of the Respondents to contend, that compensation
payable to the Claimants under Clause 15, would emerge
after the Claimants have completed their pleadings and
produced their witnesses. If the Respondents , had placed
the details of their business activities (including those of
Accel Transport and Logistics, from the date of its
incorporation of Accel Transport and Logistics ), on the
record of the case, in compliance with the directions issued
by the Hon ‘ble Delhi High Court, on 16.05.2024 {in
O.M.P. (I) (COMM.) 246/2023), it would perhaps have
been possible for the Claimants, to point out the business
transactions entered into by the Respondents, which
transgressed the ‘non-compete and non-solicit obligations’,
contained in Clause 15. The aforesaid direction of the
Hon’ble High Court, was contained in paragraph 8 of its
order, which is being extracted hereunder:- …”
102. In the present case, the respondents operate in the highly competitive
and intangible domain of international freight forwarding and
logistics, a sector driven primarily by goodwill, proprietary know-how
and confidential client relationships. It is pertinent to note that such
relationships, once breached, are not easily quantifiable in monetary
terms and cannot be adequately restored through damages alone. The
continued violation of non-compete and non-solicit obligations,
therefore, threatens to irreparably erode the market position of the
respondents, causing loss that is neither measurable nor compensable
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through a purely financial remedy.
103. In view of the matter, since the appellants failed to disclose their
financials and operational data despite clear directions vide the Order
dated 16.05.2024 passed by this Court, there was no basis for
assessing the adequacy of damages. It is pertinent to note that this
disclosure by the appellants was critical to enable the learned
arbitrator to examine whether Clause 15 of the SHA had been
breached and if so, to determine the appropriate quantum of liquidated
damages under Clause 15(3) of the SHA, which quantifies a minimum
penalty of Rs. 1 crore and provides a ceiling based on the actual losses
suffered. However, the continued failure of the appellants to comply
with this judicial direction frustrated any meaningful inquiry into the
existence and extent of breach, thereby depriving the learned arbitrator
of the evidentiary basis required to award damages at this stage, which
could very well be in excess of the minimum penalty of Rs. 1 crore.
104. The only argument of the appellants for the non-compliance of the
Order dated 16.05.2024 passed by this Court is that the disclosure
mandate is excessive, unjustified and severely detrimental to their
business. According to the appellants, compliance with this Order
would compromise client confidentiality and threaten their very
survival in the logistics sector. Further, they assert that the
respondents had already terminated their services and access to
company systems on 25.07.2023 and therefore, lacked the standing to
seek equitable relief.
105. However, this argument does not impress me, as the proceedings
under Sections 9 and 17 of the Act evolve based on the necessity to
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preserve the subject matter of arbitration or prevent irreparable injury.
This Court’s as well as the learned arbitrator’s directive for disclosure
likely stemmed from a legitimate need to assess whether there was an
ongoing violation of contractual obligations or misuse of confidential
material. Interim measures are granted on a prima facie basis and do
not require a conclusive adjudication on the merits.
106. In such circumstances, the mere existence of a liquidated damages
clause does not preclude injunctive relief where quantification of loss
is not possible due to the conduct of the breaching party. I am satisfied
that interim protection was essential to preserve the subject matter of
the dispute under Section 17 of the Act and to prevent the arbitral
proceedings from being rendered otiose. Hence, the finding of the
learned arbitrator on this point is both reasonable and supports the
triple test.
C. Balance of Convenience in Favour of the Respondents.
107. The balance of convenience too lies squarely in favour of the
respondents. The interim relief granted is not in the nature of a blanket
prohibition but is strictly limited to restraining those activities that the
appellants had contractually undertaken to refrain from. The
appellants remain free to engage in other lawful business activities not
covered by Clause 15 of the SHA. Further, the appellants are granted
the liberty to apply for recall or modification upon filing full
disclosure affidavits of their business activities, including that of the
appellant No. 3.
108. On the contrary, denial of interim relief would enable the appellants to
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continue eroding the business of the respondents in foreign
jurisdictions, thereby frustrating the purpose of the arbitration and
rendering any final award meaningless. If the injunction is denied and
the appellants are later found to have violated Clause 15 of the SHA, it
would be practically impossible to reverse the commercial harm
caused.
109. Importantly, the impugned interim award is neither punitive nor final
in nature, it merely preserves the contractual status quo under Section
17 of the Act, pending final adjudication.
110. In conclusion, the impugned interim award is a well-reasoned and
proportionate exercise of the powers of the learned arbitrator under
Section 17 of the Act. It satisfies all three elements of the established
triple test for granting an interim relief and is based on detailed
analysis of the material available on record. The appellants have not
only breached Clause 15 of the SHA but also withheld material
documents and facts. The interim injunction granted by the learned
arbitrator is not only legally sustainable but essential in this factual
backdrop to ensure that the arbitral proceedings remain meaningful,
efficacious and equitable.
CONCLUSION
111. It is well settled that under Section 37(2)(b) of the Act, this appellate
court is permitted to interfere with the impugned interim award
granting interim measures under Section 17 of the Act, only in the
case where the impugned interim award suffers from perversity, patent
illegality, arbitrariness, jurisdictional error or is contrary to public
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policy.
112. I am of the view that the impugned interim award does not suffer from
any such infirmity. The learned arbitrator has applied his mind to the
pleadings, documentary evidence and the surrounding circumstances.
He has rendered a reasoned order, giving due consideration to the
legal framework governing interim measures and balancing the
equities between the parties. The reasoning of the learned arbitrator is
not only plausible but firmly rooted in the facts and law.
113. For the said reasons, the impugned interim award dated 16.12.2024
passed by the learned arbitrator under Section 17 of the Act in the
arbitration matter titled “Surgeport Logistics Private Limited & Anr. v.
Paul Deepak Rajaratnam & Anr.” is upheld.
114. Accordingly, the petition is dismissed.
JASMEET SINGH, J
JULY 28, 2025 / shanvi
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