The fact that a party contractually undertook a complete restraint to carry on her professional practice upon herself, does not make the restraint clause reasonable and is thus, hit by Section 27 of the Contract Act

In the matter of Arvind Medicare Private Limited vs. Dr. Neeru Mehra, FAO (COMM) No. 12/ 2021 decided on 21.05.2021 by the Delhi High Court

Facts:
The Respondent, a doctor was engaged by the appellant/ plaintiff medical facility in the capacity of visiting consultant – obstetrics and gynaecology on retainership basis. It was unconditionally undertaken by the respondent / defendant, that if the respondent / defendant, for any reason whatsoever chose to terminate the Service Contract prior to the expiry of term thereof, she will not serve at any facility/clinic/hospital within a radius of 5 kms of the appellant / plaintiff’s facilities aforesaid at Gurugram and not carry on her private practice anywhere except her home clinic, for a period of one year from the date of termination. During the currency of the agreement between the parties, the Respondent tendered her resignation and stopped attending to her duties. However, the appellant did not accept her resignation and did not terminate the contract also. The appellant filed a suit before commercial court seeking decree of permanent injunction from serving at any facility/clinic/hospital within a radius of 5 kms of the appellant / plaintiff’s facilities aforesaid at Gurugram and not carry on her private practice anywhere except her home clinic. A similar relief of interim nature was also sought in the application under Order XXXIX Rule 1 and 2 of CPC. Vide the impugned order the commercial court dismissed the application for interim relief inter alia, on the ground that the clause of the service contract whereby the respondent was retrained from carrying on her livelihood was void in terms of Section 27 of the Indian Contract Act.
The present matter was an appeal under Section 13(1A) of the Commercial Courts Act, 2015.

Held:
The Court noticed that the question was not of enforceability of the restraint clause but the validity thereof in view of Section 27 of the Contract Act. Relying on the division bench judgment of Dr. Arvinder Singh vs. Dr. Lal Pathlabs Pvt. Ltd. 2014 SCC OnLine Del 2033, the Court restraining the Respondent from carrying on her profession would be contrary to Section 27 of the Indian Contract Act. Only an agreement which is valid can be considered for specific enforcement and not an agreement which is void in law. Merely because the restraint undertaken by the respondent / defendant upon herself was from practicing medicine within a radius of 5 Kms. from the hospitals of the appellant / plaintiff and for a period of one year only, would not make the said restraint reasonable and even if makes the same reasonable, Section 27 of the Contract Act makes all contracts/agreements in restrain of profession, trade or business void and does not permit restraint of any degree. The Court further held that though the appellant / plaintiff, at the time of entering into the Service Contract with the respondent / defendant is deemed to be aware of law and accordingly, of the restraint clause in the Service Contract being unenforceable, but even otherwise, if the appellant / plaintiff has paid any consideration to the respondent / defendant in consideration of the respondent / defendant having so agreed, the same will still not entitle the appellant / plaintiff to enforce the restraint and will only entitle the appellant / plaintiff to claim compensation.
The appeal was thus, dismissed.