Citation- (1874) Beng LR 76
Bench- Sir Richard Couch C.J
In this case, the Defendant faced competition from Plaintiff due to which he incurred a heavy loss. Consequently, both parties entered into an agreement. The terms of the contract state that if the Plaintiff closes his business then the Defendant would pay him the money that Madub Chunder advanced to his workers. Later on, Rajcoomar refused to pay the money as promised in the contract. Both the parties of the present case were involved in businesses established in Calcutta.
As a result, the Plaintiff filed a lawsuit to claim the amount from the Defendant.
- Whether Plaintiff’s lawsuit against the defendant is maintainable?
- Whether the Plaintiff was entitled to receive the amount as promised?
Sir Richard Couch C.J while referring to the case of Mitchel v. Reynolds laid a distinction between partial and absolute restraints of the trade. He stated that any contract which falls within the ambit of Section 27 of ICA is void unless certain exceptions.
He also asserted that “The words “restrained from exercising a lawful profession, trade or business” do not mean an absolute restriction and are intended to apply to a partial restriction, a restriction limited to someplace.”
Further, he cited Section 28 of the Indian Contract Act that has the word ‘absolutely’, proving that the intention of Section 27 is only partial restraint but not an absolute restraint. The agreement entered by both parties in the present case is a complete restraint of trade making it void and not enforceable.
The landmark ruling of the present case protects fair competition. It also broadly elucidated the scope of Section 27 of the Indian Contract act. The doctrine of Restraint of Trade was introduced in India through this judgement. It cleared all the uncertainties and confusion that may arise from the doctrine.
(By – M. Soujanya)