NEWS TODAY P LTD Vs. S HARI PRASAD

JUDGEMENT

(1.) THIS application is filed seeking appointment of an Arbitrator for resolving the dispute arising out of Training-cumrservice Agreement (TCSA), dated 20. 9. 2004, executed by and between the applicants and respondents 1, 2 and 3. The application is opposed by respondents on the ground that TCSA is an agreement, which is void ab initio, and therefore, as per common law principle 'ex nihilo nil fit', the agreement itself cannot be enforced and the question of resolving the dispute by arbitration does not arise. This stand of the respondents throws up an interesting question for consideration as to whether chief Justice of High Court or the Judge nominated by him, in exercise of powers under Section 11 (6) of Arbitration and conciliation Act, 1996 (1996 Act, for brevity)can refer the dispute to Arbitrator for resolving the dispute arising out of an agreement, which is allegedly null and void.

(2.) THE admitted fact of the matter is very short. First respondent executed TCSA agreeing to undergo training in Eenadu journalism School (EJS), Hyderabad. He agreed to work with applicant for a continuous period of four years including a period of two years for diploma course. Second and third respondents stood as sureties accepting co-terminus liability. Under the agreement, as per clause 10 (b), if first respondent fails to perform contract obligations; he shall pay compensation to applicant to a tune of Rs. 1,00,000/- (Rupees one lakh only ). After completion of training, first respondent was appointed as trainee copy writer/reporter vide letter of appointment, dated 22. 11. 2005. He went on sick leave for fifteen days from 11. 9. 2006 while he was under training. After expiry of leave, he did not report to training in spite of telegram issued by applicant on 11. 10. 2006. First respondent sought extension of leave on medical grounds. Though he was supposed to report to training on 11. 11. 2006, he did not do so in spite of advice to him to report to training at khammam office. In view of this, training period was extended by six months from 28. 11. 2006. First respondent did not report to office and committed breach of agreement. Therefore, on 15. 2. 2007, a show-cause notice was issued to first respondent as to why he should not be discharged from training for unauthorized absence as he voluntarily left the service. He received the notice but he did not send explanation. Therefore, by letter, dated 26. 2. 2007, first respondent was discharged considering that he left training on his own accord and was decided to recover compensation as per clause 10 (b) of TCSA. Subsequently, applicant's lawyer sent a notice on 8. 5. 2007 invoking clause 16 of TCSA and appointing an Advocate as Arbitrator. The consent of respondents 1 and 2 was solicited. They did not reply to the notice and hence, the arbitration application.

(3.) COUNTER-AFFIDAVIT is filed by first respondent. The application is opposed by rising following contentions. TCSA is violative of doctrine of restraint of trade and as such void ab initio, unenforceable and negates arbitration clause. As per the decision in SBP and Company v. Patel engineering Limited, 2006 (1) ALD 10 (SC) = (2005) 8 SCC 618 = AIR 2006 SC 450, Section 11 (6) of 1996 Act overrides section 16 thereof and therefore, the question comes within the jurisdiction under section 11 (6) of 1996 Act. TCSA is 'adhesion contract' showcasing unfair and unequal bargaining power and is per se unconscionable and hence, unenforceable and void. The agreement is mockery of constitutional safeguard against practice of beggar, slavery and bonded labour. As the applicant is seeking to enforce such an agreement by seeking damages for assumed service loss, the same is not permissible under law. As per law, damages for breach of employment conditions can be enforced only after the employment ceases, and if it is enforced it would violate doctrine of restraint of trade as such it is a clause compels the applicant to work for others benefit. TCSA is not a contract and the same being a void agreement, enforcement of contract does not arise.