Elcom Innovation Pvt. Ltd. v. Harish Sharma & Ors
In the High Court of Delhi
CS (OS) 288/2021
Before Justice Amit Bansal
Decided on April 21, 2022

Relevancy of the case: Suit for seeking a permanent injunction against a former employee for using company data for poaching its existing clients

Statutes and Provisions Involved

• The Information Technology Act, 2000 (Section 66)
• The Indian Penal Code, 1860 (Section 420)
• The Code of Civil Procedure, 1908 (O XXXIX Rule 1, 2)

Relevant Facts of the Case

• The first defendant was an employee and shareholder of the plaintiff company. After his resignation, the plaintiff company observed unusual activity on email accounts of key employees. These email accounts shared confidential information with an unknown email ID.
• The first defendant was also a party to the Share Purchase and Shareholders’ Agreement (SPSA). As a part of this agreement, he agreed to maintain confidentiality and not engage in anti-competitive behaviour.
• The police investigation found that the unknown email ID belonged to the first defendant. Along with defendant number 3, he ran a company called Vihaas Design Technologies. This company is defendant number 2 in the present case.
• The defendants have used data shared with the unknown email address to poach the plaintiff’s clients, resulting in financial losses to the company. The plaintiff has filed this suit seeking a permanent injunction against the defendants.

Prominent Arguments by the Advocates

• The plaintiff’s counsel relied on the police investigation findings that concluded Harish hacked the company’s system by creating a fake email ID with his phone number. Further, as per SPSA, he had to transfer his shares back to the plaintiff, which he did not.
• The defendants’ counsel submitted that the company failed to meet its obligations under SPA and did not purchase his shares. The police chargesheet only shows that the fake email account was created using the first defendant’s mobile number. There is no evidence to show that he made this email to conduct any fraudulent activity. Further, the chargesheet does not contain any information on the misuse of confidential information.

     Opinion of the Bench

• The plaintiff’s counsel has made conflicting submissions. As a result, it is not reasonable to order the first defendant to transfer his shares to the company.
• Withheld documents and information are critical in determining the relief sought.
• Without the documents, the only evidence linking the first defendant to the incident is the involvement of his mobile number in creating a fake email account.
• Without knowing what was leaked, the court cannot grant an order of injunction.

Final Decision

• The bench did not grant the interim injunction.
• Also, the bench dismissed the plaintiff’s application for transfer of shares and damages.