{ "type": "practice-guide", "canonical": "https://openagreements.org/practice-guides/non-compete/in", "links": [ { "rel": "self", "href": "https://openagreements.org/practice-guides/non-compete/in.json", "type": "application/json" }, { "rel": "alternate", "href": "https://openagreements.org/practice-guides/non-compete/in", "type": "text/html" }, { "rel": "alternate", "href": "https://openagreements.org/practice-guides/non-compete/in/markdown", "type": "text/markdown" }, { "rel": "alternate", "href": "https://openagreements.org/practice-guides/non-compete/in/json", "type": "application/json" } ], "data": { "topic": "non-compete", "state": "in", "frontmatter": { "title": "Non-Competes in India", "description": "India voids post-employment non-compete agreements under Section 27 of the Indian Contract Act, 1872 — no matter how reasonable in time, area, or scope — leaving only a narrow sale-of-goodwill exception, in-term covenants, confidentiality, targeted non-solicitation, garden leave during notice, and cost-based employment bonds.", "state": "India", "country_code": "IN", "lastReviewed": "2026-06-03", "license": "CC BY 4.0", "authors": [ "steven-obiajulu" ], "summary": { "enforceability": "banned", "bottomLine": "Post-employment non-competes are void under Section 27 of the Indian Contract Act, 1872 regardless of how reasonable they are, and Indian law offers no reasonableness saving for post-term restraints — leaving only the sale-of-goodwill exception, in-term covenants, confidentiality, non-solicitation, garden leave during the notice period, and cost-based employment bonds.", "keyLaw": "Indian Contract Act, 1872, § 27", "exceptions": "Sale of business goodwill (Exception 1 to § 27); partnership carve-outs (§§ 11(2), 36(2), 54); in-term exclusive-service covenants", "banEffectiveDate": "Longstanding — Section 27 has been in force since 1872", "courtNarrowing": "no", "appliesToContractors": "yes", "extendedForBreach": "Not applicable — the post-term covenant is void", "maxLength": "Not applicable — void", "noticeRequirement": "None", "incomeThreshold": "None", "saleOfBusiness": "Allowed — Exception 1 to § 27", "customerNonSolicit": "Targeted non-solicitation remains available", "employeeNonSolicit": "Targeted non-solicitation remains available" }, "about": [ "India non-compete agreements", "India restrictive covenants", "Section 27 Indian Contract Act 1872 restraint of trade", "India post-employment non-compete void and unenforceable", "India employee and customer non-solicitation clauses", "India garden leave enforceability", "India employment bond minimum service liquidated damages", "India sale of business goodwill non-compete exception", "India confidentiality and trade secret protection" ], "eyebrow": "India Law Practice Guide" }, "questions": [ { "slug": "post-employment-noncompetes", "label": "Are post-employment non-competes enforceable?", "heading": "Are post-employment non-compete agreements enforceable in India?", "answerText": "No. India voids post-employment non-compete agreements by statute. Section 27 of the Indian Contract Act, 1872 makes any agreement that restrains someone from exercising a lawful profession, trade, or business void to that extent, and the Supreme Court has held that a service covenant operating after employment ends is void — a position it calls completely settled.", "sources": [ { "id": "stat-s27-void", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "Indian Contract Act, 1872, § 27", "citation": "Indian Contract Act, 1872, § 27.", "url": "https://www.indiacode.nic.in/bitstream/123456789/2187/2/A187209.pdf", "proposition": "Section 27 voids every agreement that restrains a person from exercising a lawful profession, trade, or business, to that extent, subject to Section 27's own sale-of-goodwill exception and separate statutory carve-outs such as those in the Partnership Act.", "verbatimQuote": "Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void.", "anchor": "https://openagreements.org/practice-guides/non-compete/in#src-stat-s27-void" }, { "id": "krishan-murgai-void", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Superintendence Co. of India (P) Ltd. v. Krishan Murgai", "citation": "Superintendence Co. of India (P) Ltd. v. Krishan Murgai, (1981) 2 SCC 246.", "url": "https://indiankanoon.org/doc/1186410/", "proposition": "The Supreme Court held that under Section 27 a service covenant extended beyond the termination of the service is void.", "verbatimQuote": "Under Section 27 of the Contract Act, a service covenant extended beyond the termination of the service is void.", "date": "1980-05-09", "anchor": "https://openagreements.org/practice-guides/non-compete/in#src-krishan-murgai-void" }, { "id": "percept-settled", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Percept D'Mark (India) Pvt. Ltd. v. Zaheer Khan", "citation": "Percept D'Mark (India) Pvt. Ltd. v. Zaheer Khan, (2006) 4 SCC 227.", "url": "https://indiankanoon.org/doc/571375/", "proposition": "The Supreme Court described the law governing post-contractual restraints as consistent, unchanging, and completely settled.", "verbatimQuote": "The legal position with regard to post-contractual covenants or restrictions has been consistent, unchanging and completely settled in our country.", "date": "2006-03-22", "anchor": "https://openagreements.org/practice-guides/non-compete/in#src-percept-settled" } ] }, { "slug": "reasonable-noncompete", "label": "Does a 'reasonable' clause survive?", "heading": "Does it matter if an Indian non-compete is short, narrow, or paid for?", "answerText": "No. A post-employment non-compete does not become enforceable in India because it is limited to a few months, a small area, or supported by a payment. Unlike England's reasonableness doctrine, Section 27 admits no reasonableness or partial restraint saving for a post-term covenant unless it fits a statutory exception, and the Delhi High Court reaffirmed in 2025 that a restraint on post-employment work is void.", "sources": [ { "id": "krishan-murgai-no-reasonableness", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Superintendence Co. of India (P) Ltd. v. Krishan Murgai", "citation": "Superintendence Co. of India (P) Ltd. v. Krishan Murgai, (1981) 2 SCC 246.", "url": "https://indiankanoon.org/doc/1186410/", "proposition": "The Supreme Court held that neither the reasonableness test nor the partial-restraint principle applies to a case governed by Section 27 unless it falls within Exception 1, foreclosing any reasonableness saving for a post-term covenant.", "verbatimQuote": "Neither the test of reasonableness nor the principle of that the restraint being partial was reasonable are applicable to a case governed by Section 27 of the Contract Act, unless it falls within Exception 1.", "date": "1980-05-09", "anchor": "https://openagreements.org/practice-guides/non-compete/in#src-krishan-murgai-no-reasonableness" }, { "id": "q2-percept-s27", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Percept D'Mark (India) Pvt. Ltd. v. Zaheer Khan", "citation": "Percept D'Mark (India) Pvt. Ltd. v. Zaheer Khan, (2006) 4 SCC 227.", "url": "https://indiankanoon.org/doc/571375/", "proposition": "The Supreme Court held that under Section 27 a restrictive covenant extending beyond the term of the contract is void and not enforceable.", "verbatimQuote": "Under Section 27 of the Contract Act (a) a restrictive covenant extending beyond the term of the contract is void and not enforceable.", "date": "2006-03-22", "anchor": "https://openagreements.org/practice-guides/non-compete/in#src-q2-percept-s27" }, { "id": "varun-tyagi-void", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Varun Tyagi v. Daffodil Software Pvt. Ltd.", "citation": "Varun Tyagi v. Daffodil Software Pvt. Ltd., FAO 167/2025 (Delhi High Court, June 25, 2025).", "url": "https://indiankanoon.org/doc/187332526/", "proposition": "The Delhi High Court held in 2025 that any term of an employment contract restricting the employee's right to take up employment after termination is void as contrary to Section 27.", "verbatimQuote": "In view of the above, it is clear that any terms of the employment contract that imposes a restriction on right of the employee to get employed post-termination of the contract of employment shall be void being contrary to Section 27 of the ICA.", "date": "2025-06-25", "anchor": "https://openagreements.org/practice-guides/non-compete/in#src-varun-tyagi-void" } ] }, { "slug": "during-employment", "label": "Can you restrict competition during employment?", "heading": "Can an Indian employer restrict competition during employment?", "answerText": "Yes. A negative covenant that binds an employee to serve the employer exclusively during the employment is not treated as a restraint of trade and does not fall under Section 27, and a court may, in its discretion, enjoin breach of that negative promise under Section 42 of the Specific Relief Act, 1963.", "sources": [ { "id": "golikari-in-term", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Niranjan Shankar Golikari v. Century Spinning & Mfg. Co.", "citation": "Niranjan Shankar Golikari v. Century Spinning & Mfg. Co., AIR 1967 SC 1098.", "url": "https://indiankanoon.org/doc/452434/", "proposition": "The Supreme Court held that negative covenants operative during the period of employment, when the employee is bound to serve the employer exclusively, are generally not regarded as restraint of trade and do not fall under Section 27.", "verbatimQuote": "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.", "date": "1967-01-17", "anchor": "https://openagreements.org/practice-guides/non-compete/in#src-golikari-in-term" }, { "id": "q3-golikari-distinction", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Niranjan Shankar Golikari v. Century Spinning & Mfg. Co.", "citation": "Niranjan Shankar Golikari v. Century Spinning & Mfg. Co., AIR 1967 SC 1098.", "url": "https://indiankanoon.org/doc/452434/", "proposition": "The Supreme Court distinguished restrictions that apply after the contract ends from those that operate during the contract, holding the considerations against them are different.", "verbatimQuote": "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.", "date": "1967-01-17", "anchor": "https://openagreements.org/practice-guides/non-compete/in#src-q3-golikari-distinction" }, { "id": "gujarat-in-term", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Gujarat Bottling Co. Ltd. v. Coca Cola Co.", "citation": "Gujarat Bottling Co. Ltd. v. Coca Cola Co., (1995) 5 SCC 545.", "url": "https://indiankanoon.org/doc/104935066/", "proposition": "The Supreme Court held that a negative stipulation confined to the period the agreement is subsisting cannot be regarded as a restraint of trade attracting the bar of Section 27.", "verbatimQuote": "Since the negatice stipulation in paragraph 14 of the 1993 Agreement is confined in its application to the period of subsistence of the agreement and the restriction imposed therein is operative only during the period the 1993 Agreement is subsisting, the said stipulation cannot be held to be in restraint of trade so as to attract the bar of section 27 of the Contract Act.", "date": "1995-08-04", "anchor": "https://openagreements.org/practice-guides/non-compete/in#src-gujarat-in-term" }, { "id": "q3-percept-not-confined", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Percept D'Mark (India) Pvt. Ltd. v. Zaheer Khan", "citation": "Percept D'Mark (India) Pvt. Ltd. v. Zaheer Khan, (2006) 4 SCC 227.", "url": "https://indiankanoon.org/doc/571375/", "proposition": "The Supreme Court confirmed that the restraint-of-trade doctrine is not confined to contracts of employment but applies to all other contracts.", "verbatimQuote": "As held by this Court in Gujarat Bottling vs. Coca Cola (supra), this doctrine is not confined only to contracts of employment, but is also applicable to all other contracts.", "date": "2006-03-22", "anchor": "https://openagreements.org/practice-guides/non-compete/in#src-q3-percept-not-confined" }, { "id": "sra-s42", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "Specific Relief Act, 1963, § 42", "citation": "Specific Relief Act, 1963, § 42.", "url": "https://www.indiacode.nic.in/bitstream/123456789/1583/7/A1963-47.pdf", "proposition": "Section 42 lets a court grant an injunction to perform a negative agreement even where it cannot compel specific performance of the coupled affirmative agreement, provided the plaintiff has not failed to perform the contract so far as it is binding on him.", "verbatimQuote": "Notwithstanding anything contained in clause (e) of section 41, where a contract comprises an affirmative agreement to do a certain act, coupled with a negative agreement, express or implied, not to do a certain act, the circumstance that the court is unable to compel specific performance of the affirmative agreement shall not preclude it from granting an injunction to perform the negative agreement: Provided that the plaintiff has not failed to perform the contract so far as it is binding on him.", "anchor": "https://openagreements.org/practice-guides/non-compete/in#src-sra-s42" } ] }, { "slug": "non-solicitation", "label": "Are non-solicitation clauses enforceable?", "heading": "Are customer and employee non-solicitation clauses enforceable in India?", "answerText": "Sometimes — a targeted non-solicitation clause is more defensible than a non-compete, but the outcome is fact-sensitive. Indian courts have upheld a non-solicitation-of-employees clause as a restriction on the contracting parties rather than on the employees, and have granted only narrow injunctions against soliciting a former employer's customers — but they will not let a confidentiality or non-solicitation theory become a monopoly over the departing worker's clients.", "sources": [ { "id": "wipro-parties", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Wipro Ltd. v. Beckman Coulter International S.A.", "citation": "Wipro Ltd. v. Beckman Coulter International S.A., 131 (2006) DLT 681 (Delhi HC).", "url": "https://indiankanoon.org/doc/647033/", "proposition": "The Delhi High Court characterized a non-solicitation-of-employees clause as a restriction cast on the contracting parties, not on the employees.", "verbatimQuote": "It is a restriction cast upon the contracting parties and not on the employees.", "date": "2006-07-11", "anchor": "https://openagreements.org/practice-guides/non-compete/in#src-wipro-parties" }, { "id": "wipro-not-hit", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Wipro Ltd. v. Beckman Coulter International S.A.", "citation": "Wipro Ltd. v. Beckman Coulter International S.A., 131 (2006) DLT 681 (Delhi HC).", "url": "https://indiankanoon.org/doc/647033/", "proposition": "The Delhi High Court held that the non-solicitation clause did not amount to a restraint of trade and would not be hit by Section 27 as void.", "verbatimQuote": "In my view, therefore, the non-solicitation clause does not amount to a restraint of trade, business or profession and would not be hit by Section 27 of the Indian Contract Act, 1872 as being void.", "date": "2006-07-11", "anchor": "https://openagreements.org/practice-guides/non-compete/in#src-wipro-not-hit" }, { "id": "wipro-remedy", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Wipro Ltd. v. Beckman Coulter International S.A.", "citation": "Wipro Ltd. v. Beckman Coulter International S.A., 131 (2006) DLT 681 (Delhi HC).", "url": "https://indiankanoon.org/doc/647033/", "proposition": "The Delhi High Court held that the remedy for breach of a non-solicitation clause lies in a claim for damages and an injunction against future solicitation, not a bar on hiring.", "verbatimQuote": "The remedy lies in the claim for damages and an injunction against solicitation in future.", "date": "2006-07-11", "anchor": "https://openagreements.org/practice-guides/non-compete/in#src-wipro-remedy" }, { "id": "desiccant-livelihood", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Desiccant Rotors International Pvt. Ltd. v. Bappaditya Sarkar", "citation": "Desiccant Rotors International Pvt. Ltd. v. Bappaditya Sarkar, CS(OS) No. 337/2008 (Delhi HC, 2009).", "url": "https://indiankanoon.org/doc/175180860/", "proposition": "The Delhi High Court held that where the employer's wish to avoid competition clashes with the employee's right to seek employment, the right of livelihood must prevail.", "verbatimQuote": "It is this attempt to protect themselves from competition which clashes with the right of the employees to seek employment where so ever they choose and in a clash like this, it is clear that the right of livelihood of the latter must prevail.", "date": "2009-07-14", "anchor": "https://openagreements.org/practice-guides/non-compete/in#src-desiccant-livelihood" }, { "id": "desiccant-injunction", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Desiccant Rotors International Pvt. Ltd. v. Bappaditya Sarkar", "citation": "Desiccant Rotors International Pvt. Ltd. v. Bappaditya Sarkar, CS(OS) No. 337/2008 (Delhi HC, 2009).", "url": "https://indiankanoon.org/doc/175180860/", "proposition": "The Delhi High Court declined to bar the former employee from competing and limited relief to an injunction restraining him from approaching the plaintiff's suppliers and customers to solicit directly competing business.", "verbatimQuote": "The injunction only restrains Defendant No. 1 from approaching the plaintiff‟s suppliers and customers for soliciting business which is in direct competition with the business of the plaintiff.", "date": "2009-07-14", "anchor": "https://openagreements.org/practice-guides/non-compete/in#src-desiccant-injunction" }, { "id": "amex-monopoly", "authorityType": "case-law", "tier": "primary-source-backed", "title": "American Express Bank Ltd. v. Priya Puri", "citation": "American Express Bank Ltd. v. Priya Puri, (2006) III LLJ 540 (Delhi HC).", "url": "https://indiankanoon.org/doc/445135/", "proposition": "The Delhi High Court held that an employer should not be allowed to create monopolies over its clients on the ground that it has developed exhaustive customer data.", "verbatimQuote": "In my opinion no Bank should be allowed to create monopolies on the ground that they have developed exhaustive data of their clients/customers.", "date": "2006-05-24", "anchor": "https://openagreements.org/practice-guides/non-compete/in#src-amex-monopoly" } ] }, { "slug": "garden-leave", "label": "Is garden leave enforceable?", "heading": "Is garden leave enforceable in India?", "answerText": "Only during the notice period, while the employee is still on the rolls. Garden leave inside the notice period works as an in-term exclusive-service covenant, which Section 27 does not reach; but a garden leave clause that operates after the employee has ceased employment is prima facie in restraint of trade and hit by Section 27 — even though the employer keeps paying — because it stops the former employee from working elsewhere.", "sources": [ { "id": "q5-golikari-in-term", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Niranjan Shankar Golikari v. Century Spinning & Mfg. Co.", "citation": "Niranjan Shankar Golikari v. Century Spinning & Mfg. Co., AIR 1967 SC 1098.", "url": "https://indiankanoon.org/doc/452434/", "proposition": "The Supreme Court held that an in-term exclusive-service negative covenant is not a restraint of trade and falls outside Section 27 — the basis on which garden leave inside the notice period, while the employee remains employed, is defensible.", "verbatimQuote": "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.", "date": "1967-01-17", "anchor": "https://openagreements.org/practice-guides/non-compete/in#src-q5-golikari-in-term" }, { "id": "vfs-garden-leave", "authorityType": "case-law", "tier": "primary-source-backed", "title": "VFS Global Services Pvt. Ltd. v. Suprit Roy", "citation": "VFS Global Services Pvt. Ltd. v. Suprit Roy, 2008 (2) Bom CR 446 (Bombay HC).", "url": "https://indiankanoon.org/doc/1547420/", "proposition": "The Bombay High Court held that a post-cessation garden-leave clause is prima facie in restraint of trade and hit by Section 27.", "verbatimQuote": "The Garden Leave Clause is therefore, prima facie in restraint of trade and is hit by Section 27 of the Contract Act.", "date": "2007-12-10", "anchor": "https://openagreements.org/practice-guides/non-compete/in#src-vfs-garden-leave" }, { "id": "vfs-obstruct", "authorityType": "case-law", "tier": "primary-source-backed", "title": "VFS Global Services Pvt. Ltd. v. Suprit Roy", "citation": "VFS Global Services Pvt. Ltd. v. Suprit Roy, 2008 (2) Bom CR 446 (Bombay HC).", "url": "https://indiankanoon.org/doc/1547420/", "proposition": "The Bombay High Court reasoned that obstructing an employee who has left service from obtaining gainful employment elsewhere is not fair or proper.", "verbatimQuote": "To obstruct on employee who has left service from obtaining gainful employment elsewhere is not fair or proper.", "date": "2007-12-10", "anchor": "https://openagreements.org/practice-guides/non-compete/in#src-vfs-obstruct" } ] }, { "slug": "employment-bonds", "label": "Are employment bonds enforceable?", "heading": "Are employment bonds and minimum-service clauses enforceable in India?", "answerText": "Yes, when they recover a genuine cost rather than penalize departure. A minimum-service clause backed by liquidated damages is not a restraint of trade under Section 27 — the Supreme Court held in 2025 that such a clause furthers the employment relationship instead of restraining future work — and any recovery is capped at reasonable compensation under Section 74 of the Contract Act.", "sources": [ { "id": "vijaya-furtherance", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Vijaya Bank v. Prashant B. Narnaware", "citation": "Vijaya Bank v. Prashant B. Narnaware, 2025 INSC 691.", "url": "https://indiankanoon.org/doc/42763766/", "proposition": "The Supreme Court held that the object of the minimum-service covenant was in furtherance of the employment contract and not to restrain future employment, so it was not a Section 27 restraint.", "verbatimQuote": "The object of the restrictive covenant was in furtherance of the employment contract and not to restrain future employment.", "date": "2025-05-14", "anchor": "https://openagreements.org/practice-guides/non-compete/in#src-vijaya-furtherance" }, { "id": "vijaya-holding", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Vijaya Bank v. Prashant B. Narnaware", "citation": "Vijaya Bank v. Prashant B. Narnaware, 2025 INSC 691.", "url": "https://indiankanoon.org/doc/42763766/", "proposition": "The Supreme Court concluded that the minimum-service covenant did not amount to a restraint of trade and was not opposed to public policy.", "verbatimQuote": "In light of the aforesaid discussion, we are of the view the restrictive covenant in clause 11(k) of the appointment letter does not amount to restraint of trade nor is it opposed to public policy.", "date": "2025-05-14", "anchor": "https://openagreements.org/practice-guides/non-compete/in#src-vijaya-holding" }, { "id": "stat-s74", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "Indian Contract Act, 1872, § 74", "citation": "Indian Contract Act, 1872, § 74.", "url": "https://www.indiacode.nic.in/bitstream/123456789/2187/2/A187209.pdf", "proposition": "Section 74 entitles the non-breaching party to reasonable compensation not exceeding the sum named or penalty stipulated, whether or not actual damage is proved — capping employment-bond recovery.", "verbatimQuote": "the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for.", "anchor": "https://openagreements.org/practice-guides/non-compete/in#src-stat-s74" } ] }, { "slug": "sale-of-business", "label": "Is there a sale-of-business exception?", "heading": "Is there a sale-of-business or goodwill exception to India's non-compete ban?", "answerText": "Yes, but it is narrow. Exception 1 to Section 27 lets someone who sells the goodwill of a business agree not to compete within reasonable local limits while the buyer carries on a like business, and the Indian Partnership Act, 1932 adds express notwithstanding Section 27 carve-outs for partners — covering both an outgoing partner's restraint and restraints made on dissolution. A purely financial or minority-investor exit, with no goodwill transferred, does not qualify.", "sources": [ { "id": "stat-s27-exception1", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "Indian Contract Act, 1872, § 27 (Exception 1)", "citation": "Indian Contract Act, 1872, § 27, Exception 1.", "url": "https://www.indiacode.nic.in/bitstream/123456789/2187/2/A187209.pdf", "proposition": "Exception 1 to Section 27 permits a seller of business goodwill to agree not to carry on a similar business within reasonable specified local limits while the buyer carries on a like business there.", "verbatimQuote": "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.", "anchor": "https://openagreements.org/practice-guides/non-compete/in#src-stat-s27-exception1" }, { "id": "partnership-s36", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "Indian Partnership Act, 1932, § 36(2)", "citation": "Indian Partnership Act, 1932, § 36(2).", "url": "https://www.indiacode.nic.in/bitstream/123456789/19863/1/indian_partnership_act_1932.pdf", "proposition": "Section 36(2) of the Partnership Act allows a partner to agree that, on ceasing to be a partner, he will not carry on a similar business within specified limits, and validates that agreement notwithstanding Section 27 if the restrictions are reasonable.", "verbatimQuote": "A partner may make an agreement with his partners that on ceasing to be a partner he will not carry on any business similar to that of the firm within a specified period or within specified local limits; and, notwithstanding anything contained in section 27 of the Indian Contract Act, 1872 (9 of 1872), such agreement shall be valid if the restrictions imposed are reasonable.", "anchor": "https://openagreements.org/practice-guides/non-compete/in#src-partnership-s36" }, { "id": "partnership-s54", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "Indian Partnership Act, 1932, § 54", "citation": "Indian Partnership Act, 1932, § 54.", "url": "https://www.indiacode.nic.in/bitstream/123456789/19863/1/indian_partnership_act_1932.pdf", "proposition": "Section 54 of the Partnership Act allows partners, on or in anticipation of dissolution, to agree not to carry on a similar business within specified limits, and validates the agreement notwithstanding Section 27 if the restrictions are reasonable.", "verbatimQuote": "Partners may, upon or in anticipation of the dissolution of the firm, make an agreement that some or all of them will not carry on a business similar to that of the firm within a specified period or within specified local limits; and notwithstanding anything contained in section 27 of the Indian Contract Act, 1872 (9 of 1872), such agreement shall be valid if the restrictions imposed are reasonable.", "anchor": "https://openagreements.org/practice-guides/non-compete/in#src-partnership-s54" } ] }, { "slug": "what-to-protect", "label": "What can you protect instead?", "heading": "What can an Indian employer protect instead of a non-compete?", "answerText": "Genuine confidential information, targeted non-solicitation, in-term exclusivity, garden leave during notice, and cost-based bonds — applied to employees and to independent contractors alike, because Section 27 reaches non-employment contracts too. A confidentiality clause that protects real trade secrets is enforceable, but it cannot be written so broadly that it bars the former employee from working in their field.", "sources": [ { "id": "vfs-confidentiality", "authorityType": "case-law", "tier": "primary-source-backed", "title": "VFS Global Services Pvt. Ltd. v. Suprit Roy", "citation": "VFS Global Services Pvt. Ltd. v. Suprit Roy, 2008 (2) Bom CR 446 (Bombay HC).", "url": "https://indiankanoon.org/doc/1547420/", "proposition": "The Bombay High Court held that a clause prohibiting an employee from disclosing commercial or trade secrets is not in restraint of trade and remains enforceable.", "verbatimQuote": "A clause prohibiting an employee from disclosing commercial or trade secrets is not in restraint of trade.", "date": "2007-12-10", "anchor": "https://openagreements.org/practice-guides/non-compete/in#src-vfs-confidentiality" }, { "id": "amex-freedom", "authorityType": "case-law", "tier": "primary-source-backed", "title": "American Express Bank Ltd. v. Priya Puri", "citation": "American Express Bank Ltd. v. Priya Puri, (2006) III LLJ 540 (Delhi HC).", "url": "https://indiankanoon.org/doc/445135/", "proposition": "The Delhi High Court held that an employee's freedom to change employment to improve service conditions is a vital right that cannot be curtailed on the ground that the employee holds the employer's customer data ascertainable by independent canvass.", "verbatimQuote": "Freedom of changing employment for improving service conditions is a vital and important right of an employee which cannot be restricted or curtailed on the ground that the employee has employer's data and confidential information of customers which is capable of ascertainment on behalf of defendant or any one else, by an independent canvass at a small expense and in a very limited period of time.", "date": "2006-05-24", "anchor": "https://openagreements.org/practice-guides/non-compete/in#src-amex-freedom" }, { "id": "q8-percept-not-confined", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Percept D'Mark (India) Pvt. Ltd. v. Zaheer Khan", "citation": "Percept D'Mark (India) Pvt. Ltd. v. Zaheer Khan, (2006) 4 SCC 227.", "url": "https://indiankanoon.org/doc/571375/", "proposition": "The Supreme Court confirmed that the restraint-of-trade doctrine under Section 27 is not confined to employment contracts but applies to all contracts, so the rule cannot be evaded by engaging a worker as a contractor.", "verbatimQuote": "As held by this Court in Gujarat Bottling vs. Coca Cola (supra), this doctrine is not confined only to contracts of employment, but is also applicable to all other contracts.", "date": "2006-03-22", "anchor": "https://openagreements.org/practice-guides/non-compete/in#src-q8-percept-not-confined" }, { "id": "const-art19", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "Constitution of India, art. 19(1)(g)", "citation": "Constitution of India, art. 19(1)(g).", "url": "https://www.indiacode.nic.in/bitstream/123456789/16124/1/the_constitution_of_india.pdf", "proposition": "Article 19(1)(g) guarantees all citizens the right to practise any profession or to carry on any occupation, trade, or business — the constitutional backdrop to Section 27's protection of the freedom to work.", "verbatimQuote": "All citizens shall have the right— (g) to practise any profession, or to carry on any occupation, trade or business.", "anchor": "https://openagreements.org/practice-guides/non-compete/in#src-const-art19" } ] } ] } }