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Non-compete clauses are frequently incorporated into employment and commercial contracts to safeguard the proprietary interests of businesses, such as confidential information, trade secrets, and client relationships. However, the enforceability of these clauses under Indian law is subject to strict
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FAQ :
The main law governing non-compete clauses in India is Section 27 of the Indian Contract Act, 1872, which states that agreements restraining a person from exercising a lawful profession, trade, or business are void.
Yes, non-compete clauses are generally valid and enforceable during the term of employment because an employee owes a duty of fidelity and exclusivity to their employer.
Generally, non-compete clauses are void after employment ends under Section 27, as they restrict an individual's right to earn a livelihood. However, there are limited exceptions.
Exceptions include the sale of goodwill, reasonable restraints in partnership agreements, and non-compete clauses in franchise, joint venture, or M&A contracts where parties have equal bargaining strength and the restriction is reasonable.
No, Indian law does not follow the 'rule of reason' adopted in many common law jurisdictions. Restraints, even if partial or seemingly reasonable, are generally held to be void, especially in employment contexts post-termination.
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