• Is non-compete applicable in India?

Hi,
My Employer does same business in English countries like USA and Europe which I want to start in India?
Will Non-Compete be applicable to me? I have signed Non Compete for 2 years
Asked 2 years ago in Business Law from New Delhi, Delhi

Yes it is applicable in India for you to start any such business.

Vimlesh Prasad Mishra
Advocate, Lucknow
5683 Answers
19 Consultations

4.9 on 5.0

contracts as “restraint of trade” is impermissible under section 27 of the Indian Contract Act-1872, and have held them as void and against the public policy because of their potential to deprive an individual of his or her fundamental right to earn a living.

It depends in these two years if you re employee of the company then it is binding. After your employment you can carry whatever business you want

Varnika Singh
Advocate, Ghaziabad
261 Answers
2 Consultations

4.9 on 5.0

Supreme court has also said that restraints or negative covenants in the appointment or contracts may be valid if they are reasonable

Varnika Singh
Advocate, Ghaziabad
261 Answers
2 Consultations

4.9 on 5.0

any agreement in restraint of trade is void

2) you can resign from company and start your own business in same field

Ajay Sethi
Advocate, Mumbai
69049 Answers
4153 Consultations

5.0 on 5.0

you are at liberty to sell goods in India after you resign from your job

Delhi High Court in Foods Ltd. and Others v. Bharat Coca-cola Holdings Pvt. Ltd. & others held

“It is well settled that such post termination restraint, under Indian Law, is in violation of Section 27 of the Contract Act. Such contracts are unenforceable, void and against the public policy. What is prohibited by law cannot be permitted by Court's injunction

Ajay Sethi
Advocate, Mumbai
69049 Answers
4153 Consultations

5.0 on 5.0

Dear Querist, as explained if you want to start up the same business as that of your employer then there might be hurdles as per the agreement between you and the employer. However, if you see the legal provisions under section 27 of The Indian Contract act, 1872 then anything in restraint of trade is void. It is advisable to have a detailed discussion of your case and provide legal opinion.

Thanks & Regards.

Megha Kain
Advocate, New Delhi
9 Answers

4.0 on 5.0

Prima facie the Non- Compete would not be applicable - but would need too look at the document in details before I can give a detailed advice.

Avhijit Patro
Advocate, New Delhi
1 Answer

4.0 on 5.0

The issue arises in a variety of contexts, including when a company is considering hiring a candidate burdened by a non-compete, whether to include a non-compete in an executive employment agreement or sometimes whether, and to what extent, a non-compete can be enforced against a departing employee. Employers, especially in knowledge-based industries, understandably wish to protect themselves against the risk that their human capital will — after receiving training, developing relationships with customers and/or having access to the company’s most sensitive proprietary information — walk out the door and go to work for a competitor.

Unfortunately, the enforceability of a non-compete usually depends on the law of the jurisdiction where the employee lives and works, and the applicable legal principles vary widely from country to country and even, as in the US, from state to state. Most companies do business — and have employees — in multiple jurisdictions, and many employees cross state or national boundaries in the performance of their jobs. Accordingly, determining the enforceability of a non-compete in the cross-border context is often a vexing and fact-specific inquiry.

Kishan Dutt Kalaskar
Advocate, Bangalore
4690 Answers
134 Consultations

5.0 on 5.0

hi,it will not be applicable if you sell it in india..

Hemant Chaudhary
Advocate, Gurgaon
4310 Answers
31 Consultations

4.9 on 5.0

As per section 27 of the Indian contract act and various interpretation by Courts in India the restriction in the clause should be reasonable and not one-sided that is to say that you should be fairly compensated during the no compete clause as per Garden Leave doctrine. Further, you are advised to share the contract or at least the affecting clauses for more clarity on the issue.

Saurabh Yadav
Advocate, Gurgaon
50 Answers
1 Consultation

4.0 on 5.0

Please reproduce the relevant non-compete clause on this portal so that a concrete response can be given to your query.

Generally speaking, any agreement in restraint of trade is void in terms of section 26 of the Indian Contract Act and hence, if the scope of this non-compete clause is very narrow, it will be hit by section 27 of the Indian Contract Act.

Vibhanshu Srivastava
Advocate, New Delhi
8734 Answers
144 Consultations

5.0 on 5.0

Hello,

If you have signed a non compete agreement then you can not enter into the same business in same business area, meaning thereupon that your business shall not effect their business in any way.

Regards

Anilesh Tewari
Advocate, New Delhi
17270 Answers
267 Consultations

5.0 on 5.0

You have already left the company 2 years back, for how much time as per the agreement the Non compete agreement was valid?

Regaards

Anilesh Tewari
Advocate, New Delhi
17270 Answers
267 Consultations

5.0 on 5.0

Sir

Before giving subjective advise it is important to peruse the non compete agreement between you and the Employer. Based on which i could advise and opine on the respective and rights, obligation and limitation of the parties.

However, let me know brief you about the law prevailing in India. Under the Indian legal system, any contracts which curtails the right of any person to carry on trade or any business activity is VOID. This is not applicable when a person is in employment of his Employer. But the moment the Employee leaves the Job of his Employer all contract conditions restraining the right of Employee post Employment becomes void and illegal. Henec if you are not in employment of your Employee then you can certainly continue the Competing Business.

However, there is one more aspect to be considered. In most of the Employment Contract, condition is mentioned that after employment is terminated, the Employee cannot use the Contact (i.e. vendors, elc) of the Employer for a particular period of time. That is protection of IP right of the Employee and this is valid if the restriction is only for a limited period. So if there is any such clause in your Agreement and if you are trying to do business with the associate / vendor or existing client of your Employer then there might be an issue.

So depending upon the nature of agreement with your former employer and other conditions, i could give you opinion if your proposed business activity is in violation of the non compete agreement or not.

Feel Free to Contact

Vivek N Mapara

Vivek Mapara
Advocate, Ahmedabad
28 Answers
3 Consultations

5.0 on 5.0

A non compete clause in any agreement is there to put a reasonable amount of restriction who has earlier either worked on some exclusive project or has been trained for that or has received some special qualification for which the amount was to be paid by the organisation or institution who assisted in attaining that special qualification by providing financial assistance.

A non compete clause is also applicable on all the employees who have worked with the organisation of their own and now wants to do the same business in same circle or the other circle.

The idea is to restrict you for some period of time before you venture out in that business becoming the competitor of your previous organisation. A lot goes into making a business stand the way it is and with the passage of time every business eventually grows with the help of further recruit, technology and finance. So every company wishes to have a buffer period with themselves wherein they can grow further so that they can absorb further competitor which may come in near future.

So this non compete clause of 02 years is totally justified and you can't do the same business even if you are doing it in some other country where your previous employer do not exist.

Pulkit Prakash
Advocate, Delhi
220 Answers
3 Consultations

5.0 on 5.0

Hello,

It has already been two year, as told by you therefore you may go ahead and as such the non- compete agreement has lost its efficacy. You may go ahead and start the business.

Regards

Anilesh Tewari
Advocate, New Delhi
17270 Answers
267 Consultations

5.0 on 5.0

You cannot solicit clients or divulge confidential information about company

2) clause 10.1 (b) is void

3) clause (c) is void as in restraint of trade

Ajay Sethi
Advocate, Mumbai
69049 Answers
4153 Consultations

5.0 on 5.0

Dear Querist, as explained in the earlier answer, that as per section 27 of The Indian Contract Act, 1872, anything in restrained of trade would be void "every agreement by wich any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void."

Hence you can start your start your business keeping all the points in consideration.

Thanks & Regards.

Megha Kain
Advocate, New Delhi
9 Answers

4.0 on 5.0

Sir

Clause 10.1.(b) and 10.2 (c) restrict the right of the Employee to do any competing business after the termination of Employment,hence it is void and cannot be enforced by the Employer. So you are free to do any such business, notwithstanding such contract clause.

However, Clause 10.2 (a) is valid and can be enforced by the Employer. You cannot directly or indirect solicit the Employees / Customer of the Company for Business.

Clause 10.2.(b) is valid. However, the later portion which fixes the liability in case of non-reporting is very subjective and depends on several facts and circumstances.

So over all, you can do the business of selling in India, notwithstanding the contract clause, however, to do such business you cannot approach the Vendors / Contractors of your former Employer.

Let me know should you have any questions

Vivek Mapara
Advocate, Ahmedabad
28 Answers
3 Consultations

5.0 on 5.0

"10.1 (a) The Employee agrees that during his Employment Period and for a period of 2 (two) years thereafter he shall not engage himself, directly or indirectly, in any business or service whether as principal, agent, partner, or employee or in any other capacity either full time or part time in any business which could be considered competitive to the Company."

"10. 2 (c) Compete with the business of the Company during the period of employment and 1 (one) year thereafter from the termination of this Agreement or resignation of the Employee."

You are advised to refrain from starting the same business as that of your ex-employer at least for a period of 1 year. I'm saying one and not two, because there seems to be a conflict in the non-compete clause. At one place it prohibits you for 1 year, whereas in clause 10.2 (c) it prohibits you from starting a competing business for a period of 1 year.

Thus, wait for one year before you begin doing what you wish to do.

Vibhanshu Srivastava
Advocate, New Delhi
8734 Answers
144 Consultations

5.0 on 5.0

if your not hiding anything then absolutely you are free to do any trade anywhere as per section 27 of the indian contract Act, but said act is not applicable in U.S and other countries so some time law is different but so far India is concerned there is no hurdle as such.

but i advise to visit an expert lawyer along with your MOA and AOA and the earlier agreement..

Atul Shahi
Advocate, Allahabad
110 Answers
1 Consultation

4.0 on 5.0

The clause per se appears to be one sided and putting restrictions which are excessively harsh, restrictive, one-sided and also unreasonable. Further, as per Section 27 of the Indian Contract Act, every agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void. Also such post termination restraint is in violation of Section 27 and are unenforceable, void and against the public policy. Further, only confidential information of the employer can be protected in the post employment period.

Saurabh Yadav
Advocate, Gurgaon
50 Answers
1 Consultation

4.0 on 5.0

i believe the clauses herein are not reasonable, however you signed it so if you do it now as per the agreement the company can initiate legal proceedings against you as per the terms of the agreement. however I find the clauses unreasonable, and the same can be challenged

Varnika Singh
Advocate, Ghaziabad
261 Answers
2 Consultations

4.9 on 5.0

It was nice to see a rating of 1/5!!! Thanks!

I have similar reference of the termination/resignation of the Managing Director of India of a Multinational Engineering Co of UK/USA and the clauses were similar as provided by you above.

The deed signed by you is obligatory on your part to perform. The detailed reference may be provided if requested.

Vimlesh Prasad Mishra
Advocate, Lucknow
5683 Answers
19 Consultations

4.9 on 5.0

This is a standard format found in almost all such agreements wherein some reasonable restriction is put on you to stop you from competing the main organisation in their business in any form.

Pulkit Prakash
Advocate, Delhi
220 Answers
3 Consultations

5.0 on 5.0

My Employer does same business in English countries like USA and Europe which I want to start in India?

Will Non-Compete be applicable to me? I have signed Non Compete for 2 years

You cannot start doing your own business while you are still employed.

In India, the law that governs non-compete clauses is Section 27 of the Indian Contracts Act. Section 27 declares any agreement in restriction of trade to be void. The courts have interpreted this section to include a non-compete clause operating beyond the term of the Contract.

T Kalaiselvan
Advocate, Vellore
58895 Answers
746 Consultations

5.0 on 5.0

But i have already left jobs 2 months back also, the countries in they are selling are totally different.

P.S they are selling in USA and Europe and i want to sell in india.

A 'Restraint of Trade' clause in a contract that is intended to not allow one party to practice a certain profession, trade or business is only valid under certain conditions of the given and is otherwise void as per Section 27 of The Indian Contract Act, 1872.[1] The 'Non-Compete' clauses in certain contracts that are for example:

Where an employee has agreed to work for an employer for a specified period of time but resigns from the employment prior to the completion of the specified period of time, then a non-compete clause in the employment contract may still be enforced by the court for the remaining unserved period unless the clause is unconscionable, excessively harsh, unreasonable or one-sided.

The Delhi High Court has however taken the view in Jet Airways v. Jan Peter Ravi Karnik, (2000) 4 Bom CR 487, that a non-compete clause in the employment agreement would be enforceable for the remaining unserved period only if in so restraining the employee, the employer seeks to protect some of its proprietary interests, which may have been divulged to the employee during the course of employment. Thus, if the employee is privy to various confidential and proprietary information relating to the employer (other than general information and experience that the employee may have gained while in the service of the employer) then the non-compete clause may be enforced by the court to prevent the employee from disclosing such proprietary information to a rival entity or otherwise using such information to the detriment of the employer. Further, it must also be noted that a non-compete clause would not be enforced during the unserved period, if the intent behind such a clause were to curb or restrict competition for the employer.

T Kalaiselvan
Advocate, Vellore
58895 Answers
746 Consultations

5.0 on 5.0

A non-compete clause which is intended to protect the interests of the employer in a situation where confidential information has been disclosed to the employer by clients/ suppliers only on the employer's undertaking to obtain corresponding secrecy clauses from its employees has been held to be a reasonable restriction to protect the interests of the employer for the unserved period, as breach of the non-compete clause by an employee who has knowledge of such confidential information, may cause the employer to breach the employer’s confidentiality undertaking to its clients.

While it is suggested that the term of the contract run for a specific period, in order to ensure the chances of enforceability of a non-compete clause, a provision for termination by the employee with a reasonable notice period would have to be provided for in the employment contract, as in the absence of such a clause, the agreement may be considered one sided and unconscionable and hence be held void.

Negative Covenants tied up with positive covenants during the subsistence of a contract be it of employment, partnership, commerce, agency or the like, would not normally be regarded as being in restraint of trade, business of profession unless the same are unconscionable or wholly one-sided.

a non-compete clause maybe enforceable for the remaining unserved period of service under a fixed term contract if the restriction is not unconscionable or excessively harsh.

T Kalaiselvan
Advocate, Vellore
58895 Answers
746 Consultations

5.0 on 5.0

Ask a Lawyer

Get legal answers from top-rated lawyers in 1 hour. It's quick, easy, and anonymous!
  Ask a lawyer