• Non compete clause

Hello everyone, i have joined new company as Deputy General manager-Imports, my employer has included Non compete clause in appointment letter which reads:
Quote:
You agree that during the term of the employment with the companyand for a period of 1 year thereafter regardlessof the reason for termination of your employment with the company.you shall not directly and /or indirectly compete with the business of the company or its successors or assigns in the following manner.

1.By soliciting and/or pursuing training/employment and/or contract or any other opportunities(both full time and part time),either directly or indirectly,with the past and present clients of the company regadless of whether or not you personally dealt with that client during your employment at the company.
2.By inducing any personnel of company to leave the employment services with a view to solicit his employment elsewhere.
3.That failure to comply with any of these statutes would constitute a serious breach of employee's contract of employment and may result in immediate legal action as well as termination of your employment for cause.

Unquote:

Pls advice by signing am i bound to follow, because i read that under section 27 of indian labour law it is not enforceable.

Thanks

Aditya Kar
Asked 2 years ago in Labour

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13 Answers

What you have signed is not covered in Sec.27, the clause you referred is right as this related to save goodwill of the business.

Koshal Kumar Vatsa
Advocate, Gurgaon
2283 Answers
3 Consultations

5.0 on 5.0

Any agreement in restraint of trade is void under section 27 of contract act 

 

2) you are at liberty after resignation to join any other organisation 

 

3) however you cannot solicit employees of your organisation 

Ajay Sethi
Advocate, Mumbai
87212 Answers
6048 Consultations

5.0 on 5.0

 An employee is refrained from continuing to work in the same profession after the term of employment then such a restraint is unfair to an ex-employee skilled in only that particular profession. Non-compete clauses which extend to post employment are held to be invalid and in violation of Article 19 (1) (g) of the Constitution and section 27 of India Contract Act.

See you may ask to remove the clause from your agreement to avoid litigation though the clause cannot be enforced. 

Shubham Jhajharia
Advocate, Ahmedabad
25518 Answers
171 Consultations

5.0 on 5.0

Only if you use there private information for personal gain and/or bring any loss due to use of that information, Company can claim compensation and recover damages.

Non solicitation clause up to not working/compete etc is invalid. 

Yogendra Singh Rajawat
Advocate, Jaipur
21482 Answers
31 Consultations

4.4 on 5.0

This is a very normal clause in case of the higher positions to safeguard the business interest of the company but it should not be one sided if  this clause is part of your appointment letter then there must be a compensating clause as well and the company should compensate for the period of one year your salary and expenses so that incase complete clause is applicable then it should not have any burden on you in case you signed this appointment letter without the compensation clause this will be one sided and incase your services are terminated from the company then for the period of one year you will not be able to join any similar business which is doing business of the similar commodities the sale purchase as the expertise you get while working in this company will definitely be your easiest way to get similar jobs.

Vimlesh Prasad Mishra
Advocate, Lucknow
6848 Answers
23 Consultations

4.9 on 5.0

Ans: Yes you are bound this agreement as its a valid contract and you are able to understand the contents of the same before signing the same.

The Company can initiate legal action against you.

Garima Anil Mehrotra
Advocate, Mumbai
514 Answers
1 Consultation

4.9 on 5.0

After proper resignation you can join any company.

A non-solicitation clause prevents an employee or a former employee from indulging in business with the company's employees or customers against the interest of the company.

Mohammed Mujeeb
Advocate, Hyderabad
19012 Answers
32 Consultations

4.5 on 5.0

In contract law, a non-compete clause (often NCC), or covenant not to compete (CNC), is a clause under which one party (usually an employee) agrees not to enter into or start a similar profession or trade in competition against another party (usually the employer).

Section 27 of the Indian Contract Act-1872 provides that ”Every agreement by which anyone is restrained from exercising a lawful profession or trade or business of any kind, is to that extent void”

Indian law is therefore very clear and strict on this point, any such non compete agreement shall not be binding on the parties and the same shall be null and void. By using the term void ab initio, for such type of agreements it has shown that it has kept such non compete clause in the agreements beyond consideration. Indian courts have also consistently refused to enforce post termination non compete clauses in employment 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.

 

T Kalaiselvan
Advocate, Vellore
77366 Answers
1458 Consultations

5.0 on 5.0

However considering the developed social, legal, and corporate circumstances, and the required confidentiality and the integrity of the employments, the judiciary has inclined its view towards giving some regard to the non compete agreements. In the case of ‘Niranjan Shankar Golikari Vs the Century Spinning and Manufacturing Company Ltd.’ , the Hon’ble Supreme Court observed that-“restraints or negative covenants in the appointment or contracts may be valid if they are reasonable”. Further in one case - V.F.S. global services Pvt. Ltd Vs Mr. Suprit Roy, 2008(2) Bom CR 446, the Bombay High court established the principle that a restraint on the use of trade secrets during or after the cessation of employment does not tantamount to a “restraint on trade” under section 27 of the Act and therefore can be enforceable under certain circumstances.

 

They may.

 

T Kalaiselvan
Advocate, Vellore
77366 Answers
1458 Consultations

5.0 on 5.0

However considering the developed social, legal, and corporate circumstances, and the required confidentiality and the integrity of the employments, the judiciary has inclined its view towards giving some regard to the non compete agreements. In the case of ‘Niranjan Shankar Golikari Vs the Century Spinning and Manufacturing Company Ltd.’ , the Hon’ble Supreme Court observed that-“restraints or negative covenants in the appointment or contracts may be valid if they are reasonable”. Further in one case - V.F.S. global services Pvt. Ltd Vs Mr. Suprit Roy, 2008(2) Bom CR 446, the Bombay High court established the principle that a restraint on the use of trade secrets during or after the cessation of employment does not tantamount to a “restraint on trade” under section 27 of the Act and therefore can be enforceable under certain circumstances.

 

They may.

 


However considering the developed social, legal, and corporate circumstances, and the required confidentiality and the integrity of the employments, the judiciary has inclined its view towards giving some regard to the non compete agreements. In the case of ‘Niranjan Shankar Golikari Vs the Century Spinning and Manufacturing Company Ltd.’ , the Hon’ble Supreme Court observed that-“restraints or negative covenants in the appointment or contracts may be valid if they are reasonable”. Further in one case - V.F.S. global services Pvt. Ltd Vs Mr. Suprit Roy, 2008(2) Bom CR 446, the Bombay High court established the principle that a restraint on the use of trade secrets during or after the cessation of employment does not tantamount to a “restraint on trade” under section 27 of the Act and therefore can be enforceable under certain circumstances.

 

They may.

 

T Kalaiselvan
Advocate, Vellore
77366 Answers
1458 Consultations

5.0 on 5.0

The said clause will be valid as if you voluntarily sign the same. Company can restrict you with confidentiality agreement

Prashant Nayak
Advocate, Mumbai
26719 Answers
79 Consultations

4.4 on 5.0

1. Non compete clause will be null and void because the agreement or contract in restrain of trade is void under section 27 of Indian contract act.

2. You can join any company of your choice after resigning from this organization whether they are clients or Rivals of your employer.

 

 

Mohit Kapoor
Advocate, Rohtak
10688 Answers
7 Consultations

5.0 on 5.0

This is my response to you:

1. You should know this case beforehand: In the case of Pepsi Foods Ltd. & Others v. Bharat Coca-Cola Holdings Pvt. Ltd. and Ors., the enforceability of the negative covenant restraining employees from employment elsewhere was viewed as ‘economic terrorism';

2. Even then they will send you a legal notice;

3. Even if they approach the court, they will not be able to prove concrete proofs;

4. If you have signed a bond  or paper or document or agreement where you agree to pay the compensation then they will chase you;

5. You can always claim protection under fundamental rights under Art. 19(1) (g): Right to profession;

6. Therefore do not worry about getting Dragged in court;

7. If you worry so much then do not join any competitor business, take a different line of business or corporate work.

Gowaal Padavi
Advocate, Mumbai
1920 Answers
5 Consultations

5.0 on 5.0

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