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Home » Glossary » Non-compete clause

Is a non-compete clause enforceable in India?

Quick answer: A non compete clause India courts will enforce works only while the person still works for you. Section 27 of the Indian Contract Act, 1872 voids any agreement restraining someone from a lawful profession, trade or business. So a restraint that runs after resignation or termination fails, however short or local it looks.

  • Section 27 has one exception, for a seller of goodwill, and none for employment.
  • The Supreme Court upheld an in-term negative covenant in Niranjan Shankar Golikari (1967).
  • In 2018 the Delhi High Court voided a one-year post-exit non-compete in Navigators Logistics.
  • A void clause supports neither an injunction nor damages.

What does section 27 of the Contract Act say?

It makes restraint of trade void. The text of section 27 of the Contract Act covers “every agreement” restraining anyone from a lawful profession, trade or business.

Indian courts read that bluntly.

Unlike English law, there is no reasonableness test for restraints that start after employment ends. Percept D’Mark v Zaheer Khan (2006) refused a post-term restriction for that reason. So when people search is non compete enforceable in India, the honest answer splits by timing.

RestraintPosition in Indian courts
Exclusivity during employmentUsually, unless unconscionable
Garden leave on full pay during noticeUsually, as the person is still employed
Non-compete after exitVoid
Duty not to misuse genuine confidential informationYes, if you can identify the information
Non-solicitation of clients or staff after exitUnsettled

What can you protect instead of a post-exit non-compete?

Three things, each with a better legal footing.

First, in-term loyalty. The Supreme Court in Niranjan Shankar Golikari held that negative covenants operating during the contract are generally outside section 27. The Model Standing Orders, 2026 add an exclusive-service clause, which also bears on moonlighting.

Second, information. A tight non-disclosure agreement (NDA) survives exit, provided you can say what is secret and how you kept it so.

Third, ownership. An IP assignment clause settles who owns the code and designs before anyone leaves.

Let’s say your Bengaluru sales lead resigns, serves 60 days on garden leave and then joins a direct rival. You cannot block the new job. You can act if they walk out with your pricing model, client contracts or product roadmap, because that claim rests on misuse of confidential information. Different claim. Better odds.

Is non-solicitation any safer?

Not reliably. In Navigators Logistics the Delhi High Court said customer details were not trade secrets, and no clear Indian ruling yet backs post-exit non-solicits of staff. Treat them as a deterrent, not a remedy.

How does Remunance draft restraint clauses for India hires?

As the legal employer, Remunance issues every employment contract with India-valid restraints: in-term exclusivity, confidentiality and IP assignment, with no void post-exit ban. Our guide to the employer of record contract explains how IP then flows to you. With 150+ international clients from 22 countries, we see a lot of US templates. Have your restraint clauses reviewed by an India specialist.

What else do people ask about non-compete clauses in India?

Can an employer stop me joining a competitor after resignation in India?

Generally not. A post-employment ban is void under section 27, though you remain bound by valid confidentiality and IP terms.

Is a non-compete valid during the notice period?

Usually yes, because you are still employed. Courts have upheld in-term negative covenants, including garden-leave style arrangements, where they are not one-sided.

Can a company sue for breach of a non-compete in India?

It can file, but it will usually lose on the post-exit restraint itself. Claims built on genuine confidential information or IP stand a far better chance.

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