Importance Of Restrictive Employment

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ENFORCEABILITY OF RESTRICTIVE COVENANTS IN EMPLOYMENT CONTRACTS IN INDIA Tanvi Giri INTRODUCTION The relationship between an employer and employee has always been in a state of evolution. This evolution has led to changes in their relationship, resulting into emergence of new issue of disputes between the two. In India, no specific legislation exists to balance certain interests of employer and employee. The only recourses available are Judicial Interpretations and Common Law. However, there is profound inconsistency within the judiciary itself in developing appropriate standards of review for addressing these employment related issues like confidentiality and non-solicitation. This paper is an attempt to elucidate one major issue resulting…show more content…
Most common restrictive covenants incorporated in employment contracts are confidentiality, non-disclosure, non-compete, garden leave and non-solicitation clauses. It is often contended that these are in the nature of restraint of trade and therefore void as per Section 27 of the Indian Contract Act, 1872 which states: “Agreement in restraint of trade void- Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void.” The exceptions to this provision are either created by statute or those arising from Judicial Interpretations of Section 27. The exceptions created by statute are: sale of goodwill and those provided under the Indian Partnership Act, 1932 . In India, the enforceability of restrictive covenants depends on the term of the agreement of service. Restraints upon employees during employment are enforceable. But an agreement to restrain an employee after the termination of employment may not be allowed by the…show more content…
The enforceability of this restrictive covenant was considered by the Bombay High Court. In the case of VFS Global Services Private Limited v Mr. Suprit Roy , it was argued that such a clause was prima facie restraining trade and thus, violative of Section 27 of the Indian contract Act, 1872. The Court accepted this argument and held that obstructing an employee who has left service from obtaining gainful employment elsewhere is not fair or

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