Generally not after the relationship ends. Section 27 of the Indian Contract Act, 1872 makes any agreement that restrains a person from a lawful profession, trade or business void, and courts apply it to post-employment non-competes. Restraints during employment, confidentiality obligations and a seller’s non-compete on sale of goodwill are treated differently and can be enforced.
Indian Contract Act, 1872
Section 27Agreements in restraint of trade are void, except a reasonable restraint on a seller of goodwill.
Supreme Court of India
Niranjan Shankar Golikari v. Century Spinning (1967)Negative covenants operating during the term of employment can be enforced.
Supreme Court of India
Superintendence Co. of India v. Krishan Murgai (1980); Percept D’Mark v. Zaheer Khan (2006)Post-termination restraints are void under Section 27.
Specific Relief Act, 1963
Section 42Injunction to enforce a negative agreement in suitable cases.
Section 27 declares void every agreement by which anyone is restrained from exercising a lawful profession, trade or business, to that extent. Unlike English law, Indian law has no general “reasonableness” test for post-termination restraints; the only express exception is for a seller of goodwill who agrees not to carry on a similar business within specified local limits, so long as the limits are reasonable.
Usually not through a non-compete. In Superintendence Co. of India v. Krishan Murgai (1980), the Supreme Court refused to enforce a post-employment restraint, and later decisions such as Percept D’Mark v. Zaheer Khan (2006) confirmed that restraints operating after a contract ends are void under Section 27. An employer can still enforce confidentiality and protect trade secrets.
Restraints during the term of employment are generally upheld: in Niranjan Shankar Golikari v. Century Spinning (1967), the Supreme Court enforced a negative covenant not to work for a competitor during the contract term. Exclusivity in an ongoing commercial contract, garden-leave arrangements during a notice period, and a promoter’s or seller’s non-compete tied to a sale of goodwill or shares are also more likely to be enforced, depending on the facts.
Courts are divided. Some have treated restrictions on soliciting clients or employees after exit as a form of restraint of trade and refused to enforce them, while others have protected an employer against misuse of confidential client information. Drafting non-solicitation narrowly — tied to confidential information, limited in time and to clients the employee actually handled — improves the chance of enforcement.
A post-employment non-compete is generally void under Section 27, so a suit based only on it is unlikely to succeed. You can still be sued for misusing confidential information or breaching notice-period obligations.
Restraints that apply while the employment subsists, including during a notice period or paid garden leave, are generally enforceable.
A seller’s non-compete given on the sale of a business with its goodwill can fall within the Section 27 exception if it is reasonable in scope and duration. Courts look at the commercial context.
No. Consent does not cure a restraint that Section 27 declares void; the clause is void to the extent it restrains lawful trade.
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