Non-Compete Clause

A restrictive covenant in an employment or commercial contract prohibiting one party from engaging in a competing business or working with a competitor after termination.

Legal Enforceability Under Indian Law

Under Section 27 of the Indian Contract Act, 1872, agreements in restraint of trade, profession, or business are VOID. Indian courts consistently hold that post-employment non-compete clauses cannot be enforced against employees. However, non-compete clauses during the active term of employment and reasonable non-solicitation/confidentiality covenants post-termination are legally valid.

Standard Sample Clause Language

During the term of employment, the Employee shall not directly or indirectly engage in any competing business. For a period of twelve (12) months following termination, the Employee shall not solicit any existing client or employee of the Company.

Common Drafting Pitfalls to Avoid

✕Drafting post-employment non-competes in Indian employee agreements thinking they will stand in court.
✕Conflating non-compete (void) with non-solicitation and trade secret protection (enforceable).

Frequently Asked Questions

Can an employer hold back relieving letters for non-compete breach?

No. Holding back relieving letters or statutory experience certificates on the basis of void post-employment non-compete clauses has been repeatedly condemned by High Courts in India.

Related Commercial & Legal Terms

Indemnity Clause →

An indemnity clause is a contractual commitment where one party (the indemnifying party) promises to compensate and hold harmless the other party (the indemnified party) for specified losses, legal claims, damages, or liabilities arising out of a breach or specific event.

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