Restrictions on competition through prohibitive non-compete
clauses have become par for the course in most commercial
agreements. These clauses are designed to protect the business
interests of the party or parties, as the case may be, and
corporates do indeed get very creative and the non-compete often
becomes the subject of a thorough and substantial redline,
especially between businesses involved in a similar vertical.
While all contractual rights are primarily dependent on the
parties' mutual understanding, the exception to Section 27 of
the Indian Contracts Act, 18721, delineates the extent
to which businesses may be subjected to restrictions under a
contract. Any restriction sought to be imposed on another
entity's operations has to be reasonable, with specific
regard to the nature of the business. It is but apparent that such
concerns come into greater focus during transactions involving
mergers & acquisitions (M&A). M&A in India is broadly
scrutinised by a
