A non – compete clause in an employee agreement is being
used frequently by most of the Employers but there are some
uncertainties amongst stakeholders with respect to whether such
clauses are enforceable in India or not. Section 27 of the Indian
Contract Act explains that every agreement by which anyone is
restrained from exercising a lawful profession, trade or business
of any kind, is, to that extent, void.
The only exception provided in the said section is involving the
sale of goodwill. The purpose of this exception is to protect the
interest of the buyer in an agreement where the buyer has agreed to
purchase the seller’s goodwill. In such circumstances, the
seller may agree with the buyer from carrying on a similar business
within specified local limits. What is important here is that there
should be a genuine goodwill which can be sold. In absence of such
real and genuine goodwill, all such agreements are likely to held
void. In common parlance, the
