Bombay High Court: Non-Compete Clause Will Not Operate Post Termination Of The Contract

The Division Bench of the Bombay High Court in the case of Indus Power Tech Inc v. Echjay Industries Private Limited, [Commercial Appeal (Lodging) No. 26031 of 2023], decided on October 17, 2024, inter alia held that a non-compete clause can only be valid during the term of the agreement. The Court went on to hold that such a non-compete clause shall not operate post-termination of the agreement, owing to a restraint in trade being barred by Section 27 of the Indian Contract Act,1872.

Facts in Brief

1. On March 31,2015, a Master Supply Agreement ("MSA") was executed between Indus Powertech Inc ("Company") and Echjay Industries Private Limited ("Supplier").

2. Clause 3 of the MSA inter alia provided as under